The Arkansas Insurance Department has agreed to repay about $1 million in grant money that federal officials say was improperly spent on expenses related to the state's federally operated health insurance exchange, Insurance Commissioner Allen Kerr said Friday.
He said the department has also abandoned plans to transfer about $19 million in grant money to the Arkansas Health Insurance Marketplace, which was created by the Legislature to establish Arkansas-based exchanges.
The money being repaid was awarded to the Insurance Department to help regulate the plans offered on the federal exchange and provide information to consumers.
The department, which helps with the exchange under a partnership with the federal government, has been awarded about $58 million in exchange-related grants since 2010.
Earlier this year Kerr said federal officials would allow the department to spend the grant money through June 30.
On Friday, however, he said federal rules did not allow the money to be spent on operational expenses after Dec. 31.
Starting Jan. 1, Arkansas' partnership exchange was supposed to be self-supporting, but a source of funding to pay for operations was never identified.
Because Arkansas has been taking steps to establish its own exchanges, officials with the U.S. Centers for Medicare and Medicaid Services had told the department "we're going to work with you" to cover expenses while the state exchanges were being established, Kerr said.
"Our only downfall was what the definition of 'working with you' was: We're going to let you draw that money down, and when it's all over we're going to send you a bill," Kerr said.
Federal officials initially asked the Insurance Department to repay about $3 million but reduced the amount after discussions with the Insurance Department, he said.
He hopes to reduce the amount further before asking the Arkansas Legislature to allocate the money from fees collected by the department.
The federal officials didn't object to how the department was spending the money until June 30, when they froze the department's grant funds.
Because the department owes money to the federal government, it can't transfer other unspent grant funds to the Arkansas Health Insurance Marketplace, as it had planned to do, Kerr said.
Officials with Arkansas Health Insurance Marketplace, which was awarded its own $99.9 million federal grant, told insurance department officials that they don't have a critical need for the additional grant money.
"The responsible thing to do with that money is send it back to the federal government where they can recycle it into other grants that we may get in the future," Kerr said.
Cheryl Smith Gardner, director of the Arkansas Health Insurance Marketplace, referred questions about the matter to the Insurance Department.
A spokesman for the Centers for Medicare and Medicaid Services didn't respond to a message seeking comment late Friday.
Under the 2010 Patient Protection and Affordable Care Act, health insurance exchanges allow consumers to shop for coverage and apply for subsidies to help pay for it.
Sixteen states and the District of Columbia have established their own exchanges for individual consumers. Arkansas and 33 other states use federally operated exchanges.
The Arkansas Health Insurance Marketplace board has been working to establish state-based exchanges.
Enrollment in the state-based small-business exchange, installed under a $7.2 million contract with Reston, Va.-based hCentive, is expected to start Nov. 1.
At Gov. Asa Hutchinson's request, plans for an exchange for individual consumers have been put on hold while a legislative task force studies alternatives to the state's private-option Medicaid program, which buys coverage on the federal exchange for low-income Arkansans.
Hutchinson said this week that he doesn't see a need for a state-based exchange, but that he wants to wait until lawmakers decide a replacement for the private option before making a final decision whether to continue with the project.
Under an agreement signed by Kerr in May, the Insurance Department had planned to transfer the unspent grant funds to the marketplace board in July.
The department would field requests for information from consumers during the open-enrollment period that starts Nov. 1, with the board paying the salaries of four department employees through February.
But Kerr said the Centers for Medicare and Medicaid Services would not allow the marketplace board to use grant funds to pay Insurance Department employee salaries.
As a result, the department will not operate a center to field consumer calls related to exchange coverage, as it did during the last open-enrollment period.
Instead, it will refer calls to the state Department of Human Services and the Centers for Medicare and Medicaid Services.
Fred Bean, a member of the marketplace board, said he didn't think the loss of the $19 million would hinder the board's ability to implement the exchanges.
"Businesses do that every day -- they have to watch and manage their budget," he said.
A Section on 09/26/2015