Troubled state-based exchanges face critical decision

A half dozen troubled state-based health benefit exchange marketplaces (Maryland, Massachusetts, Oregon, Hawaii, Minnesota and Nevada) have been clobbered by IT glitches that have hamstrung their eligibility and enrollment functions. This circumstance calls into question the exchanges’ viability going forward since under the Patient Protection and Affordable Care Act, they must be able to financially support themselves starting in 2015 based on fees paid by health plan issuers collected for individuals and small employer groups enrolling in coverage. Getting too few people enrolled in 2014 suppresses that fee revenue and produces a knock on effect of reducing fees that could have been generated by 2014 plan renewals this fall for plan year 2015.

Each of the states must now consider their plan year 2015 options since too little time remains to recover sufficient enrollments with the close of the 2014 open enrollment period only about a month away.

The default option is to allow the federal government to take over exchange operations – the course chosen by nearly three dozen states for 2014. The federal government could also designate a non-profit organization to run the exchange marketplace in the affected states. In addition, the states have the option under Section 1311(f) of the Affordable Care Act that permits states to form “regional or other interstate exchanges,” subject to federal approval. That raises the possibility that the affected states – three of them are in the West – could opt to form a western regional marketplace, possibly with the federal government acting as a partner at least initially.


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email or call 530-295-1473. 

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Frederick Pilot

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