Health & Human Services

States Want Flexibility for Health Exchange Grants

Some say the federal government will grant states’ requests, while others say it now sees an upside to shifting more states to the federal exchange.
by | July 2014
Rhode Island Health Exchange Director Christine Ferguson
Rhode Island's health exchange director, Christine Ferguson, wants to use grant money for "maintenance and operating costs." AP/Steven Senne

For a while now, the federal government has been telling the states that created their own health insurance exchanges not to expect any more grant money starting in 2015. But to hear some state officials and policy analysts tell it, the spigot won’t run completely dry.

Under the Affordable Care Act, 14 states and the District of Columbia decided to run their own insurance marketplaces. To help build the online portals, the federal government distributed about $4.7 billion, with $2.6 billion going to the 14 states and D.C. The Centers for Medicare and Medicaid Services (CMS) reminded states in March that they can use leftover grant money beyond the first year of operations, but only for “design, development and implementation of activities” that were part of the original plan for building exchanges. The agency went on to say that the grant money can’t be used to pay for “maintenance and operating costs,” which includes rent, software, personnel and other administrative expenses.

But that’s exactly what Rhode Island wants to use the money for. And while the state’s health benefits exchange director, Christine Ferguson, has said CMS has agreed to show flexibility, the agency itself remains mum on any such agreement. Christine Hunsinger, a spokeswoman with the exchange, noted that part of the state’s 2015 fiscal year is actually in 2014. That, combined with a “pledge to be cooperative and understanding” with an exchange that worked well from an operational standpoint, helps make the case for flexibility, she says.

Meanwhile, Republicans in the state are pushing a bill that would turn the exchange over to the federal government out of concern that the state’s tiny population -- 28,000 signed up for private insurance -- will never be enough to sustain a $23 million operation. (Hawaii lawmakers face the same issue.) And unlike other states, Rhode Island doesn’t yet have a plan to raise revenue through insurer fees on premiums.

In lieu of guaranteed flexibility with leftover grant money, some states are shrinking their exchange budgets. Colorado’s budget is going from $70 million to $41 million, and the state is considering raising insurer fees to make ends meet. A current 1.4 percent fee on policies sold through the exchange could reach 3 percent by 2017, and there’s talk of putting in place a small additional fee that would apply to a host of policies outside the exchange.

Washington state is lowering its health exchange budget by nearly two-thirds, which will touch every aspect of operations in some way, says spokesman Michael Marchand. But he says he sees a strong possibility that the federal government will allow the state to spend more grant money on both outreach and staffing during surge times, especially considering the federal government lengthened open enrollment to Feb. 15. “I think they’ve left it open to states to come back to the feds with a dollar amount that they’d like to spend from their grants related to whatever needs to be done during open enrollment around outreach and call centers,” Marchand says, “but nothing that can be stipulated as operational.”

To critics, it’s hard to see how meeting enrollment needs isn’t an operational cost. But that’s a decision for CMS, which has an obvious stake in making sure that exchanges like Rhode Island’s and Washington’s, widely considered success stories in the rollout of President Obama’s signature domestic achievement, get what they need. Some other influential voices in health policy, though, say federal officials are growing increasingly wary and see an upside to shifting more states to the federal exchange, as Oregon and Nevada have decided to do.

“Forces inside the federal government think the federal government should run this,” Joel Ario, a consultant who once ran the U.S. Department of Health and Human Services exchange office, told Politico. “I think those folks are now pushing hard, and if the states aren’t careful, there may be some … motion to make it harder for the states to reclaim their role.”

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