In a 5-1 vote, a state board on Wednesday approved a proposal for a 3 percent fee on premiums for plans sold on Arkansas' health insurance exchanges starting in 2016.
If approved by the state Legislature, the fee recommended by the Arkansas Health Insurance Marketplace Board would support the operations of state-run exchanges that would replace the exchanges set up for the state by the U.S. Department of Health and Human Services' Centers for Medicare and Medicaid Services.
The fee would replace a 3.5 percent fee that insurance companies now pay to the Centers for Medicare and Medicaid Services to support the operations of the federally run exchange.
Fred Bean, who cast the lone dissenting vote, said the state-run exchange's funding should come from a portion of the 2.5 percent premium tax levied by the state on all life, health and accident policies sold in Arkansas, including plans sold on the exchange.
"My concern is, this is the -- quote, unquote -- Affordable Care Act, and we are arbitrarily saying let's increase everybody's premium by $150 a year," Bean, president of a Little Rock benefits consulting firm, said.
Board member Chris Parker, a Little Rock lawyer, noted that under the recommendation, the state fee would only go into effect in 2016 if the Centers for Medicare and Medicaid Services agrees to lift the federal fee.
He also said Act 1500 of 2013, which created the board, allows insurance companies to take any fee supporting the board as a credit on the companies' state premium tax bills.
"I feel like to the extent this gets a foot in the door, it is a foot in the door in line with reducing, rather than in line with increasing, the status quo" of the fees and taxes paid by the companies, Parker said.
Parker voted for the recommendation along with board members Mike Castleberry, Steve Faris, Jerry Jones and Annabelle Imber Tuck.
Board member Greg Hatcher was absent. Another member, John Denery, left the meeting before the vote. Chairman Sherrill Wise, only votes to break a tie.
Act 1500 set Wednesday as the deadline for the board to report its recommendation for a fee for the state-run exchange to the Arkansas Health Insurance Marketplace Legislative Oversight Committee.
The committee will make its own recommendation to Speaker of the House Davy Carter, R-Cabot, and Senate President Pro Tempore Michael Lamoureux, R-Russellville, by Jan. 1.
Sen. David Sanders, the committee chairman, said the panel likely will discuss the proposed fee at its next meeting, which hasn't been scheduled.
The board has "a competent and capable staff that considers a range of options," Sanders, R-Little Rock, said. "I look forward to listening to their plan."
Established under the 2010 federal health care overhaul law, insurance exchanges allow consumers to shop for health coverage and apply for subsidies to help pay for it.
Although Arkansas is among more than 30 states that opted to rely on a federally run exchange this year, Act 1500 directed the marketplace board to explore establishing state-run exchanges that would replace the federal exchanges.
The board decided last month to pursue a federal grant allowing it to establish an exchange next year, in time for coverage starting in 2016, offering coverage for small businesses, and in 2016, for coverage starting in 2017, for policies sold to individuals.
According to a draft application, the board will seek about $126 million in funding for three years to establish the two exchanges and pay for their first year of operations.
Under the draft application, the request would include $40.5 million for 2015, $72.7 million for 2016 and $12.8 million for 2017.
The proposed premium fee would pay for operations after the grant money runs out.
Christian Jones, a consultant with the Boston-based Public Consulting Group, told the board a 3 percent fee, levied on a projected 50,000 non-Medicaid plans sold on the exchange in 2016, would generate about $7.1 million, which could be saved to pay for operating costs in future years.
Under the board's recommendation, the fee would not be charged in 2016 on plans funded by Medicaid under Arkansas' private-option program.
According to figures that Jones presented to board, if the fee were extended to all exchange plans in 2017, including private-option plans, it would generate more than $37 million a year.
The total operating costs for the exchange would be about $20 million a year, according to the figures.
Jones noted that the board could recommend that the fee be reduced if it generated excess revenue.
As of Aug. 31, more than 211,000 people were enrolled in plans on Arkansas' exchange, including more than 172,000 in private-option plans.
The board plans to submit the grant application to the Centers for Medicare and Medicaid Services by Oct. 15.
Also on Monday, the board unanimously approved an agreement with the state Insurance Department outlining how the transition to state-based exchanges would occur.
Under the agreement, state Insurance Commissioner Jay Bradford would issue bulletins in February or March outlining the criteria set by the board for plans sold on the small-business exchange in 2016.
The board, which is authorized under Act 1500 to set up an exchange as early as July 1, 2015, would certify plans sold on the small-business exchange in 2016 and would take over certification of plans on the individual exchange for coverage starting 2017.
The board would take over outreach next year for plans on the individual and small-business exchanges "on a limited basis to gauge long-term sustainability," according to the agreement.
Special language attached to the Insurance Department's appropriation bill during this year's fiscal session prohibits the department from promoting enrollment in the exchange.
Bradford, a nonvoting member of the board, told his fellow board members that he supports the agreement.
"We want to be a partner with you," he said.
A section on 10/02/2014