Nearly half of the 17 insurance marketplaces set up by the states and the District under President Obama’s health law are struggling financially, presenting state officials with an unexpected and serious challenge five years after the passage of the landmark Affordable Care Act.
Many of the online exchanges are wrestling with surging costs, especially for balky technology and expensive customer call centers — and tepid enrollment numbers. To ease the fiscal distress, officials are considering raising fees on insurers, sharing costs with other states and pressing state lawmakers for cash infusions. Some are weighing turning over part or all of their troubled marketplaces to the federal exchange, HealthCare.gov, which supposedly now works smoothly. The actuality of how smoothly the fed program runs is for another time.
The latest challenges come at a critical time. With two enrollment periods completed, the law has sharply reduced the number of uninsured and is starting to force change in the nation’s sprawling health-care system. But the law remains highly controversial and faces another threat: The Supreme Court will decide by the end of June whether consumers in the 34 states using the federal exchange will be barred from receiving subsidies to buy insurance.
If the court strikes down subsidies in the federal exchange, the states that are struggling financially might be less likely to turn over all operations to the federal marketplace, because they will want to make sure their residents do not lose subsidies to help them buy insurance. If the court upholds subsidies for the federal exchange, some states might step up efforts to transfer operations to HealthCare.gov.
“Everyone is looking at all the options,” said Jim Wadleigh, executive director of Connecticut’s exchange, considered one of the most successful of the state marketplaces. While states are “trying to find ways to become self-sustaining,” he added, it is an open question whether they will succeed.
States have received nearly $5 billion in federal grants to establish the online marketplaces used by consumers to enroll in health plans under the ACA. The federal funding ended at the beginning of the year, and exchanges now are required to cover their operating costs.
Most exchanges are independent or quasi-independent entities. For most, the main source of income is fees imposed on insurers, which typically are passed on to consumers. Because those fees are based on how many people have signed up (a larger enrollee pool means lower individual costs), strong enrollment is critical to an exchange’s fiscal success.
But for the recently completed open enrollment period, sign-ups for the state marketplaces rose a disappointing 12 percent, to 2.8 million people. That compared with a 61 percent increase for the federal exchange, to 8.8 million people, according to Avalere Health, a consulting firm. States with the smallest enrollment growth are among those facing the greatest financial problems.
Most exchanges have operating budgets of $28 million to $32 million. One of the biggest cost drivers is call centers, where operators answer questions and can sign people up. Enrollment can be a lengthy process — and in several states, contractors are paid by the minute. An even bigger cost involves IT work to correct defective software that might, for example, make mistakes in calculating subsidies.
“A lot of people are going to want to know: What happened to all those taxpayer dollars that went to these IT vendors?” said Sabrina Corlette, project director of Georgetown University’s Center for Health Insurance Reforms.
To shore up their finances, state exchanges are looking at an array of options, although they probably will hold off on making major decisions until after the Supreme Court rules.
“They are literally looking at huge gaps, and they are not sure how they are going to get through the year,” said Caroline F. Pearson, a senior vice president at Avalere Health.
In Minnesota and Vermont, officials are so fed up with costly technical problems in their exchanges that they are considering handing over some or all of their functions to the state or federal governments. Lawmakers in Oregon abolished the state exchange in March, long after it was essentially turned into a gateway to HealthCare.gov.
In Rhode Island, the legislature is considering a fee on health plans that would go up or down according to the exchange’s operating costs.
In Hawaii, which has one of the most problem-plagued marketplaces, the exchange needs $28 million to fund operations until 2022, when it is projected to become self-sustaining, officials say. Without the money, “it’s going to be very difficult to keep the doors open,” said Jeff M. Kissel, executive director of Hawaii Health Connector.
As a backup plan, officials are talking to the Obama administration about a possible federal takeover of the marketplace, said an administration official who spoke on the condition of anonymity because the talks are ongoing.
Some states are exploring novel ways to raise funds. The Connecticut exchange is offering to help other marketplaces — for a price. It plans, for example, to renegotiate its call-center contract and share its strategy with other states that use the same contractor, Wadleigh said.
Some state lawmakers express frustration that exchange officials either do not know whether their marketplaces will eventually be self-sufficient or are reluctant to say.
“Basically, the exchange is teetering, and the question is, ‘Can this be shored up?’ ” said Republican Sen. Ellen Roberts, who chairs the committee that oversees Colorado’s exchange board. The cost of running the exchange’s call center is expected to reach $21.3 million for this year. The previous estimate was $13.6 million.
When the ACA was enacted, Democratic governors pressed to create their own exchanges to signal their support for the law and to assert their own authority. Republican governors refused to set up exchanges as “a sort of badge of honor in opposing Obamacare,” said Larry Levitt, a senior vice president at the Henry J. Kaiser Family Foundation. But now, decisions probably will be made on more pragmatic grounds. “It will come down to more of a dollar-and-cents decision,” he said.
Some critics say the states’ problems show that supporters of the law underestimated the practical difficulties of setting up the exchanges. The states are facing “execution problems more than political resistance problems,” said Thomas P. Miller, a health-care policy expert at the American Enterprise Institute.
