States crafting HIX financing

Officials looking to member fees to pay for operating new online marketplaces
By Anthony Brino
10:05 AM

State health insurance exchanges are putting together financing and revenue sources, with many likely relying on insurer fees, as long-term state or federal support remains uncertain.

The Colorado Health Benefit Exchange is aiming to create multiple revenue streams, with the board approving a 1.4 percent premium fee and now urging lawmakers to pass legislation permitting a $1.80 per member monthly fee for up to three years.

A bill allowing the fee would also offer up to $5 million in tax credits to insurers that contribute a similar amount to the fund, similar to Colorado’s funding framework for its high risk insurance plan now being phased out.

[See also: HHS delays deadline for health insurance exchanges.]

The Colorado exchange, led by executive director Patty Fontneu, a benefits consultant and former COO of the law firm Holme Roberts & Owen, is estimated to need up to $24 million annually for its operations. The exchange was awarded two federal grants totaling about $60 million, only about $15 million of which was spent as of December 2012.

Other states are adopting premium fees closer to the maximum that will be imposed by the federal exchange, 3.5 percent.

In a state with relatively high government debt, the Connecticut HIX, called Access Health CT, has been keen to note on its website that it will not be funded with state dollars (something Covered California stresses as well). The HIX is running on federal funds through 2014, and it’s likely going to have a premium fee of up to 2.8 percent.

With an estimated 360,000 uninsured residents in Connecticut, Access Health CT is going to be on the smaller side in its membership. Even so, implementation — or the pace of it, combined with the backdrop to state budget realities in Connecticut — has been such that Access Health CEO Kevin Counihan, the former chief market officer at the Massachusetts Health Insurance Connector Authority, has told the federal government the staff won’t be implementing any new federal regulations after March, until they’re sure the user interfaces are ready to work, which they’re testing in June.

[See also: Health insurance exchanges mired in political battle.]

The New York Health Benefit Exchange, meanwhile, has received about $370 million in federal funding and will be enrolling an estimated 1 million individuals and small business employees.

Created as a program of the Department of Health, with five regional advisory committees, the exchange is being built with federal funds and is required to be self-sustaining by 2015. The exchange staff is currently considering long-term financing options, as directed by its establishing law.

In Minnesota, Democrats in the house and senate disagreed over whether the exchange, now called MNsure, should be funded by premium fees or from the state’s tobacco sales tax fund, which critics of that idea said basically meant the state general fund. In the reconciled bill the Minnesota governor signed into law in March, MNsure will be financed by a premium fee of up to 3.5 percent, along with the remaining dollars from about $110 million in federal grants.

The Silver State Health Insurance Exchange in Nevada recently finalized long-term financing plans with a $8.04 per member monthly fee on health plans. In its annual report, Nevada exchange officials expect that insurers will likely build the fee into premiums and that “the fee will generally be paid by the advance
premium tax credit for individuals” with incomes between 100 percent and 400 percent of the federal poverty level.

In Kentucky, a traditionally conservative state with a Democratic governor and majority legislature, the Kentucky Health Benefit Exchange is still considering financing mechanisms (with tobacco settlement funds being floated as one source), and like other HIXs it has to be self-sustaining by 2015. Housed at the Cabinet for Health and Family Services, the exchange is permitted by the state to place a premium fee of 1 percent on health plans, but has not made any final decisions.

Exchange executive director Carrie Banahan, a long-time state employees who’s worked in the insurance and Medicaid departments, told the Associated Press that the 1 percent fee would probably generate about $26 million annually, which may or may not be enough to sustain operations. The exchange has received about $252 million in federal grants, and so far spent about $35 million on staffing and IT.