March 26, 2015 -- Three Democratic governors have become so exasperated by flaws in their health law insurance marketplace, or exchange, websites that they took steps this month that could lead to the federal government assuming control over all or part of their operation. More states may follow.
Oregon Gov. Kate Brown signed a bill on March 6 that have her state's Cover Oregon exchange use the same computers that run the federal government's healthcare.gov—after the state spent millions of dollars to fix the site and fired the contractor that built it. In a March 16 letter to lawmakers, Minnesota Gov. Mark Dayton wrote that he wants a task force to examine the long-term financial sustainability for the state's MNsure exchange. And Vermont Gov. Peter Shumlin said March 20 that if the new contractors setting up the Vermont Health Connect exchange don't have it ready by October, the state may take steps to move residents to the federal marketplace.
"Before 2014, a lot of the blue state governors saw it as politically advantageous to get out front and take ownership of the ACA and their state marketplaces," said Larry Levitt, a senior vice president at the Kaiser Family Foundation. "At this point it's not clear what are the advantages for states running their own marketplaces."
Thirteen states plus the District of Columbia are running their own exchanges, called for in the Affordable Care Act (ACA), where residents can purchase health insurance. New Mexico, Nevada, and Oregon opted to run exchanges that provide outreach and customer service, but allowed the federal government to manage the information technology supporting the website.
Sabrina Corlette, a senior research fellow with the Georgetown University Center on Health Insurance Reforms, said state-run marketplaces are spending millions of dollars to keep afloat.
"Unfortunately, with IT, you can't just build a site and walk away," she said. There are "not only regular maintenance costs but states have to sink a lot of money into significant upgrades."
Corlette said it's possible that other state exchanges will follow New Mexico, Nevada, and Oregon to use the federal healthcare.gov exchange's backend technology to support their sites. Hawaii and Rhode Island, for example, may do so because their small populations make it difficult to generate enough revenue to sustain the exchanges, Corlette said.
Dan Schuyler, a senior director for Leavitt Partners, a health care consulting firm, said that despite Oregon's woes most state marketplaces improved their performance during this past enrollment period. He said they had more time to prepare and the sites were functioning better than last year. He argues that the state exchanges have the advantage of being able to have more control of the plans on their site than they would if they relied on healthcare.gov.
Relying on the federal exchange's technology might be an option for states that haven't built their own site but "the federal platform is not going to be free forever," Schuyler said.
Nevada, which was one of the first states to set up an exchange supported by healthcare.gov, has been told by the Centers for Medicare and Medicaid Services that it will have to start paying for the support in 2017. Silver State Health Insurance Exchange officials wrote in a March 12 report that they will work with CMS to calculate how much the state will have to pay . The board for New Mexico's health exchange is also trying to pitch a "rental" fee to CMS for continued use of the federal site.
"If supported state marketplaces are going to have to pay you can almost assume the federal government will have to pass on the cost to federally facilitated marketplace states as well," Schuyler said.
Tom Miller, a resident fellow with the American Enterprise Institute said that there's not really any difference between running a state exchange versus being part of Healthcare.gov. He said the main advantage states with an exchange have right now is that their residents would be able to keep their subsidies if the Supreme Court rules that citizens in states without their own sites cannot receive them.
The court heard oral arguments in that case, King v. Burwell, on March 4. The case examines whether the ACA can give subsidies to residents of the 34 states that didn't set up health insurance exchanges. An estimated 13.4 million people could lose the subsidies if the court strikes them down, according to a Kaiser Family Foundation analysis.
The pending decision and potential lost subsidies has state lawmakers in Indiana, Maine, Missouri, New Hampshire, New Jersey, Ohio, Pennsylvania, Tennessee, and Texas weighing bills to set up their own marketplaces, according to the National Conference of State Legislatures.
Levitt said it's too soon for states to decide if they'll keep using healthcare.gov or create their own marketplaces in the wake of the high court ruling this summer.
"States might talk about moving ahead but logistically there's not a lot they can do right now," Levitt said. "The aftermath of a court decision for the challenger would be so unpredictable that I think states will wait to see how it plays out. No one knows what rules might be to constitute marketplace."