U.S. awards state $100M to build insurance hubs

Arkansas has been awarded $99.9 million in federal funding to establish state-run health insurance exchanges for small businesses and individual consumers, officials said Thursday.

The award was about $27 million less than requested by the Arkansas Health Insurance Marketplace, a nonprofit organization created by the Legislature in 2013.

Heather Haywood, a spokesman for the marketplace, said the organization doesn't view the grant amount as a setback.

"It's always been our goal to be very frugal and to be as lean of an operation as we possibly can," Haywood said. "Although the reduction could present challenges, it also presents really good opportunities to be innovative."

The exchanges, which would allow Arkansans to shop for plans and apply for subsidies to help pay for them, would replace exchanges set up for the state by the federal government.

Currently, consumers in Arkansas and 36 other states can access federally run exchanges through an online federal enrollment portal, healthcare.gov. The remaining states have already established their own exchanges.

According to figures released Thursday by the Arkansas Insurance Department, enrollment through Arkansas' exchange among those who did not qualify for Medicaid-funded coverage rose to 44,958 as of Monday, an increase of more than 5,000 people from the total at the beginning of the month.

Although the open enrollment period for coverage starting next year runs through Feb. 15, Monday was the last day to enroll for coverage that will start on Jan. 1.

According to figures released by the state Department of Human Services earlier this month, an additional 188,083 people were enrolled in coverage purchased with federal Medicaid funds under Arkansas' so-called private option as of Nov. 30.

In addition, 106 people were enrolled in coverage on the state's federally run exchange for small businesses as of Monday, Insurance Department spokesman Seth Blomeley said.

Officials with the Arkansas Health Insurance Marketplace hope to design exchanges that better suit the state's needs than the federal ones, while reducing the fee charged to insurers to support exchange operations.

Currently, the federal government charges a 3.5 percent fee on the premiums for plans sold on federal exchanges, excluding private option plans.

If Arkansas establishes its own exchanges, the federal fee will no longer be charged. The amount the state would charge to support exchange operations hasn't been determined.

The state Health Insurance Marketplace's grant application estimated that a 2.5 percent fee levied on all exchange plans, including private option plans, would generate $31.2 million in 2017, $32.8 million in 2018 and $34.4 million in 2019.

The marketplace plans to establish the exchange for small businesses next year, in time for coverage that would start in 2016, and the exchange for individuals in 2016, in time for coverage that would start in 2017.

It had requested more than $126 million in federal funding, spread over three years.

Haywood said the initial amount of the grant from the U.S. Department of Health and Human Services' Centers for Medicare and Medicaid Services was reduced by about $7.9 million because of automatic federal spending cuts.

An official with the Centers for Medicare and Medicaid Services said the remainder of the difference between the amount requested and what was awarded was "a result of budget negotiations."

Haywood said, "We're working with CMS to begin the re-budget process."

She said marketplace officials don't know which areas of the budget will be reduced, but they are confident the amount awarded will be sufficient.

In its grant application, the state marketplace had requested $40.6 million next year, $72.9 million in 2016 and $13 million in 2017 to establish the exchanges and operate them for one year.

The bulk of the request, up to $78 million, was for hiring the company that will provide the computer systems allowing people to shop for coverage, apply for subsidies and enroll in plans.

The exchanges' operating expenses were estimated at $18.7 million in 2017, $20.8 million in 2018 and $20.9 million in 2019.

Sen. David Sanders, R-Little Rock, who is chairman of a legislative committee monitoring the Health Insurance Marketplace, said he wasn't concerned that the amount awarded was less than what was requested.

Marketplace director Cheryl Smith "has been very clear that we are going to ask for a significant amount of money, but that every effort was going to be made to not use all that money," he said.

"We have a very resourceful staff, and I think they're going to be able to work with that," Sanders said.

A Section on 12/19/2014

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