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HealthCare Checkup

The Seattle Times health-care team tracks the local impact of the Affordable Care Act.

June 26, 2014 at 7:10 PM

Costs to run state health exchange to exceed tax revenue

Logo for the state's insurance exchange.

Logo for the state’s insurance exchange.

Officials with the state’s health insurance marketplace estimate that they will need at least $53 million next year to keep the exchange running.

That amount is more than the $40 million that has been allocated by the state Legislature, but far less than the $127 million the insurance exchange expects to spend this year. Officials with Washington Health Benefit Exchange, which operates the marketplace, presented their first crack at a budget at a meeting before their board in SeaTac on Thursday.

Where the money will come from — whatever the amount –  is unclear. The exchange is supposed to be self-sustaining by Jan. 1 of next year. The exchange is supposed to be self-sustaining by Jan. 1 of next year. The $40 million is expected to come primarily from a 2 percent tax levied on insurance premiums. Beginning this year, proceeds from that tax as assessed on plans sold through the Washington Healthplanfinder will go toward operating the exchange. If the tax doesn’t raise sufficient funds, the exchange can also assess a fee on insurers selling plans through the exchange beginning next year to make up the difference.

Many board members expressed concern that $53 million wasn’t going to be enough to make sure the exchange would run well and have enough outreach to meet enrollment goals.

“I don’t want to be so conservative we undermine our capacity,” said board chairman Ron Sims, former King County executive.

The exchange was created under the federal Affordable Care Act and the expenses for setting up, running and promoting the marketplace so far have been covered by federal dollars. From 2011 through 2014, the state expects to spend close to $250 million on the effort.

The federal support, however, is slated to largely end next year. But given all of the technical challenges that hampered the first insurance enrollment period that ended in March, the federal government decided to delay the next enrollment window. Instead of running from October to December 2014, it will start in mid-November and stretch into February 2015.

Washington’s exchange officials are asking for an extension of federal grants meant to help with the next enrollment period so they’ll cover that new window. That could provide $26 million in federal dollars for next year, but there are strict limits as to where they can spend that money.

The exchange has struggled to come up with a budget request for next year, given that the insurance marketplace is a brand-new creation that only opened for the first time in October 2013.

“We don’t have enough of a business cycle,” said Richard Onizuka, chief executive officer for the exchange. “We don’t know what normal is.”

The state also is waiting for updated projections for how many plans they’re likely to sell. Early predictions put that number at 280,000 plans by the end of the year. By the end of open enrollment on March they sold nearly 165,000 plans.

While the exchange website experienced some significant technical problems — problems that have continued to plague some customers trying to verify that they’ve bought insurance — Washington’s site was considered a success compared with the national exchange and many of the other state-led efforts. The state continues working on technology fixes to improve operations.

In the $53 million budget, roughly $19 million would go toward IT programs and $20 million is allocated for operations.  Most of the IT money is earmarked for operations and maintenance work by Deloitte Consulting, the primary contractor for building the exchange website. The operations budget is largely spent on Faneuil, which runs Healthplanfinder’s help call center.

The budget includes limited dollars for advertising the site, essentially eliminating TV, print and radio ads, and leaving some money for less expensive digital advertising. It also curtails money for navigators who are trained to meet with people one-on-one and help them sign up for insurance coverage.

The exchange staff plans to continue working on the budget and more clearly defining what it would lose according to  where it cuts costs. It’s also looking at what other states are expecting to spend, said exchange spokesman Michael Marchand.

“We have as a board a really heavy decision to make,” said member Hiroshi Nakano, who is also CEO of South Sound Neurosurgery.

The exchange and its board need to settle on a number to present to the Legislature when it meets in January. We need to figure out “what it’s going to take for us to hit our [enrollment] target,” Nakano said.

(Clarification: This post was clarified June 27 to note that the 2 percent tax on insurance premiums is an existing tax. What is new is that beginning this year, the tax revenue derived from plans sold on Washington Healthplanfinder is designated for exchange operations.)

Comments | Topics: Affordable Care Act, health insurance, Washington Health Benefit Exchange

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