The Woes of State-Based Exchanges

What do Hawaii, Nevada, New Mexico, and Oregon have in common? They each established their own, state-based Obamacare exchanges – and they all failed. Kentucky will join the ranks after announcing that they will close down their state exchange by the end of 2017.

In a recent report entitled Implementing Obamacare: A Review of CMS’ Management of the State-Based Exchanges prepared by the Energy and Commerce Committee, the common factors causing the failure of the SBEs are lower-than-expected enrollment and higher-than-anticipated costs. In addition, younger, healthier people have failed to enroll at the rate expected while older, sicker people joined in unexpected numbers. Technology also played a part according to the report, which cited various technological issues in using the federal website, as well as issues in navigating individual state’s websites.

In testimony before the Energy and Commerce Subcommittee on Oversight and Investigation last December, CMS Acting Administrator Andrew Slavitt did not display confidence that the remaining SBEs would be around for the long haul. In 2015 the committee started an investigation into the failures of the SBEs and examined CMS’s oversight of the more than 4.6 billion funding allocated for the administration of the SBEs. The committee found issues with CMS’s handling of the grant money and found that CMS’s failure to meet its regulatory responsibilities resulted in federal tax dollar waste.

The fate of the remaining 12 SBEs are in question, as the report indicates that CMS “appears to be encouraging SBEs to close and join the federal exchange…”

Highlights of the Findings:

• As of September 2016, every SBE still relies on federal funding 20 months after they were supposed to be self-sustaining by law
• Pay-per-enrollee schemes are prohibited in federally facilitate exchange state, but CMS allows them in SBEs in order to increase enrollment numbers.
• CMS failed to enforce its own rules by not recovering misspent dollars identified by the Health and Human Services Inspector General.
• Beginning in 2017, CMS will offer a reduced rate of 1.5 % to SBEs to use healthcare.gov at the expense of federal tax payers.
• Kentucky was the only SBE to comply with the PPACA requirement that all SBEs publish the costs associated with operating its exchange on the internet, and the amount lost to waste, fraud, and abuse.

For a review of the full report click herehttps://energycommerce.house.gov/sites/republicans.energycommerce.house.gov/files/documents/114/analysis/20160913Review_of_CMS_Management_of_the_State_Based_Exchanges.pdf