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State creating own exchange gets price tag

Federal grant as proposed runs $133 million at top end by Andy Davis | July 24, 2014 at 3:47 a.m.

The director of a state-created nonprofit exploring a possible state-run health insurance exchange said she will recommend next month that the board request $91 million to $133 million in federal grant money to pay for the exchange's setup costs.

The bulk of the money -- $75 million to $85 million -- would be allocated for the creation of computerized systems allowing people to shop for health plans and apply for subsidies, Cheryl Smith, director of the Arkansas Health Insurance Marketplace, said Wednesday.

Those same funds also would help ensure that insurance companies are paid the correct amount in premiums and federal subsidies, and provide an online portal to allow small-business owners to shop for group health plans.

An additional $10 million to $35 million would potentially go toward "stakeholder engagement," including establishing a customer-service call center.

Smith said the cost estimates were based on spending associated with seven state-based insurance exchanges with "proven functionality."

Included in that category were exchanges that met certain criteria, such as having enrolled at least 25 percent of a state's eligible population in coverage, not having had any security breaches and not being involved in litigation with their contractors.

Costs for those exchanges tended to be lower than those that were less successful, she said.

"What we have figured out is [that] it's expensive to establish a working exchange," Smith told the marketplace board. "It is more expensive to establish a failed exchange."

The grant request, which would be submitted Aug. 15, should include any money the board thinks it might need to establish an exchange, because the last opportunity to apply for a grant is Nov. 14, she said.

The board would not be obligated to spend all of the money awarded, and up to 25 percent of the grant amount could be reallocated with federal approval, she said.

The money would be awarded for one year, but the state could request extensions allowing it to spend the money over a longer period, she said.

Board member Chris Parker said he was "astounded at the numbers," but added, "I don't have any quarrel with how they arrived at them.

"I expected to be surprised at how expensive it was because it's my first rodeo."

Many people may have "sticker shock" when they learn of amount of the request, he said, but he stressed that the board would not necessarily spend the entire amount awarded.

"We are asking for funds to maintain flexibility to do an appropriate job, not saying this is necessarily what it will cost," Parker said.

Established in every state under the federal Patient Protection and Affordable Care Act, exchanges allow consumers to shop for health insurance and apply for subsidies to help them pay for it.

The U.S. Department of Health and Human Services' Centers for Medicare and Medicaid Services operates the exchanges in Arkansas and 35 other states. The remaining states opted to set up their own exchanges.

A law passed by the Legislature last year created the Arkansas Health Insurance Marketplace Board and directed it to decide whether Arkansas should take over the operation of the state's exchange as early as next year.

The Centers for Medicare and Medicaid Services in January awarded the Arkansas Insurance Department about $3.6 million to pay for the board's planning efforts.

Enrollment on the exchanges began Oct. 1 for coverage that started in January. In Arkansas, those who can sign up include those who became eligible for Medicaid under the expansion of the program last year.

The expansion extended Medicaid eligibility to adults with incomes of up to 138 percent of the poverty level: $16,105 for an individual, for instance, or $32,913 for a family of four.

Under the state's so-called private option, most of those who qualify for the expanded Medicaid program can sign up for a plan on the exchange and have the premium paid by Medicaid.

Those who don't qualify for the private option may be able to get federal tax credits to help pay their premiums. The credits are available to people with incomes of less than 400 percent of the poverty level: for example, $45,960 for an individual or $94,200 for a family of four.

As of early July, almost 200,000 Arkansans had enrolled in coverage on the exchange, including more than 157,000 who were in Medicaid-funded plans.

If Arkansas establishes its own exchange, it could use federal grant money during its first year of operation but would have to support itself after that through user fees, Smith said.

Currently, a 3.5 percent fee on premiums purchased on federal exchanges goes to the federal government to pay for the cost of running the exchanges.

Smith will present the application for a grant to establish a state exchange to the board for approval on Aug. 11.

Sen. David Sanders, R-Little Rock and chairman of a legislative committee that monitors the Arkansas Health Insurance Marketplace, said Smith "made a very strong case" for the funding request.

"What we need to focus on is make sure we are considering all of our options as we move forward," he said.

Smith, former director of a Utah health insurance exchange for small businesses that was established before the federal health care law was passed, was hired by the board in March and started work in May.

She told the Arkansas Health Insurance Marketplace Board on Wednesday that she has made her first hires. Amanda Spicer, financial manager for the Insurance Department's Health Connector Division, started work Monday as the board's finance director.

Heather Haywood, public information manager for the Health Connector Division, will be the board's director of policy and communications, and Tangelia Marshall, the Health Connector Division's program fiscal manager, will be the marketplace's business manager.

Haywood and Marshall will start work at the board next month, Smith said.

Meanwhile, a market research firm, hired by a consultant to the board, has been collecting information about what consumers, insurance brokers, business owners and others want from an exchange.

The effort by the research firm, the Cicero Group, will include focus groups with individuals, employers and insurance agents in Little Rock, Texarkana, Jonesboro, Pine Bluff and Bentonville; interviews with two dozen legislators, insurance company representatives, consumer advocates and others; and a survey of about 1,200 Arkansans.

"I'm eager to see some of the feedback," Smith said.

A Section on 07/24/2014

Print Headline: State creating own exchange gets price tag

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