In Vermont, where the system’s cost is projected to balloon to almost $200 million by the end of the year, officials are eyeing a move to the federal marketplace if things don’t improve. Officials from Vermont, Rhode Island and Connecticut met recently to explore banding together in some sort of regional effort.
In Maryland, where the exchange’s technology problems were so daunting that officials turned to Connecticut for help, officials expect to have enough revenue to cover operations for the fiscal year that begins July 1. If not, the exchange would need to ask the governor for more funds.
Much will depend on how much the call center costs, said Andy Ratner, a spokesman for the marketplace.
In Colorado, Connecticut, Kentucky, Maryland and the District, fees to support the exchange are imposed on plans sold on and off the marketplaces. In the District, about $25 million of the exchange’s $28 million budget comes from user fees assessed on insurance products not offered on the exchange. The exchange budget would increase to $32.5 million in the budget year beginning in September under the mayor’s proposed plan. Debra Curtis, deputy director of the exchange, said the marketplace estimates it will raise about $28 million from the assessments and “use existing federal grants for ongoing implementation.”
Even if some state exchanges wind up handing the reins to HealthCare.gov, doing so is not free. Each exchange would have to be made compatible with the federal marketplace at a cost of about $10 million per exchange, Wadleigh said.
One other aspect of this expansion of the exchange based system, which is mainly a Medicaid system, is who is going to care for all these patients? The poor payment through Medicaid doesn’t allow many practices to accept more and more of these patients. Remember also that the Supreme Court just stated that physicians cannot sue the state Medicaid systems to force at least a cost of living increase in reimbursements. Remember that in order to care for the Medicaid and Medicare patients the practices/physicians have to “invest” in computers and computer software and maintenance costs, which are not covered by the minimal if any increases in reimbursements that occasionally are increased to the poor reimbursements for care.
Also, consider the reports on emergency room visits, which the designers of the Affordable Care Act thought would decrease with the access to primary care practices. Three-quarters of emergency physicians say they’ve seen ER patient visits surge since Obamacare took effect — just the opposite of what many Americans expected would happen.
A poll released today by the American College of Emergency Physicians shows that 28% of 2,099 doctors surveyed nationally saw large increases in volume, while 47% saw slight increases. By contrast, fewer than half of doctors reported any increases last year in the early days of the Affordable Care Act.
Such hikes run counter to one of the goals of the health care overhaul, which is to reduce pressure on emergency rooms by getting more people insured through Medicaid or subsidized private coverage and providing better access to primary care.
A major reason that hasn’t happened is there simply aren’t enough primary care physicians to handle all the newly insured patients, says ACEP President Mike Gerardi, an emergency physician in New Jersey.
“They don’t have anywhere to go but the emergency room,” he says. “This is what we predicted. We know people come because they have to.”
Experts cite many root causes. In addition to the nation’s long-standing shortage of primary care doctors — projected by the federal government to exceed 20,000 doctors by 2020 — some physicians won’t accept Medicaid because of its low reimbursement rates. That leaves many patients who can’t find a primary care doctor to turn to the ER — 56% of doctors in the ACEP poll reported increases in Medicaid patients.
Emergency room usage is bound to increase if there’s a shortage of primary care doctors who accept Medicaid patients and “no financial penalty or economic incentive” to move people away from ERs, says Avik Roy, a health care policy expert with the free market Manhattan Institute.
“It goes to the false promise of the ACA,” Roy says, that Medicaid recipients are “given a card that says they have health insurance, but they can’t have access to physicians.”
Complicating matters, low-income patients face many obstacles to care. They often can’t take time off from work when most primary care offices are open, while ERs operate around the clock and by law must at least stabilize patients. Waits for appointments at primary care offices can stretch for weeks. And are the primary care as well as specialty physicians accepting these patients to there practice?
Case in point, I had a call from a woman who just got her new insurance and wanted me to perform a surgical procedure called a reduction mammoplasty or a breast reduction. My staff had to enlighten this person that I don’t accept her insurance at all for any surgical procedures. Why? Because the payment or reimbursements from the new insurance, Medicaid, the exchange based health care system would be about 10 cents on the dollar or about $400 per side for a 4 ½ hour procedure plus 90 days of post operative care.
Now the hospitals in states like Maryland don’t really feel the impact, as do the physicians. Why because Maryland is an all payer model where they don’t see the difference in payments from different insurance companies or state versus federal or state run programs. Maryland is the research case for an all payer or model where the hospital or medical system a yearly fee to care for patients. Is this good?
It forces hospitals to make financial decision in caring for patients; some I’m not sure are the best for the patient. Keeping patients out of the hospital makes sense in this model, which should promote quality home or out patient programs. We need good outpatient care models… and care givers to monitor and deliver health care to all of these patients. Who will care for these patients, since less people are finding this vocation not as enticing as our fathers and grandfathers.
We can double or triple the number of Affordable Care Act enrollees, but we need to strategize how and who care for these enrollees. We need to complete the equation of the future health care system. How best do we educate the needed physicians and who pays for the potential physicians and whether the physicians are the need or do we educate more physician assistants and nurse practitioners?