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You are here: Home / Anderson On Health Insurance / Advantages of state based exchanges

Advantages of state based exchanges

by David Anderson|  December 27, 201811:50 am| 10 Comments

This post is in: Anderson On Health Insurance

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Virginia’s governor is considering running a state based exchange for the Affordable Care Act. The Roanoke Times reports:

The group also likes the idea of creating a state-operated insurance exchange, which the General Assembly initially supported and then abandoned in 2011 at the recommendation of Gov. Bob McDonnell…

Several other states such as New Mexico and Nevada are considering leaving Healthcare.gov and moving to their own State Based Marketplaces (SBMS) in the next two years.

There are several reasons why this might be attractive. The biggest one risk pool composition.

Right now Healthcare.gov charges 3.5% of premium as the price to run Healthcare.gov. With that money, the feds are supposed to upgrade the system, buy server space, run phone centers, perform outreach and keep the entire process humming. Since January 20, 2017, the federal government has dramatically reduced advertising and outreach expenditures while still collecting the entire fee. The code base of Healthcare.gov is fairly stable at this point and the demand for server space is also stable as enrollment is slightly declining for three years in a row now. Healthcare.gov should have the money to spend on outreach. And they are not spending money on outreach.

Shafer, Fowler, Baum and Gollust have shown that engagement drives enrollment activities. Shafer and I have a forthcoming paper that shows immediate enrollment activity changes on Healthcare.gov due to changes in messaging regimes. We know that engagement works to drive marginal buyers to Healthcare.gov and away from Healthcare.gov whenever the political powers that be are in favor of one of those results. The SBMS, like California, New York, Massachusetts etc. have been spending money on engagement. They are seeing flat or increasing enrollment despite a negative federal messaging and support environment.

We can make a strong assumption that the people who are the most marginal of buyers and who will either buy or not buy an ACA plan conditional on outreach and messaging tend to be healthier and lower cost than average. More low cost people in a pool lowers average premiums and lowers federal advanced premium tax credits per insured individual. States that engage in aggressive outreach should, all else being equal, see a healthier risk pool and thus a lower benchmark premium. If Virginia was to buy an Exchange out of the box and run their own system, the exchange fee could either be held constant with far more local outreach being funded or it could be lowered while holding current outreach constant. That is an actuarial and political question as to what would buy on net lower premiums but that is the biggest play for a state based exchange.

The other major reason that a state may want to have their own exchange is that it is far easier to customize that portal to play nicely with other state portals and policies. Smooth transitions between Medicaid Expansion and Exchange plans may be a desired policy outcome. It is easier to achieve when both platforms are owned by the same entity. Updating verified income across social service programs and tax records may also be easier. Building a complex 1332 waiver with significant alterations to the current program design are probably easier on a state owned platform compared to Healthcare.gov.

These are some of the reasons why Virginia and other states may want to think about building out an exchange on their own or in collaboration with neighboring states. It gives them control and it offers a fairly low cost way to hold premium increases down.

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10Comments

  1. 1.

    Ohio Mom

    December 27, 2018 at 12:26 pm

    Meanwhile, the Ohio legislature is considering overriding several of outgoing governor Kasich’s vetos, including the one that maintains our Medicaid expansion.

    Kasich tried so hard to look moderate for his 2020 run for the White House.

  2. 2.

    ??? Goku (aka Amerikan Baka)  ??

    December 27, 2018 at 12:45 pm

    @Ohio Mom:

    Meanwhile, the Ohio legislature is considering overriding several of outgoing governor Kasich’s vetos, including the one that maintains our Medicaid expansion.

    Are you fucking serious? They’re still trying to destroy the Medicaid expansion, nearly a decade out, that hundreds of thousands of their citizens rely on? These assholes never quit.

    They need to understand that this is a settled political question. The Republicans in the Ohio General Assembly should focus on more important things, like properly investigating that online school scandal. Fat chance I know.

  3. 3.

    Yutsano

    December 27, 2018 at 1:20 pm

    @??? Goku (aka Amerikan Baka)  ??: That doesn’t surprise me. What will surprise them is how hard that expansion will be to reverse. A lot of the smaller, more rural hospitals in Ohio are only existing right now because of the expansion of Medicaid. There will be lawsuits.

    Also: remember the blowback Bevin got in trying things like this in Kentucky.

  4. 4.

    Ohio Mom

    December 27, 2018 at 1:21 pm

    Yeah, gerrymandering has screwed our fair state.

  5. 5.

    Luthe

    December 27, 2018 at 1:45 pm

    There are other advantages to SBMs, like the ability to lengthen the enrollment period. Here in CT AccessHealth decided to push the deadline to enroll to January 15th to allow more people to sign up. They also are constantly holding enrollment fairs in large cities during the enrollment period. Also, anyone who qualifies for HUSKY (Medicaid) gets additional information about signing up for benefits like food stamps, job training, etc.

    Now if only more places took Exchange plans…

  6. 6.

    stinger

    December 27, 2018 at 1:47 pm

    Thanks, David. Interesting and understandable!

  7. 7.

    Litlebritdifrnt

    December 27, 2018 at 1:49 pm

    It is sad to me to read stories like this when we in the UK are currently celebrating the 70th anniversary of the NHS. All medical treatment is free (unless you choose to go private) and all prescriptions are 8 pounds each unless you are over 60 in which case they are free. My prescription for my blood pressure meds varied between $90 and 300 a month depending on what the pharmacy decided to charge me (I had no insurance). With co-pays in the US my husband’s prescriptions were $300 a month. The cost now is nothing. No one in the UK goes bankrupt because of medical bills. The US is the richest country in the world, there is no reason that people should go bankrupt because of medical bills and no reason for people to die because they can’t afford medical treatment or medications. The NHS is not perfect by any means but it is still the gold standard around the world.

  8. 8.

    Mnemosyne

    December 27, 2018 at 2:05 pm

    California advertises our state exchange (Covered California) very, very heavily with really good TV commercials and lots of print advertising everywhere you look. Which makes it even more maddening that Twitter is currently infested with Berniebros insisting that PPACA was a total failure and nobody actually got coverage. ?

  9. 9.

    Sab

    December 27, 2018 at 4:23 pm

    @??? Goku (aka Amerikan Baka)  ??: Due to term limits, Ohio Republicans never learn anything. They do what their paymasters want.

  10. 10.

    Beth

    December 28, 2018 at 2:32 pm

    I second the robust nature of the ACA in California. They are also sensational in outreach. I haven’t even had a Covered California plan for 2 years, but I’ve gotten several text messages on my phone reminding me to sign up before the deadline if I need to. I’m really grateful to and proud of my state!

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