Illinois' Failure to Create Health Exchange Leaves State Vulnerable

by | December 5, 2014

By Ellen Jean Hirst

An estimated $270 million in federal funding was left on the table when Illinois lawmakers didn't vote Wednesday on a measure to create a state-run health insurance exchange.

A bill sponsored by Rep. Robyn Gabel, D-Evanston, that would guarantee future funding for the exchange by taxing insurers didn't get a full vote in the Illinois House before the session ended, effectively killing the measure for the year.

State spokesman Mike Claffey said the state applied last month for $270 million to cover the cost of developing an information technology system, an outreach campaign and other operational costs over three years, with the hope that the state would approve the exchange during the veto session.

This is the last year the federal government is offering financial assistance to states to set up their own exchanges.

Without a state-based exchange, Illinois consumers also could be affected by a pending U.S. Supreme Court case that could result in higher health costs for some. Justices will take up the question of whether health insurance subsidies are legal in states, including Illinois, that use the federal health insurance portal to connect consumers with health plans offered under the federal Affordable Care Act.

Up to 1 million Illinois residents are eligible for subsidies, state officials have said. The average Illinois resident who bought coverage for 2014 on the federal exchange received a $202 credit, lowering the monthly premium to $114 from $316, according to government data.

The threat to the subsidies is based on a legal dispute over language in the Affordable Care Act, commonly known as Obamacare. A provision in the law appears to restrict the subsidies to policies bought on an "exchange established by the state."

A ruling from the high court is expected in June or July. Establishing a state-run exchange would have served as a safeguard for Illinois' subsidies regardless of the high court's decision.

Still, some representatives said the tax on insurers that would have funded the exchange would have meant higher costs for consumers.

"Of course every tax is passed down onto the end users," said Rep. Ron Sandack, R-Downers Grove. "This wasn't an expense that was going to be borne by insurance companies without some kind of pass-through."

Although Illinois could still move to authorize an exchange, the loss of federal funding would pose a considerable hurdle, given the state's budget troubles, health advocates have said.

It's hard to say, however, whether lawmakers will continue to pursue a state-based exchange, state officials said, especially with the upcoming shift in the governor's office.

More than three dozen states will rely on the federally operated portal for their residents to sign up for 2015 coverage through Obamacare.

Fourteen states and the District of Columbia launched their own exchanges last year with federal grants ranging from $42 million for Minnesota to about $829 million for California. Some exchanges were deemed successful, while others struggled to get off the ground.

Legislators have been working to get the go-ahead for a state-run exchange for years. In 2013, a bill passed the state Senate but the legislation never reached the House floor.

"You never know what the feds are going to do, they could extend the deadline," said House Majority Leader Barbara Flynn Currie, D-Chicago.

"We'll wait and see. I'm disappointed, I thought it was a good bill, carefully thought out, but unfortunately we didn't have the breadth of support we needed."

Tribune reporters Wes Venteicher and Monique Garcia contributed.

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