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May 25, 2015

Almost Half of State Health Insurance Exchanges Are Fighting For Survival

IPI expert referenced: Merrill Matthews | In The News | Media Hit
  Heartland Institute

By S. T. Karnick

Almost half of the 17 health insurance exchanges set up by the states and the District of Columbia under the Affordable Care Act (ACA), also known as Obamacare, are in trouble financially, The Washington Post reports.

The setbacks are creating fiscal headaches for state officials, just five years after the passage of President Barack Obama’s massive health care reform bill.

Many of the exchanges are dealing with rising costs, especially those related to inefficient technology, expensive customer support centers, and unexpectedly low enrollments.

To stave off financial crisis, state officials are considering a number of solutions, such as raising fees on insurers, cost-sharing with other states, and begging state lawmakers for a quick shot of cash. Others are looking at turning over the whole enterprise to the federal exchange HealthCare.gov.

Enrollment Short of Predictions

Dr. Roger Stark, a health care policy analyst at the Washington Policy Center and a retired physician, says many state exchanges were set up as public-private partnerships and were required to be financially self-sufficient, but enrollment for most exchanges has fallen short of predicted levels.

“Premium fees to support the exchanges have consequently not met goals,” Stark said. “Washington State, where individual-market enrollment is at 60 percent of [the] predicted [level] and 80 percent of overall enrollees are in Medicaid, is an excellent example.”

Universal Aspirations, Financial Nightmares

Several mostly blue states jumped on the health insurance exchange bandwagon as a way of showing support for Obamacare, says Merrill Matthews, a resident scholar with the Institute for Policy Innovation.

Something similar happened in 1993 and 1994 with Clintoncare, Matthews says. Several states passed their own versions of the Clinton health care proposal—which never passed in Washington, DC—explaining they were going to reduce the number of uninsured and thereby save so much money they eventually would be able to provide universal coverage for all their residents.

“Those universal-coverage dreams turned into financial nightmares, and every one of those states eventually dramatically modified, scaled down, or eliminated their plans,” Matthews said.

“It’s entirely possible we will see something similar with health insurance exchanges, though what direction those changes take would depend on the Supreme Court’s June ruling,” Matthews said, referring to the decision in King v. Burwell. In King, the plaintiffs are challenging the IRS’ decision to provide subsidies for insurance purchased through federal exchanges in defiance of the explicit wording of the ACA.

‘Doomed from the Start’

Greg Scandlen, founder and director of Consumers for Health Care Choices and a senior fellow at The Heartland Institute, which publishes Health Care News, says the situation is another example of the federal government’s interference in the U.S. economy.

“Policy wonks sit around a table in Washington, DC and make ambitious plans for ruling the world without any understanding of what it takes to run a business, in this case, a health insurance exchange,” Scandlen said.


 

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