Under the Affordable Care Act (ACA), states have the option of operating their health insurance marketplace on the Federally Facilitated Marketplace (FFM or healthcare.gov), setting up a State-Based Marketplace (SBM), or using a blended model known as State-Based Marketplace-Federal Platform (SBM-FP). As states begin to seek cost savings or more local policy control, they are moving from the FFM and SBM-FP models to setting up their own exchanges (SBMs).

These implementations come with a unique set of technology challenges. The state’s choice of a technology platform in building a state-based marketplace impacts policy considerations, budgets, timelines, and overall success of an exchange.

Below we take a brief look at custom exchange builds, builds that leverage accelerators to reduce risk and development time, technology transfers from another state, open-source platforms, and systems that are delivered through software-as-a-service (SaaS). For more detailed information on each platform, download our white paper.


Custom Build

In the early days of state-based marketplaces after the passage of ACA in 2010, custom built solutions were the only viable way to deliver a workable exchange solution, but many failed to work as expected. Custom solutions face challenges when responding to ever-changing requirements and regulations, ongoing bug fixes, security updates, and additional features to promote operational efficiencies — all of which require continued investment beyond the initial implementation.

Lengthy development times can also be a challenge when developing custom solutions. The amount of time to design and develop a custom state-based marketplace solution with 100 percent of IT resources allocated to the build has been estimated at two to four years, depending on the resources and skills available. During this development time, states’ needs and policies can, and likely do, change, making the solution potentially obsolete by the time it is deployed.

For the most part, custom build solutions have proven to be too risky to stand up, and too expensive to be truly sustainable for the long term.



System integrators, who offer custom built solutions, often point to the use of accelerators to de-risk the implementation of a solution. Accelerators typically refer to pre-built tools or widgets that can be used as building blocks to develop some of the functionality that is required to deploy a new exchange and are frequently presented as out-of-the-box functionality. These accelerators can certainly reduce the development time needed for initial deployment of the exchange, but they don’t address the ongoing maintenance needs of the exchange and the ongoing cost of enhancing a custom solution to ensure that the needs of the state are met.


Technology Transfers

In some cases, vendors can “transfer” a platform from one state to another. This means that the source code from one state is copied and used as the basis to begin work on another state’s platform. While this may shorten the initial implementation timeline and seem like an efficient way for a new state-based marketplace to reuse an existing platform, in practice this process still requires the new state to take ownership of the code base, and to continue to invest to further develop and customize it to fit their needs.


Open Source-Based Custom Build

Open-source software is typically released into the public domain by a developer and made available for others to use and build upon as they see fit. This type of initiative works well for operating systems and widely used components with broad developer community support. For example, open-source projects such as the Linux operating system, a commonly used operating system, and MySQL, the second most widely used database server in the world, are largely successful due to their broad applicability and deep support from the developer community.1,2

Purpose-built state healthcare IT solutions such as exchanges do not have the broad developer support needed to maintain and enhance the platform. Such solutions demand client states make continued investments to improve or enhance the platform, since no financial incentive exists for independent developers or other institutions to invest in the platform. Core product improvements specific to the state’s requirements and enhancements driven by state or federal policy and regulatory changes will drive added costs and investment.


Software as a Service (SaaS)

SaaS is a methodology of delivering software services that has rapidly gained acceptance across industries. SaaS vendors deliver functionality “on tap” by deploying their software in the cloud and leveraging a common code base across clients. This approach is extremely efficient since it enables development, infrastructure, and other costs to be shared, and does not require clients to have large technical teams to maintain and support the platform. While many SaaS solutions make use of widely used open-source technology, the codebase is typically proprietary, and is maintained by the SaaS vendor. Providing a SaaS product that uses open-source technologies delivers an out-of-the-box exchange that benefits from open-source principles without requiring large investments from clients.

SaaS benefits include:

  • Reduced implementation timeline
  • Configurability
  • Policy flexibility
  • Ongoing and timely innovation
  • Lower costs

To provide some real-life examples of the benefits of leveraging a SaaS platform:

  • The Pennsylvania exchange (Pennie) increased the number of enrollees by 9.7 percent year-over-year and was able to offer lower premiums in its first open enrollment period as an SBM3.
  • Get Covered New Jersey plan selections for 2021 coverage increased 9.4 percent year-over-year, as the state successfully expanded access to health coverage through its new state-based marketplace, Get Covered New Jersey, during its first open enrollment period.4
  • Nevada Health Link saw a 6.2 percent decrease in premiums after switching from an SBM-FP state to a state-based marketplace.5

As states make moves to lower operating costs, increase policy flexibility and autonomy, and leverage product innovation to drive enrollments, SaaS state-based marketplace solutions are the platforms of the future. Expertise, security and compliance are automatically built into proven SaaS platforms in lieu of outsourced IT or staffing, which in turn frees up internal capacity to focus on other technology, operations and policy challenges.

  1. Linux vs. Windows usage statistics, May 2021
  2. DB-Engines Ranking – popularity ranking of database management systems
  3. Pennie BOD Strategic Planning Discussion
  4. Governor Murphy Announces Health Insurance Signups In New Jersey Surpass Previous Two Years
  5. Nevada Health Insurance