Who pays for health exchange?

Even if they disagree about the federal health care law that created it, Rhode Island’s major candidates for governor all want to see the state’s health-benefits exchange become a moneymaker.
A resounding success compared to most of its counterparts in other states, HealthSource RI still faces an uncertain future because of its ongoing cost and unidentified future funding source.
Like their counterparts in Washington, the five major Ocean State gubernatorial candidates are split along party lines about whether the state should consider abandoning Healthsource instead of having to pay for it when federal funding runs out.
The three leading Democratic candidates – Clay Pell, General Treasurer Gina M. Raimondo and Providence Mayor Angel Taveras – all want to maintain the Rhode Island exchange, even if it means dipping into state coffers to pay for it.
The two Republicans – Barrington businessman Ken Block and Cranston Mayor Allan Fung – have no preference for keeping the existing organization going as is and would support switching to the federal exchange if current HealthSource costs cannot be offset or lowered.
But the first preference for all five candidates would be for Rhode Island to leverage the technical success of HealthSource into a funding stream to pay for its future insurance-exchange needs.
The most obvious avenue to monetize HealthSource would be to license some part of its technology, or sell exchange services, to one of the states still struggling with their insurance portals.
Unfortunately that might not be as easy as it sounds.
Twenty-six states are using the federally run insurance exchange and among those with failing state-run exchanges, switching to a national system is often seen as a safer and cheaper alternative than buying a new system from a neighbor.
But even if another state were interested in licensing HealthSource software, Rhode Island may not be able to sell it because the code was paid for with federal dollars.
That’s what happened next door in Connecticut, site of another successful state exchange, which shared its technology with Maryland to replace that state’s failing system.
Although Connecticut has been aggressively marketing its health-exchange system and expertise, Maryland adopted the Connecticut code and then hired Connecticut’s consultant, Deloitte, to implement it, according to the Washington Post. Perhaps a more realistic option for Rhode Island would be to use HealthSource as the basis for a larger regional exchange serving multiple states.
The other states wouldn’t necessarily pay Rhode Island for the system, but their residents would create a larger pool using the system and potentially sharing the ongoing operational costs.
Massachusetts, where the Health Connector exchange has been called one of the worst in the country, could be a partnership candidate, but Bay State officials are exploring hiring a new vender to fix the Connector or switching to the federal exchange.
Of course, partnering with another state will be more complicated and seems less popular with the candidates, especially Democrats with strong support for HealthSource.
“Since HealthSource RI is hailed as one of the nation’s best, it may make sense to [license] the program to other states and collect the revenue,” said Raimondo spokeswoman Nicole Kayner in an email responding to questions about how the state should pay for the exchange.
Asked whether merging with another state was a good idea, Kayner wrote that it is “worth considering.”
Taveras expressed a similarly cautious interest in working with other states.
“Any proposal to change the current exchange would need to be thoroughly vetted to ensure Rhode Islanders receive a substantial benefit and that Rhode Island continues to have a system robust enough to meet its needs,” Taveras said in an email through a spokeswoman.
Clay Pell says he supports keeping HealthSource running, even at state expense, but his campaign did not respond to questions about merging with another state.
Pell said even if Rhode Island had to eventually pick up the entire cost of HealthSource, it would be better than abandoning one of the more successful exchanges in the country.
“I believe Rhode Island has done a good job and taken a big step in the right direction,” Pell said. “We should recognize that this has been a significant investment and that we should not lose this investment if there is a short-term concern about cost.”
The Republican candidates, both of whom now attack federal health care reform – known as “Obamacare” – as a disaster for Rhode Island, have even more nuanced positions on what to do with HealthSource.
Fung, who has aggressively attacked Block for his past support for Obamacare, does not necessarily think Rhode Island should abandon HealthSource. “He has said we have to take a look at the possibility of going to the federal exchange and he has talked about hosting other states or partnering with a private business to help fund it,” said Fung spokesman Robert Coupe.
Despite his past support for the Affordable Care Act, Block is the most aggressive when it comes to changing HealthSource, saying the exchange “will not exist in its current form when I am governor.”
He’s called for a 2016 deadline to decide on a future funding plan, or cut off current funding, which would mean settling the issue by next summer.
On exactly what a solution should look like, Block said he can’t say without the detailed information known only to those running the system now, but he’s enthusiastic about marketing HealthSource and working with other states.
“The annual projected cost of what we are doing now – our cost structure versus the number of people covered – is outrageous,” Block said in a phone interview. Unlike Connecticut, Rhode Island officials have been relatively quiet about their efforts to sell HealthSource outside state borders.
“Preliminary conversations about how Rhode Island might offer its technology to other exchanges, as well as work with other states to maximize efficiency, are ongoing,” said HealthSource spokeswoman Dara Chadwick in an email.
She would not elaborate on who the state is speaking with or what arrangements might work.
HealthSource officials believe $23 million in federal funds included in the pending fiscal 2015 budget will cover operation of the exchange until next July. After that, Chadwick said HealthSource is “evaluating our operations and their associated costs to identify areas for potentially improving efficiency.”
The federal government puts a charge on all insurance policies – not just those acquired through an exchange – in states that use healthcare.gov. In Rhode Island, that charge would come out to 1.9 percent on all policies, according to HealthSource.
“As for other potential costs of switching to the federal exchange, we expect that there would be a significant cost to dismantling the existing eligibility and enrollment system and retooling it to fit the federal system, but we can’t say with certainty what that cost would be at this time,” Chadwick wrote. •

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