State-run Obamacare exchanges face mounting financial messes. According to a recent Washington Post report, nearly half of all state-run insurance marketplace are struggling with lackluster enrollment and surging costs—a circumstance that is prompting them to raise fees or hand their system to the federal exchange. Washington State’s very own insurance marketplace happens to be one of these struggling state-run exchanges.
The Washington Health Benefit Exchange (WHBE) launched its insurance marketplace, Washington Healthplanfinder, with the help of billions of dollars in federal grants. These grants helped develop the exchange website and train workers. It’s money that was designated by the federal government for the purpose of setting up the exchange, not to keep it running. But, according to one federal agency, that’s not what the WHBE has been doing.
Last week, Daniel Levinson, the inspector general of the U.S. Department of Health and Human Services, sent a letter to the Centers for Medicare and Medicaid Services (CMS)—the agency responsible for issuing the grants. The letter warned that some states were “struggling with their exchange budget and illegally allocating federal funds to pay for operational costs.” Levinson singled out Washington State as one of the offenders.
Levinson questioned our state’s use of “$10 million in establishment grant funds to support operations” in part—as the Seattle Times reports—to “pay for printing and bank fees in the latter half of 2015.” Levinson asked CMS to “clarify what the grants can and can’t be used for to prevent their illegal use.”
According to Healthpathfinder spokesperson Michael Marchand, the exchange was merely stuck in the middle of a disagreement between two federal agencies and the problem has since been resolved. CMS “approved the grant and the exchange can use the money as planned.” Without the approval, the exchange would be in a bigger financial mess than is already faces.
As its revenue sources now stand, our state’s exchange cannot make ends meet. The Seattle Times,
“Washington has a plan to pay for its exchange through three revenue streams. First, all health-insurance premiums in Washington include a 2 percent state tax, and the revenue collected on exchange plans goes back to Healthplanfinder. Second, because Healthplanfinder is now also the portal for people to sign up for Medicaid, the exchange is reimbursed for those services with state and federal Medicaid dollars. And finally, the exchange charges insurance companies a per-month, per-person fee for everyone receiving insurance through the state’s website.”
Healthplanfinder’s revenue stream is heavily reliant on meeting its quota for healthcare enrollees—something the exchange has failed to do. During the second open enrollment period, the exchange needed 213,000 enrollees. Yet, even after extending the open enrollment period, it only cleared 170,000 enrollees. The Seattle Times,
“With the lower enrollment, the three sources come to roughly $101 million, leaving the exchange short $26 million, which would need to be made up, perhaps with a higher assessment or with money provided from the state general fund.”
Healthplanfinder’s poor enrollment performance forces it to become more reliant on the other two sources of revenue. Exchange officials asked state lawmakers for a whopping $127 million for its 2015-17 budget. Citing unresolved transparency issues, GOP lawmakers earmarked $85.9 billion in the state Senate budget. Democrats handed over $124 million in the state House spending package.
Considering the state of budget negotiations in Olympia, it is highly unlikely that exchange officials will get all the hard earned taxpayer dollars it wants. That leaves the assessment fee as the primary source of funding—a fee that “could increase from its current $4.19 per health plan to $13.66.”
Inevitably, that means an even higher premium for health care enrollees. Which, in turn, means that more people are likely to drop out of the exchange thereby exacerbating the financial problem.
Through the past two open enrollment periods, it has become clear that Washington’s state-run exchange is failing. Officials have—time and time again—made excuses for its poor performance. They have called the financial trauma inflicted on unsuspecting enrollees mere “glitches.” The latest excuse to explain their failure is to classify the exchange as a mere “start-up” that—as one official put it—faces all the problems most start-ups encounter.
Well, most start-ups don’t receive billions in federal grants during the course of two years to help them launch. If Healthplanfinder is a start-up, it’s a failed start-up—the Pets.com of Washington State, if you will.