In order for states to self-fund their exchanges, beginning in 2015, they may tack a surcharge fee onto the income stream of agents and brokers, says Charles “Chip” Kerby III, owner and attorney of Washington-based Liberte Group, LLC.
Kerby spoke May 24 at the Washington Legislative Update held by the International Foundation of Employee Benefit Plans.
The Department of Health and Human Services pays all exchange costs through the end of 2014, but after that states must brace themselves to self-fund.
Kerby offers a list of possible post-2014 funding options aside from the surcharge. Likely candidates or targets of the revenue may include health insurance carriers selling products both on and off the exchange, as well as third party administrators. A state could also assess a 0.25% increase in its sales tax, or raise the highest income tax bracket by a similar amount.
Kerby adds that he does not believe money will come from user fees, so he expects that it will come from a variety of these different sources.
Additionally, he questions how the implementation process will play out.
“If these exchanges work, this entire system is going to work. But is your experience as a consumer going to be like your experience when you go to Amazon — seamless and easy — or is it going to be like your experience at the Department of Motor Vehicles?” Kerby jokes.
If an exchange is set up as a nonprofit entity instead of by a government agency, it can become very political. In such cases Kerby predicts certain questions will arise: Who’s in charge? Who appoints? What are their credentials and term lengths? And most importantly, how does a nonprofit coordinate with existing government agencies — each with its own bureaucracy?
“In the states, all hell is breaking loose because we got a very short timeline to do this," Kerby says. “We have a lot to do, you’ve got lots of different approaches, politics, bureaucracy within states.”
