Nearly half of the 17 state-run public health insurance exchanges are suffering financial difficulties with the chief culprits being high expenses and tepid enrollment, which rose just 12% compared with compared to a 61% increase for Healthcare.gov.

Several solutions are being pondered, says the report The Washington Post, including higher fees imposed on insurers that participate in the HIX marketplace, cost-sharing with neighboring states, calls for more funding and even switching to Healthcare.gov.

In addition, an Urban Institute report funded by the Robert Wood Johnson Foundation predicts that 9.8 million residents in the 20 states that did not expand Medicaid or take full responsibility for operating their exchanges would lose their 2016 coverage if federal subsidies for Healthcare.gov enrollees are eliminated. Such a ruling in King v. Burwell would mean those states miss out on $721 billion of federal funding from 2016 to 2025.

Also see: How King v. Burwell could shake out for employers

Healthcare.gov certainly represents a reasonable alternative to state-run exchanges that simply wasn’t available during the HIX enrollment’s maiden voyage, according to Robert Booz, a health care analyst with technology consultant Gartner.

“The big issue for a lot of exchanges is their economic sustainability,” he says, believing that scenario would be more of a quick-fix remedy. “Where are they going to get the operating capital they need for the out years?”       

After operating with federal grants to invest in software and hardware, as well as develop enrollment and billing capacities, state-run exchanges are expected to solely rely on the revenues they generate beginning in 2016, explains Henry J. Aaron, a senior fellow with the Brookings Institution. If push comes to shove, he wonders about “the possibility that the federal government will allow no-cost extensions so that the grant funds can be applied to development of software and hardware into early 2016.”

Also see: Will loss of ACA subsidies spur economic growth?

Aaron references the District of Columbia HIX as an example of preparing for a self-sustaining future. Rates are subject to city council approval and he believes “grant funds that the city has received will be sufficient to establish a smoothly running exchange for individuals and businesses with up to 50 employees, and that locally generated revenues will be managed starting next year.”

Another possibility is that some states that rely on Healthcare.gov “might elect to try and piggy-back on or use the technology from the better operating states” in the event that the U.S. Supreme Court rules against federal subsidies for Healthcare.gov enrollees.

“I don’t think that’s a problem for the state-run exchanges,” says Aaron. “It could be an opportunity, but I think that’s all quite secondary because the real effect of withdrawing the availability of tax credits in the federally managed exchanges will just be so much turmoil that Congress is going to have to step in. And where the chips might fall, even congressional action at that point, I think that uncertainty is the main thing that would affect the state-run exchanges.”

Register or login for access to this item and much more

All Employee Benefit Adviser content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access