Should Your State Consider Building a State-Based Exchange?

CMS recently released updated enrollment numbers and average premiums for plan year 2019. From this, it’s pretty simple math to determine a state’s assessment fees (the 3 percent it currently pays to Healthcare.gov to operate on the Federally Facilitated Marketplace (FFM) platform). In the years since the launch of the Affordable Care Act (ACA), many states have seen increases in insurance premiums. We believe that states paying more than $7.5M in annual assessment fees have the opportunity to both reduce their technology spend and lower premiums by moving off of the FFM and establishing a State-Based Marketplace (SBM). Lower premiums could also lead to higher enrollment. So, in effect, everybody wins.

Why would this be the case?

1. Private technology is just plain cheaper. When the ACA first launched and states were building exchanges, the technology was new, oftentimes cumbersome, and certainly very costly. Today, with several years of experience under their belts, private vendors can build modular systems for a fraction of the original cost of setting up an exchange. These savings go back to the state. For instance, Nevada estimates that in 2020, the 3 percent assessment fee would translate into approximately $12 million for the state; but with their own platform, operational costs will be closer to $6 million — a savings of 50 percent! 
2. By establishing a State-Based Marketplace (SBM), or state exchange, the State can exercise more control over rising premiums. (See research from The Commonwealth Fund suggesting SBMs have nearly 20 percent lower premiums than States on FFM/healthcare.gov.) Assuming the State has at least 100,000 enrollees in combination with average premium of $500/month (states like Tennessee, Pennsylvania, New Jersey, Virginia, and Wisconsin, to mention just a few, meet both criteria easily), the State will realize cost savings in comparison to the FFM assessment fees which carriers pay and pass on to the consumer in the form of higher premiums. The more enrollees, the more compelling the business case, and the bigger the savings.
3. As a result of setting up their own SBM, States wouldn’t just have the funds to provide better outreach, they will also have the data to fuel marketing efforts. The FFM does not provide any data for marketing efforts. Having granular data about insured and uninsured citizens will allow States to ultimately take advantage of the federally-funded tax credits available to the underserved (400% FPL) populations. Alternatively, or additionally, these savings can be used for a reinsurance pool, further lowering premiums.

Why make the move to a State-Based Marketplace now?

The move from FFM to SBM is much easier due to new policies that encourage States to leverage 1332 waivers, and the move is quicker due to the fact that end-to-end (call center, technology, and operations) solutions are readily available and private vendors with a proven track records (such as GetInsured) make the transition from FFM happen in less than a year.

Operating costs for States on the FFM are growing as a result of increasingly expensive reliance on Healthcare.gov. Worse, Healthcare.gov is built to support many states with an inflexible infrastructure that will not easily support policy flexibility.

A State-Based Marketplace can be more user-friendly for everyone. It can:

• Eliminate auto-renewal risk present with Healthcare.gov;
• Support shopping and enrollment for Medicaid buy-in, state subsidy or tax credits;
• Support the unique churn needs between Medicaid, Medicaid buy-in and QHPs;
• Provide administrators the data they need to target outreach efforts in particular counties, cities, towns;
• Provide multilingual language support where appropriate;
• Support workflow that gets users their insurance cards (an issue many states have seen in the past); and
• Enable advocacy with optimal use of the health plan wellness services.

What’s your state paying?

Select your state from the drop-down menu below to see what it’s currently paying to operate on the FFM.

Let’s take Utah as a real-life example:

Using the 2019 CMS average premium of $459/mo and roughly 195k enrollees. This makes assessment fees more than $32M in 2019. SBM costs are estimated at $23.2M, therefore Utah’s savings would be $9M annually or $45M over 5 years.

Obviously, there are significant differences in savings among states and some, particularly those with enrollment under 30,000 enrollees, may be better served by staying on FFM, if costs are the only consideration.

If you’re interested in exploring how a State-Based Marketplace can transform the health insurance market in your state, email GetInsured’s Business Development at hello@getinsured.com.