The managers of the Patient Protection and Affordable Care Act (PPACA) public exchange programs are facing a tough new challenge: Figuring out how the exchange programs will earn their keep.
PPACA calls for the U.S. Department of Health and Human Services (HHS) to provide generous startup funding for the state-based exchanges, but only for one year.
In theory, most of the state-based exchanges are supposed to be self-sustaining starting as early Jan. 1, 2015, but many still have some HHS grant money or other grant money left over.
All of the exchanges that will be in operation Jan. 1 are supposed to be able to operate without federal taxpayer support by Jan. 1, 2016.
Here’s a look at exchange financial sustainability options.
1. It’s possible that the federal government could help support the exchange system
PPACA provides only temporary federal funding for public exchange system operations and Republicans who say they oppose PPACA will control both the House and the Senate in 2015.
But Republicans have supported the exchange system concept in the past, and it’s possible that they could scrape up future exchange system funding if voters and insurers seem to like the exchange system.
2. The plan sellers could pay user fees
Many state-based exchanges already impose fees on the insurers that sell qualified health plans (QHPs) through their systems, and HHS imposes a user fee on the insurers that sell QHPs through HealthCare.gov.
This year, for exchange, HHS charges QHP issuers a user fee equal to 3.5 percent of the premiums. The fee will stay the same in 2015.
3. All health insurers in a market could pay fees
One problem with charging exchange issuers a high user fee is that the fee could make the cost of coverage sold through an exchange much higher than the cost of the coverage sold outside the exchange.
When exchange system advocates were promoting the exchange concept, one argument was that distributing coverage through an “Amazon.com for health insurance” would be cheaper than the traditional system.
The board of BeWellNM, New Mexico’s health insurance exchange, for example, has talked about funding its exchange with an assessment on all insurers that sell major medical policies, on or off the exchange, and all dental coverage sold through the exchange.
Supporters of that approach say it broadens the potential source of funding for the exchange, decreases the effects on exchange users, and eliminates the possibility that exchange user fees themselves could drive consumers away from the exchange system.
In the District of Columbia, the D.C. Health Benefit Exchange Authority is trying to further expand the base of support for its locally run DC Health Link exchange, by imposing an assessment on insurers that sell all types of health-licensed products in that market, including many products that cannot be sold through the exchange.
The American Council of Life Insurers (ACLI) is fighting that approach in the federal courts, arguing that approach is unfair to insurers shut out of the exchange system.
4. States could use their own tax revenue
Many states have been generous supporters of their exchange programs, and they could continue to support their exchange programs with their tax revenue. Vermont, for example, has been talking about creating a new tax to fund a shift to a single-payer health care system.
5. They might be able to sell ads
Today, the public exchange programs are major buyers of advertising, but they attract many users themselves. In the past, some exchanges have talked about generating revenue by selling advertising.
