States Looking to Run Their Own Health Insurance Marketplace See Opportunity for Funding, Flexibility
The Affordable Care Act (ACA) brought about landmark reforms, including the requirement for states to establish insurance marketplaces to facilitate the sale of comprehensive health plans. The law anticipated that states would largely elect to run their own marketplaces, but offered a federal fallback option. After evaluating the state-based marketplace model, and the variants allowing states to have partial control over their marketplace, most states opted for the federal marketplace. But recently, some have expressed interest in transitioning away from the federal model.
States Use Range of Models to Run Marketplaces
The ACA’s marketplaces currently operate under an array of models. During the initial enrollment period, marketplace websites, including the federal platform HealthCare.gov, experienced technology failures that dampened inaugural enrollment. In some states, elected officials faced political pressure to disassociate from the ACA. As the new law experienced growing pains, the state insurance marketplaces became an impractical operation for some states and a political liability for others, and spurred new hybrid marketplace models that allow states to shift some responsibilities to the federal government. Currently, states can house the entire marketplace operation, including the eligibility and enrollment platform, at either the state or federal level; run their own marketplace but use HealthCare.gov as their platform; or operate as a federal marketplace but conduct plan management tasks. As such, after the tumultuous marketplace launch, four states that initially ran their own enrollment websites ultimately transitioned to the HealthCare.gov platform (but otherwise maintained their state marketplace status), and Hawaii eventually joined the federal marketplace.
More States Are Considering Running Their Own Marketplaces, Platforms
Since the ACA went into effect, the marketplaces have matured and the federal policy landscape has changed. In recent years, the Trump administration slashed funding for advertising and consumer assistance for the FFM and shortened the annual enrollment period, reducing visibility and critical enrollment resources. A report by the Government Accountability Office found fault with the federal government’s open enrollment management. Despite its poor performance and enrollment budget cuts, the federal government raised user fees for SBM-FPs. In light of these changes, and along with improved technology options and other incentives, several states are contemplating or going forward with plans to run their own marketplaces.
States See Greater Flexibility, Financial Incentives to Running Their Own Marketplaces
State marketplaces offer opportunities for flexibility and autonomy. States on the FFM have little recourse when confronted by federal actions that undermine enrollment efforts. In New Jersey, an FFM state transitioning to an SBM, state officials have noted that the state has been “subject to the whims of the Trump administration and directly impacted by its efforts to damage and destabilize the market.” Although SBMs are subject to many federal policy changes, their authority over certain marketplace aspects, such as special enrollment periods or advertising and outreach, gives them more options to boost and maintain enrollment.
State-based marketplaces can capture user fees. Another reason states are considering transitioning to their own marketplace is to avoid paying the federal platform’s user fee and instead keep the premium assessment in-state. Nevada, an SBM-FP transitioning to its own platform, anticipates that keeping the user fee in-state will save the marketplace $19 million by the end of the 2023 fiscal year. Pennsylvania, which has taken steps toward transitioning from the FFM to an SBM, hopes to capture the user fee, improve efficiencies, and put the savings toward a state reinsurance program.
State enrollment platforms can be customized and provide useful data. State-run platforms are more customizable than HealthCare.gov. Oregon, which is assessing the feasibility of operating its own platform, has cited the one-size-fits-all nature of HealthCare.gov as an obstacle. States that run their own websites have the opportunity to tailor them to their circumstances, such as integrating enrollment in other state programs or extending the enrollment period, a strategy that has proved to be successful. State websites also provide access to data about who is and is not enrolling in marketplace coverage. This was a key reason that New Mexico, an SBM-FP, decided to transition to a full SBM.
Not every state will be able to operate its own marketplace. Even with the many opportunities it presents, building a state-based marketplace and online platform is a significant undertaking, requiring time and state resources, including an up-front financial investment. All of the ACA’s marketplaces rely on a certain amount of market stability to survive, and further federal attempts to undermine the ACA could destabilize marketplace coverage. Most states publicly considering a transition to an SBM are proceeding with caution, particularly those like Oregon that have battle scars from the launch of their original online platforms. Nevada will be the first to roll out a new state website, with the introduction of its enrollment platform set for the next open enrollment period. If they are successful, more states may consider moving away from HealthCare.gov, but at least in the near term, most states are likely to continue to rely on the federal marketplace.