Insurance companies selling plans on Arkansas' health insurance exchange would pay a fee equal to 3 percent of the plans' monthly premiums under a recommendation by a committee of the Arkansas Health Insurance Marketplace Board.
The fee, which would support the operations of a state-based exchange, would replace a 3.5 percent fee the companies now pay to the U.S. Department of Health and Human Services' Centers for Medicare and Medicaid Services, which operates the exchanges in Arkansas and more than 30 other states.
The Arkansas Health Insurance Marketplace Board, created last year by the state Legislature, plans to apply for federal funding to establish an exchange for small businesses next year for coverage starting in 2016.
The board also plans to set up an exchange for policies sold to individuals in 2016 for coverage that would start in 2017.
Both exchanges would replace ones set up for the state by the Centers for Medicare and Medicaid Services.
During a conference call with the Health Insurance Marketplace Board's financial management and sustainability committee on Monday, Arkansas Health Insurance Marketplace Director Cheryl Smith said a 3 percent fee would generate about $7.1 million in 2016.
That estimate assumes that 50,000 Arkansans who do not qualify for Medicaid will be enrolled in plans on the individual insurance market exchange by then, paying monthly premiums that would average $395 a month before any subsidies were applied.
As of Sept. 1, about 39,000 Arkansans were enrolled in such plans.
The fee would also generate less than $10,000 from the 70 people projected to be enrolled in plans on the small business exchange.
About 60 people were enrolled in plans on the small business exchange as of earlier this month, according to a state Department of Insurance spokesman.
Federal grant money is expected to pay for the establishment of the state-run exchanges as well as their first year of operation.
Health Insurance Marketplace Board spokesman Heather Haywood said money generated from the fee in 2016 would be saved to pay for operations in future years, after the grant money is used up.
At a financial management and sustainability committee meeting earlier this month, a consultant with the Boston-based Public Consulting Group told members that an exchange with an enrollment of about 55,000 people could have an annual operating cost of about $13.7 million.
Under the committee's recommendation, the state fee wouldn't go into effect unless the Centers for Medicare and Medicaid Services agrees to drop the 3.5 percent fee the agency charges plans on the state exchange.
A Public Consulting Group memo to board members noted that the federal agency agreed not to charge a fee this year in Idaho. Idaho's state-run exchange is expected to begin enrollment Nov. 15 for coverage starting next year.
This year, Idaho is charging a 1.5 percent fee to pay for future operational costs of its state-run exchange.
"The end result was that Idahoans paid a lower fee for use of the [federal exchange] while the Idaho Marketplace increased its potential to be sustainable," the memo says.
During the call on Monday, Smith noted that, if Arkansas doesn't charge a fee, the Centers for Medicare and Medicaid Services would continue to charge its 3.5 percent fee.
"That $7 million is either going to go to them or to us," she said. "It's not a matter of that not being charged."
The Arkansas fee wouldn't be levied on Medicaid-funded plans on Arkansas' exchange in 2016. The committee didn't make a recommendation on what fee would be levied beyond 2016. A document provided to committee members indicated a 3 percent fee levied on all exchange plans, including those funded by Medicaid under the state's so-called private option, would generate more than $37 million in 2017.
That estimate assumed 260,000 Arkansans would be enrolled in Medicaid and non-Medicaid plans and that 80 people would be enrolled in plans on the small business exchange. As of Aug. 31, more than 172,000 Arkansans were enrolled in Medicaid-funded plans on the exchange.
The Centers for Medicare and Medicaid Services' fee is not levied on private option plans, in part because online enrollment in those plans takes place through state websites instead of through the federal enrollment portal, healthcare.gov, Smith said.
Committee members John Denery, Sherill Wise, Chris Parker and Jerry Jones unanimously approved the recommendation for the 3 percent fee. The recommendation will go to the full board on Wednesday.
Under Act 1500 of 2013, which created the board, Wednesday is 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.
The final decision on what fee, if any, to charge will be up to the state Legislature.
In addition to the federal 3.5 percent exchange fee, insurance companies pay a 2.5 percent state premium tax on all life, health and accident insurance policies sold in the state, including private option plans.
Special language attached to the Insurance Department's appropriation for the state fiscal year that started July 1 requires premium tax money collected on private option plans to be placed in a trust fund to pay for future costs of the program.
Metro on 09/30/2014