Can state’s Obamacare exchange “live within its means”?

Eighteen months and two open enrollment periods since its launch, Washington’s Health Benefit Exchange continues to underperform. Enrollment and technical glitches remain a problem in year two, and the number of sign-ups lags expectations. That is threatening the exchange’s budget.

“There are always startup costs,” an industry observer reassured the Seattle Times recently. “Most businesses aren’t profitable the first or second year.” Keep in mind, though, that the exchange’s “startup costs” were covered by the federal government. That’s not what the exchange is struggling to pay for today.

No, its problems now involve covering its ongoing costs. Exchange leadership has been aware since its inception that the day would come when the exchange is expected to be self-sustaining. None of this came as a surprise.

Three sources of revenue
The exchange receives revenue from three main sources. From the Times:

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.

Now exchange leaders are talking about greatly increasing the monthly fee charged on each policy to help make up its budget shortfall, to the tune of over $13 per month per policy. That, of course, decreases the attractiveness of plans purchased through the exchange.

Exchange not adapting to budget realities
Last fall, exchange leaders proposed a whopping $147 million budget, well above the amount it was set to take in from taxes, monthly assessments, and Medicaid reimbursements. Even Democratic legislative leaders balked, and this winter they slammed the exchange’s budget presentation as “vague” and missing key details.

House Democrats, who were more generous to the exchange in their budget proposal, allocated $124 million, including $18 million from the general fund. That is a large additional subsidy for an agency that runs what is essentially Expedia for health insurance and which is already supported by pretty large per-policy fees and taxes.

It’s fairly easy to define what “living within its means” would look like for the exchange. That’s a reality that exchange leadership seems dead-set on ignoring.
-Rob McKenna

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Rob McKenna
Rob served two terms as Washington’s Attorney General, from 2005 to 2013. He successfully argued three cases before the U.S. Supreme Court and negotiated three of the largest consumer financial protection settlements in national history, all involving mortgage lending and servicing. He is a recognized leader in the development of consumer protections on the internet, in data protection and privacy regulation.