Last month, the Board of New Mexico’s health insurance exchange voted to transition from HealthCare.gov to a state-based exchange. The state will undertake the task of building its own eligibility and enrollment platform with the hopes of launching a website in time for the 2021 plan year. This is the same exchange that, in 2015, called the federal platform HealthCare.gov the “safest, most risk-free way to proceed.” So, what changed?
The ACA’s marketplaces got off to a rocky start. When the exchanges first launched, HealthCare.gov along with numerous state websites experienced substantial technological failures. Some states, such as New Mexico, decided that building and operating an eligibility and enrollment platform wasn’t worth the time or money, and either shut down or ceased developing their websites, instead directing consumers to HealthCare.gov.
The Affordable Care Act gave states the option to run their own exchange
Under the Affordable Care Act (ACA), states can opt to run their own private health insurance marketplaces or use the federally run marketplace. States that operate their own marketplace take on myriad responsibilities, including plan management, marketing and outreach, consumer assistance, and financing, while states on the federally facilitated marketplace (FFM) defer to the federal government for most, if not all of these tasks. Both paths offer options for states to take on more or less responsibility; some states on the FFM conduct plan management (although the federal government is legally responsible for all marketplace functions), and some state-based marketplaces (SBMs) have elected to use the federal government’s enrollment platform.
Here are some key distinctions between the different marketplace models:
Comparison of Marketplace Models
|Model||State conducts plan management||State assumes responsibility for outreach, marketing, consumer assistance||State runs IT platform for eligibility and enrollment|
|Federally Facilitated Marketplace (FFM)||
|FFM, State Performs Plan Management||√||X||
|State-Based Marketplace on the Federal Platform (SBM-FP)||
|State-Based Marketplace (SBM)||
You can access a breakdown of each state’s marketplace type here.
New Mexico is one of a handful of states that operates its own private health insurance exchange but relies on the federal eligibility and enrollment platform. Along with other states, it is answering a growing call to leave HealthCare.gov and build their own, state-run websites. This shift, they say, would give the state more power over its marketplace and could save millions of dollars.
Switching to a state-based platform could substantially lower costs
State-based marketplaces on the federal platform may get a higher return on investment from creating their own websites. Since 2017, SBM-FPs have paid the federal government a user fee – based on a percentage of premiums – for the operation of HealthCare.gov. For the upcoming open enrollment period, the HealthCare.gov user fee has jumped to 3% of premiums (compared to 1.5% in 2017). By shifting to a state-run marketplace, states can keep the premium assessment collected in the state, instead of sending the majority of it to the federal government.
While it requires an upfront investment, states who are moving towards their own platforms estimate big savings: Nevada, which will launch its new state platform in time for plan year 2020, anticipates the exchange will save more than $18 million over the course of the five-year vendor contract. New Mexico announced it will likely save over $8 million by 2025 by transitioning to a full state-based marketplace.
State-Based Marketplaces can customize their websites to fit their unique market needs
In addition to cost savings, states can get a bigger bang for their buck by designing a platform attuned to their markets’ particular needs. States on the federal platform have no control over when and how consumers enroll; HealthCare.gov currently can’t accommodate state-by- state customization.
For example, some SBMs have created consumer decision-support tools that help consumers compare plans and understand total costs. SBMs have also extended their open enrollment periods, allowing more time for consumers to sign up for coverage. States can also integrate their marketplace platform with their state Medicaid program, offering a “single door” for consumers to access affordable coverage.
Other customizable features are as simple as a state-based call center. For example, Oregon is considering a transition to a full SBM in part because agents and consumer assistersdisappointment that the federal platform’s call center lacked “Oregon-specific knowledge,” which can lead to errors and faulty guidance that delay and complicate the enrollment process.
States can leverage consumer data to improve outreach efforts and support consumers in need of assistance
Another benefit of creating a state-based platform is access to real-time consumer data. As the platform administrators, SBMs can gain insight into how consumers interact with the marketplace and use this information to tailor their marketing campaigns, upgrade the website interface, and improve the customer experience. Additionally, SBMs have the opportunity to target website users in need of assistance to help them complete the enrollment process.
For example, Heather Korbulic, the Executive Director of Nevada’s exchange, notes that some consumers may go through the process of choosing a plan but fail to pay for it. Currently, Nevada’s exchange does not have this information, but upon transitioning to a full SBM, they will be able to identify consumers who haven’t completed the enrollment process. Nevada plans to use this data to contact customers and advise them to pay for their plan in order to obtain coverage.
Take-Away: Ultimately, the decision of whether to transition to a state-based platform is a cost-benefit analysis. Amidst rising user fees for HealthCare.gov, state exchanges that rely on the federal platform are questioning whether they are paying for value, but the ghost of enrollment periods past has some states hesitating. At the same time, some FFM states are opting for more oversight, taking on a larger role to protect their markets and consumers. As states weigh these policy decisions, the experience of Nevada, New Mexico and other exchanges leaving HealthCare.gov will offer lessons for other states on the rewards and challenges of doing so.