Kentucky Strategy Will Test Need For State-Run Obamacare Exchanges
By Phil Galewitz
December 2, 2015 - Kaiser Health News
Kentucky Gov.-elect Matt Bevinfs plan to dismantle the statefs successful
health insurance exchange, Kynect, and shift consumers to the federal one would
likely have little impact on consumers, health experts say.
gThe federal exchange is a perfectly viable alternative,h said Jon Kingsdale,
a Boston health care consultant who formerly led the state agency that started
Massachusettsf exchange in 2006, the model for the federal health law. Consumers
on the federal exchange would still be able to shop and enroll in private plans
and apply for federal subsidies to lower their costs.
State-run exchanges have some advantages, Kingsdale said. For instance,
enrolling in Medicaid is easier because they connect consumers directly to the
state-federal health insurance program for the poor. State exchanges also
generally have lower premium taxes than the federal exchange, fees that insurers
pass on to consumers.
Bevinfs plan to end Kynect has brought a strong rebuke from Obamacare
advocates and outgoing Kentucky Gov. Steve Beshear, but itfs also revived
questions about whether the states or the federal government are best positioned
to run the marketplaces. Bevin is a Republican and Beshear is a Democrat.
The exchanges are a linchpin in the federal law that has brought health
coverage to 16 million people since 2010. The lawfs drafters initially thought
all but the smallest states would run their own exchanges, but most Republican
governors blocked them in their states, citing opposition to the Affordable Care
Act.
Thirteen states run their own insurance exchanges and the rest are run fully
or in part by the federal government. If Bevin follows through on his plan,
Kentucky would be the first state to close its exchange and push most
responsibilities to the federal government.
Kentucky Gov.-elect Matt Bevin gives his victory
speech at the Republican Party victory celebration in November in Louisville,
Ky. Experts say Bevin is likely planning to end the statefs health insurance
marketplace, Kynect. (Photo by Timothy D. Easley/AP)
Nevada, Oregon and Hawaii ran into technological problems with their
enrollment systems and have shifted in the past year to using the federal
healthcare.gov site, but they still do other marketplace functions, including
marketing and offering consumer assistance. Nevada and Oregon both posted solid
enrollment gains in the second annual enrollment period that ended in March
2015 after switching to healthcare.gov.
State-run exchanges have enrolled higher percentages of their uninsured
citizens than states on the federal exchange. Thatfs partly because all but one
state with its own exchange also have expanded Medicaid, making millions more
people eligible. Idaho is the only state that has its own exchange and has not
broadened Medicaid. Twenty states have not expanded Medicaid.
Kentuckyfs exchange is considered one of the best-run state exchanges because
of its innovative, extensive marketing to uninsured consumers and its ease of
use. About 500,000 Kentucky consumers have enrolled on Kynect since 2013, most
of them for Medicaid. The statefs uninsured rate has dropped from 20 percent to
9 percent the past two years, according to the latest Gallup poll.
Bevinfs concern is whether the state could end up being on the hook
financially if its revenues from premium taxes donft keep up with the expenses
associated with operating Kynect. That wasnft a problem in the exchangefs
startup years when the federal government paid all the costs for state
exchanges. But the federal money has run out, and Kynect, like other state
exchanges, must rely mainly on premium taxes to fund operations.
Several states including Vermont and Minnesota are struggling to raise enough
revenue through premium taxes. With less money, some state exchanges including
Rhode Island have greatly curtailed marketing to attract more enrollees. With
the dramatic drop in uninsured Americans nationally and the exchanges now more
well known, itfs unclear whether either will matter. More than 97 percent of
people have coverage in Rhode Island, according to Gallup.
Dan Schuyler, at health care consulting firm Leavitt Partners, said states
that run their own exchanges retain more control over their individual insurance
markets and how consumers experience the sign-up process. Californiafs exchange,
for instance, limits which insurers can participate to help it negotiate better
rates. Connecticutfs exchange requires all insurers to offer standardized plans
so itfs easier to compare rates and benefits.
gIf you take consumers out of Kynect and put them into the federal
marketplace, from a product perspective, nothing changes as consumers have
access to same plans,h said Schuyler, Leavittfs senior director of exchange
technology.
But executing such a move would cost Kentucky control over which nonprofit
groups provide consumer assistance and the statefs call center would likely move
out. Joel Ario, a partner with Manatt Health Solutions who oversaw the
exchangesf launch while at the federal Department of Health and Human Services,
said switching to the federal marketplace is the lowest-risk move for a state
and gcin theory the end user should not notice a differencec.in
functionality.h
The question of whether states should continue running their own marketplaces
should come down to whether states have the right technology and the funding to
keep them sustainable. But Ario said politics is too often at play.
State exchanges could lower their costs by using healthcare.gov for
enrollment while retaining other functions such as consumer assistance and
marketing. Starting next year, the federal government will charge state
exchanges to use its enrollment system.
Kynect has an annual budget of about $28 million, all funded by its 1 percent
assessment on health premiums. That charge would increase to 3.5 percent in a
federal exchange, and dismantling Kynect would cost the state an estimated $23
million in one-time expenses, said Audrey Tayse Haynes, head of Kentuckyfs
Cabinet for Health and Family Services.
Bevin takes office Dec. 8. The earliest that he could shut Kynect would be in
2017 because the health law requires a 12-month notice to the federal
government.
The technology work for decommissioning would take about nine months, state
officials said.
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