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Insurance-savings idea floated; Arkansas legislators told of option to fold exchange into state agency

by Andy Davis | September 19, 2018 at 4:30 a.m.

The Arkansas Insurance Department could lower a fee charged to insurance companies and reduce state spending by more than $3.2 million by taking over responsibility for the state's health insurance exchange, Insurance Commissioner Allen Kerr told legislators Tuesday.

Officials with the Arkansas Health Insurance Marketplace, which has responsibility for the exchange now, countered that the savings would be less than that because the marketplace has already been cutting its own spending.

And Angela Lowther, the marketplace's executive director, said the impact of the fee on consumers is "minimal, if not insignificant."

Both the marketplace and Insurance Department made presentations to the Legislative Council's marketplace oversight subcommittee, which is exploring whether the marketplace's responsibilities should be shifted to the Insurance Department.

Kerr said the Insurance Department already performs much of the work involved with carrying out the marketplace's responsibilities.

For instance, the department reviews the plans that insurance companies hope to sell through to ensure they meet federal and state regulations, and recommends them to the marketplace for approval.

The marketplace has never identified a problem that was missed during the Insurance Department's review, he said.

"It's really not a merger or acquisition," Kerr said. "It's simply skipping a step."

The Legislature created the marketplace in 2013 to set up state-run exchanges that individual consumers and small businesses would use instead of the federally managed

Under the 2010 Patient Protection and Affordable Care Act, such exchanges allow consumers to shop for coverage and apply for subsidies to help pay for it.

Using money from a $99.99 million federal grant, the Arkansas marketplace set up the small-business exchange in 2015.

But at Gov. Asa Hutchinson's request during his first year in office, the agency scrapped its plans to use its remaining grant money to build an exchange for individual consumers.

Instead, the marketplace took responsibility for certifying the plans sold through and for helping consumers sign up for them.

Meanwhile, enrollment in the small-business exchange ended last year because Arkansas Blue Cross and Blue Shield, the only company offering plans through that exchange, dropped out.

During the fiscal year that ended June 30, the marketplace's spending totaled $3.8 million, according to Insurance Department figures presented to the subcommittee.

Kerr said his department could take over the same duties at an annual cost of $505,000 to $571,500.

The move would involve eliminating the marketplace's 11-member board and its 10 employees, as well as a contract that calls for the marketplace to pay the Arkansas Foundation for Medical Care $350,000 for one year to operate a call center, with outreach workers, known as "navigators" who provide enrollment help over the phone.

Kerr said the Insurance Department already has a center with more than a dozen trained staff members who answer calls from consumers. If the call volume is high, he said the center could add additional operators at an annual cost of about $66,500 in salary and benefits.

Federal law requires exchanges to have navigators, however. The department would spend about $200,000 on navigators and about $300,000 on an outreach campaign aimed at consumers, which is also required by federal regulations, Kerr said.

As a result of the reduced costs, Kerr said the department would reduce a fee paid by insurance companies to support the exchange.

This year, that fee is equal to 3 percent of the premiums for the plans sold in the state through Two-thirds of the fee goes to the federal government to pay for the costs associated with the website. The rest goes to the state marketplace to pay for its costs.

Next year, the marketplace fee is scheduled to increase to 4.25 percent, in part to pay for an increase in the federal fee, which will go to 3 percent. The state fee will increase from 1 percent of the premiums to 1.25 percent of premiums.

Kerr said the Insurance Department would eliminate the state portion of the fee and allow the federal government to collect its portion directly from insurers.

That means the total fee in 2020, the earliest the proposed change would take effect, would be 3 percent. In the 34 states that don't have their own exchanges, insurers pay a 3.5 percent fee.

Insurance companies pass the fee along to consumers in the form of higher premiums. In Arkansas, the premiums are also paid by the state Medicaid program. That's because the state provides coverage under its Medicaid expansion program, known as Arkansas Works, through the same plans that insurance companies sell on

The total amount paid by an individual consumer this year is less than 3 percent of the premium. That's because the fee is based on premiums paid by about 53,000 Arkansans who are enrolled in non-Medicaid plans offered through, but is built into the rates for all the plans the companies sell on the individual insurance market, including Arkansas Works plans.

The Insurance Department is funded by a separate fee equal to 2.5 percent of insurance plan premiums. In the fiscal year that ended June 30, the department was appropriated $13.8 million from the fee, but only spent $10.8 million, Kerr said.

Any fees the department doesn't spend are returned to the state budget, he said.

Mark Meadors, vice chairman of the marketplace's board, said the reduced cost wouldn't be worth it if its means less service to consumers.

He also noted the marketplace doesn't receive any funding other than the fee it collects. Shifting its functions to the Insurance Department would mean less of the department's fee would go to the state budget, he said.

Allowing the department to take over those duties would also require a change in state law.

Special language that has been attached to state appropriation bills since 2014 bars the state Insurance, Human Services and Health departments from employing navigators or promoting enrollment in the exchange.

Rep. Deborah Ferguson, a chairman of the subcommittee, had initially planned for the subcommittee to make a recommendation on the move Tuesday.

But she said Tuesday that she had been asked by Hutchinson to wait on the results of a study aimed at consolidating some of the 42 agencies that report to the governor. Hutchinson has said he plans to unveil his plans next month.

A Section on 09/19/2018

Print Headline: Insurance-savings idea floated; Arkansas legislators told of plan to fold exchange into state agency


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