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A state agency can begin collecting a fee on insurance plans offered on Arkansas' health insurance exchange for individuals without the full Legislature's approval of the fee, agency officials say.

The Arkansas Health Insurance Marketplace is preparing to take over responsibility for the state's individual exchange next year. It needs a source of income because it will no longer be able to use a $99.9 million federal grant that it received to set up exchanges for small businesses and individual consumers.

Marketplace spokesman Alicia McCoy said in an email M̶o̶n̶d̶a̶y̶ Tuesday* that her agency has already met the legal requirements to begin collecting a fee even though Act 1500 of 2013, which created the marketplace, says the Legislature "shall establish a reasonable initial assessment or user fee and reasonable increases or decreases in the amount of future assessments."

Kendall Marr, a spokesman for Gov. Asa Hutchinson, agreed with McCoy's view.

The fee "was approved in compliance with state law," Marr said in an email last month.

The Health Insurance Marketplace has notified insurance companies that it will begin collecting a fee equal to 3 percent of the premiums for plans sold on the exchange starting Dec. 1.

According to an agency memo, such a fee would generate about $10.7 million in annual revenue.

Half of the money is to go to the federal government, which handles the systems for enrolling individual consumers through healthcare.gov.

The rest of the money is to support the state Health Insurance Marketplace, which under a proposal by Hutchinson would be responsible for certifying plans available to Arkansans on the federal website and offering one-on-one help to applicants.

The 3 percent fee would replace a 3.5 percent fee that has been collected by the U.S. Department of Health and Human Services' Centers for Medicare and Medicaid Services since enrollment on the federal exchanges began in 2014.

The 2013 law creating the Health Insurance Marketplace requires its board to make a recommendation on the fee each year to the Arkansas Health Insurance Marketplace Legislative Oversight Committee, created under Act 1500 to monitor the Health Insurance Marketplace.

The oversight committee is required to report the board's recommendation on the fee, along with the committee's own opinion, to the speaker of the House and president pro tempore of the Senate.

The marketplace board recommended the 3 percent fee at a meeting last Sept. 30.

Chris Parker, a Little Rock attorney who was board chairman at the time, reported the recommendation to the oversight committee on Oct. 22.

Although the committee did not take action on the recommendation at the meeting, its chairmen, Sen. David Sanders, R-Little Rock, and Rep. Stephen Magie, D-Conway, said in a Dec. 11 letter to Senate President Pro Tempore Jonathan Dismang, R-Searcy, that a "motion was made to accept the Board's recommendation, and the motion was affirmed by the Oversight Committee."

The full Legislature has not approved the fee.

"Act 1500 gave AHIM the authority to assess user fees and this was done at the Sept. 2015 board meeting," McCoy said in the email M̶o̶n̶d̶a̶y̶ Tuesday*.

In the past, Health Insurance Marketplace staff and board members have said the Legislature must approve the fee.

At the Sept. 30 meeting, for instance, the agency's director, Cheryl Gardner, said, "Ultimately it is the Legislature that decides what any assessments or user fees will be."

Similarly, at the Oct. 22 oversight committee meeting, Parker said Act 1500 requires the board and committee to make recommendations before the legislative session that are "acted on in some way through the course of the session."

Rep. James Sorvillo, R-Little Rock, asked at the meeting what would happen if the fee needed to be increased or decreased.

"Act 1500 indicates that that's strictly the Legislature" that would make such an adjustment, Gardner responded.

Sanders agreed.

"We would make that decision," he told Sorvillo.

Former state Rep. Mark Biviano, the lead sponsor of Act 1500, said M̶o̶n̶d̶a̶y̶ Tuesday* that he intended the Legislature to have final approval over the fee.

The Health Insurance Marketplace officials' interpretation of the law is "a reasonable argument, but ultimately I do believe that it should lie with the legislative body to make the decision," Biviano said.

Health Insurance Marketplace Board Chairman Mike Castleberry said he didn't know whether approval of the full Legislature is required to set the fee.

"That's something that the legislative folks would need to tell us, how that part works," he said.

Dismang, who also sponsored Act 1500, and House Speaker Jeremy Gillam, R-Judsonia, said M̶o̶n̶d̶a̶y̶ Tuesday* that they would research the requirements.

Even if the Health Insurance Marketplace can assess the fee without legislative approval, that "doesn't mean it's a good idea," Gillam said.

Deputy Insurance Commissioner Suzanne Tipton, the Insurance Department's general counsel, asked Gardner in an Aug. 19 email about the Health Insurance Marketplace's authority.

Act 1500 "sets out the process for the General Assembly establishing the fee and for AID to enforce," Tipton wrote. "I could not find any legislation where they established the 3% fee" for the individual and small-business exchanges.

Gardner did not send a written response, Insurance Department spokesman Ryan James said.

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.

The state Health Insurance Marketplace was created by the Legislature to establish state-run health insurance exchanges as allowed under the federal law.

Using money from a $99.9 million federal grant, the agency set up a small-business exchange that opened for enrollment in November.

But money from the grant can't be spent on operations after Jan. 1.

Hutchinson has said he doesn't see the need for the state to spend the remainder of the grant money to build an enrollment system for the exchange for individual consumers.

Instead, under his proposal, the state would take over responsibility for the individual exchange while continuing to use the federal enrollment system.

The exchange fees are ultimately paid by consumers, through monthly premiums, in the individual and small group markets, as well as by the federal government, which subsidizes the premiums for many consumers.

In Arkansas, those who receive coverage through exchange plans include more than 258,000 low-income adults whose premiums are paid by Medicaid under the so-called private option. The exchange fee is not assessed against those plans, however.

The fee is assessed on non-Medicaid plans that were covering 61,189 Arkansans as of Aug. 15. Coverage in those plans is subsidized for many people who don't qualify for Medicaid and who have incomes below 400 percent of the federal poverty level: $47,520 for an individual, for instance, or $97,200 for a family of four.

The small-business exchange makes a tax credit available to businesses that have fewer than 25 employees and that pay average wages of less than $50,000.

The Health Insurance Marketplace's small-business exchange was covering 171 employees and 66 spouses or dependants from 44 business people as of April, while the federal small-business exchange was covering 49 employees and 36 spouses or dependants from 11 businesses, a spokesman for Arkansas Blue Cross and Blue Shield said. The company is the only one offering plans on the small-business exchanges.

A Section on 09/07/2016

*CORRECTION: Arkansas House Speaker Jeremy Gillam, Senate President Pro Tempore Jonathan Dismang and former Rep. Mark Biviano spoke Tuesday about the Arkansas Health Insurance Marketplace’s plans to begin collecting a fee from insurance companies. Health Insurance Marketplace spokesman Alicia McCoy also sent an email Tuesday responding to questions about the fee. This article incorrectly said when Gillam and Dismang spoke and when the email was sent.

Print Headline: Marketplace: It can collect a fee

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