After the close of the 2015 health insurance open enrollment period, the federal marketplace boasted a 61% increase in sign-ups on healthcare.gov. But the 14 state exchanges had little to talk about, posting a meager 12% increase in enrollments – just 2.8 million new people.1
The lack of sign-ups means most states did not produce enough income to stay sustainable – if they were not living on federal grants or other funding to help keep the lights on. But federal aid ends in 2016, and state exchanges will have to survive on their own, or find alternative options. Cash flow is one of the reasons New Mexico, Nevada and Oregon have already dumped their state exchange enrollment and now send residents to healthcare.gov. To make state exchanges sustainable, they will need to go beyond cutting marketing budgets, and increase fees imposed on consumers who purchase health insurance on the marketplace exchange.
Every state charges fees at a flat rate per month or a percentage based on the health insurance plan monthly cost. Some states charge both a flat rate and a percentage. Many times the exchanges make the health insurance carrier pay the fee, but some charge the consumer directly. If a carrier pays, they put the cost back into the health insurance plan, making the fee the individual’s responsibility. In the states of Colorado, Connecticut, Kentucky, Maryland and the District of Columbia, exchanges charge the fee on both on-exchange plans and off-exchange plans.
It’s important to note that healthcare.gov also charges consumers 3.5% of the healthcare plan’s premium to enroll on either on-exchange or off-exchange plans. There has not been an indication that the federal marketplace will increase its fee in 2016, but it will certainly be up for debate in the near future.
To find out what is happening on your state exchange, here’s a breakdown of the fee assessment structure in each state currently:
Fee: $13.95 per member per month
California has cut its advertising and outreach budget for 2015, as well as its information technology services that were needed when Covered California was initially being built. This is all part of California’s goal to become self-sufficient by 2016. They will use the last $100 million of reserve money from the federal government this year, so it’s imperative for California to break even in 2016. With advertising and outreach budgets already slashed, where will the California exchange get money to continue running in the black? The monthly administrative fee could be the easiest target, forcing consumers to pay even more for their state exchange in 2017.
Fee: 1.4% fee based on the plan’s monthly cost, plus $1.25 per member per month fee in 2015 (which is a drop from $1.80 per person due to high enrollment rates). In 2016 the percentage fee will increase to 3.5%. The per member per month fee is collected on both on-exchange and off-exchange plans, but the percentage fee is only collected for on-exchange plans.
Fee: 1.35% fee based on the plan’s monthly cost for on-exchange and off-exchange plans
One of the lowest rates of any state, Access Health CT has Connecticut’s exchange running on solid financial footing. However, increases to the assessment fee Connecticut collects for running the exchange’s administration is currently under discussion for increases. There are two proposals: 1) Increase the fee to 1.5% in 2016 and again hike the fee up to 1.65% in 2017; or 2) Increase the fee to 1.65% starting in 2016. The increases would help Access Health build a nine-month reserve. Access Health is also in talks with other states to help bolster their struggling technology infrastructures to fund Connecticut’s administrative exchange costs. Maryland is already paying Access Health to run part of its exchange.
Fee: 2% fee based on the plan’s monthly cost
Fee: 1.5% assessment fee in 2015, increasing to 1.99% in 2016
Fee: 1% fee charged to health insurance companies in 2015 on both on- and off-exchange plans
Fee: 2% fee based on the plan’s monthly cost on both on- and off-exchange plans
Fee: 2.5% fee based on the plan’s monthly cost
Fee: 3.5% fee based on the plan’s monthly cost
Fee: $13.00 per member per month
Fee: No fee currently, but the New Mexico exchange board passed a financial subsidy plan in late December 2014 to assess New Mexico insurers that offer major medical plans on- and off-exchange.
Fee: No fee today, but it is currently under debate. New York’s exchange is currently funded by state appropriations. New York Governor Andrew Cuomo has proposed an added tax to both on-exchange and off-exchange health insurance plans that is less than $25.
Fee: $9.66 per member per month
Fee: No fee, but the exchange board is currently debating whether to move the state exchange to healthcare.gov
Fee: No fee today, and a long-term funding mechanism for the exchange has not been determined. State dollars are currently funding the Vermont Health Connect exchange.
Fee: 2% fee based on the plan’s monthly cost plus $4.19 per member per month fee in 2015. The per member per month fee will increase to $13.66 per member per month in 2016.
Fee: 1% fee based on the plan’s monthly cost on both on- and off-exchange plans
For residents of California, Hawaii, Idaho, Massachusetts, Minnesota, Nevada, Oregon and Washington, where they only charge the assessment fee for on-exchange healthcare plans, consumers should look at the opportunity to buy plans off the exchange, especially if they do not qualify for a tax subsidy to help fund their health insurance plan. Here’s why:
- Without the fee, the net cost for the health insurance plan is less overall.
- Off-exchange plans typically have a broader doctor network
- Plans outside the marketplace take half the time to enroll in since personal income information is not required.
Looking at off-exchange plans is always a good idea, no matter what state you reside in. It’s important to know every single option you have available when shopping for health insurance.
1 The Washington Post. “Almost Half of Obamacare Exchanges Face Financial Struggles in the Future.” Lena Sun and Niraj Choshi. May 1, 2015.