States Flubbed the Rollout of Their Health Insurance Exchanges. Now, They’re Ready to Try Again
The launch of President Barack Obama’s Affordable Care Act (ACA) was marred by the performance of the newly created state health insurance marketplaces.
With generous federal financial support, many states created these markets, also called exchanges, based on soaring promises: Individuals and small businesses could compare policies. They could get federal subsidies. It would be easy to sign up. And if people’s income declined, they could enroll in their state’s Medicaid plan.
It didn’t work out that way. Websites didn’t work. Data couldn’t be accessed. Call centers were overwhelmed, and states spent millions on quick fixes, many of which failed.
Hawaii, Nevada and Oregon abandoned plans to operate their independent marketplaces and instead relied on the federal marketplace, Healthcare.gov. Other states including California, Colorado, Massachusetts, Maryland and Washington spent millions of dollars to overcome problems with technology.
The experience so rattled states that seven years later, only 11 of them, plus Washington, D.C., operate independent marketplaces. The rest either use the federal marketplace or a federal-state partnership.
But now at least six states—Maine, New Mexico, New Jersey, Nevada, Oregon and Pennsylvania—are creating their own marketplaces or are seriously considering doing so.
Officials in those states insist they can avoid past failures and state-focused websites can help more residents get insurance. They believe they can piggyback on the successes of other states, and knowing their population and geography better positions them to increase enrollment and possibly reduce their residents’ premiums.
In recent years, experts say, vendors have developed software and other technology to make the online sign-up systems work.
“A lot of kinks have been worked out, and the ability to set up marketplaces that run effectively and efficiently has gone up,” said Jeanne Lambrew, commissioner of the Department of Health and Human Services in Maine, which hopes to launch its own exchange in 2021.
“We know much more now than states knew back in 2013,” said Lambrew, who was Obama’s deputy assistant for health policy and one of his top aides in the implementation of the ACA, including Healthcare.gov.
The states creating their own marketplaces or considering it have Democratic governors, some of whom recently succeeded Republicans. All but Pennsylvania have Democratic legislatures.
But notable Republicans also are supporting the shift to a state-based model. The previous governor in Nevada, Republican Brian Sandoval, initiated the effort in his state. And the Republican House majority leader in Pennsylvania, Bryan Cutler, has been a strong supporter of the move there.
The final Pennsylvania bill passed both chambers this year without a negative vote. Cutler said creating a state marketplace is consistent with traditional GOP values.
“Our philosophy is that local control is always best,” he said in an interview. “Time and again, it’s proven that states can do it better and cheaper than the federal government.”
The U.S. Department of Health and Human Services (HHS) has not signaled any opposition to state-based exchanges, and Cutler pointed out that President Donald Trump, in an executive order issued the day he took office, trumpeted his administration’s intent to “afford the States more flexibility and control to create a more free and open healthcare market.” That executive order, however, pertained to his goal of repealing the ACA, which has so far eluded him.
HHS did not respond to a Stateline request for comment.
A recent report by the National Academy for State Health Policy (PDF) presented evidence that state-based health insurance exchanges enrolled more residents and kept premiums lower than Healthcare.gov. The decline in marketplace enrollment since 2016 has largely been driven by states using the federal marketplace, the report found.
While enrollment in the federal exchange declined by 3.7% this year, the report found, it increased in state-based exchanges by less than 1%. And while premiums increased by 71% on the federal exchange between 2016 and 2018, a period in which many health policy experts say Trump administration actions destabilized health insurance markets, the report found premiums in state exchanges increased by 40%.
Soon after taking office, the Trump administration slashed funding for advertising and consumer assistance designed to boost participation in the federal exchange. The administration also shortened the enrollment period for Healthcare.gov to six weeks. In some states with their own exchanges, enrollment stayed open for months. Colorado allowed enrollment year-round.
In an email to Stateline, Marlene Caride, commissioner of the New Jersey Department of Banking and Insurance, cited the Trump administration’s actions against Obamacare as one of the main reasons the state plans to run its own exchange starting next year.
“Clearly, activities at the federal level to undermine the ACA have created significant challenges for states,” Caride wrote.
Jessica Altman, Pennsylvania’s insurance commissioner, said she is confident her state’s marketplace, which it hopes to launch in 2021, will be superior to the federal marketplace.
“We know our markets and our consumer and our carriers best,” Altman said in an interview. “We believe we can leverage that information to make the experience of seeking health insurance more consumer-friendly and provide plans that are more affordable.”
Altman said the money Pennsylvania saves by running its own marketplace will allow it to add to the 400,000 state residents who get their individual coverage through the federal marketplace now, though she couldn’t say how many more people might enroll. She also said the shift will allow the state to extend open enrollment beyond the six weeks allowed under federal rules.
States also can do a better job in outreach efforts than the federal government, Altman said. A state exchange can gather reams of data about potential enrollees, which officials could use to better target their marketing. For example, the state could detect people who filled out most of an application but didn’t complete it or young people about to turn 26 and become ineligible for their parents’ insurance plans.
“We understand that people who are uninsured in Philadelphia may be different from people in the rural areas of Pennsylvania,” Altman said. “We know who those people are and how we can better reach them. Even when the federal government was doing outreach and marketing, they were fairly one-size-fits-all.”
Heather Korbulic—executive director of the Silver State Health Insurance Exchange, which launched as Nevada’s independent marketplace last week—said another advantage her state will explore is the ability to automatically re-enroll consumers each year unless they opt out.
That is especially important, Korbulic said, now that the Trump administration has raised the possibility of ending that feature, which she said is popular with Nevadans, on the federal marketplace.
States that develop their own exchanges also can use the assessment fees that the federal government collects on insurance premiums sold in the federal marketplace. Altman estimated that would bring Pennsylvania an additional $88 million a year. She said that around $30 million to $35 million would go toward operating the state exchange.
Much of the remainder would go to the establishment of a state reinsurance fund, which would be used to pay health insurance claims for patients with exorbitant medical bills. That in turn should result in lower premiums for everyone else, according to a study by Oliver Wyman, a New York consulting firm, commissioned by Altman’s office.
Moving to a state marketplace, the study estimated, could result in an overall decrease in insurance premiums of up to 10%.
Several states making the shift to a state-based exchange said they consulted with more experienced states and their vendors as they developed plans.
“Nevada spent two years working with our colleagues in other state-based exchanges,” said Janel Davis, spokeswoman for the state exchange, “looking at the mechanics of their operations to understand not only what would be required for Nevada’s own implementation, but also to understand what efficiencies could be achieved.”
But there are risks, cautioned Sarah Lueck, a senior health policy analyst at the Center for Budget Policy and Priorities, a progressive research and policy institute based in Washington, D.C.
“It’s still an expensive and risky proposition,” Lueck said—one that will have an obvious barometer for success.
“You don’t want to see a decrease in enrollment.”