By law, the online health insurance marketplaces created under the Affordable Care Act (ACA) must be financially self-sustaining by 2015. Most states are planning to pay for their operation by charging a user fee to insurers that sell their plans on the marketplaces, also known as exchanges. But those costs will likely be passed onto the customer, making health coverage under the ACA a little less affordable.
That gave one state, Nevada, an idea: sell advertising space on the exchange’s website to generate some extra revenue.
The state doesn’t yet know exactly how much money banner or pop-up ads could yield for the exchange, but every advertising dollar means a lower price for the people purchasing coverage. Officials are in the process of drafting a request for proposals and hope to have ads on the exchange site by the middle of 2014. Nevada’s marketplace -- like others across the country -- launches Oct. 1, 2013.
“If we broaden our revenue base, we will have a viably funded exchange. We want to be sure that we don't just burden the insurance buyer,” says C.J. Bawden, a spokesperson for Nevada’s marketplace, the Silver State Health Insurance Exchange. “The more we can broaden our base, the more we can hopefully lower those charges and lower the price of insurance.”
For now, Nevada is the only state with definite plans to sell ads on its website. Governing surveyed 16 of the 17 state-based exchanges (Idaho was excluded because of its late start) and only three—Colorado, Hawaii and Vermont—said they were considering selling ads in the future.
As for the federal exchange that will sell insurance plans for the 30-plus states that decided not to set up their own marketplace, officials at the U.S. Department of Health and Human Services (HHS) say it won't sell ads as a revenue source -- but there's nothing stopping the state-based exchanges from doing so.
So why aren’t more of them following Nevada's footsteps?
Most likely because of the administrative and publicity headaches that might come with selling ads on a political lightning rod like the ACA’s exchange, says Jennifer Tolbert, director of state health reform at the Kaiser Family Foundation.
“States will want to be really careful about the ads that they allow on the exchanges. I suspect that's why many states have chosen not to allow ads to be sold,” she says. “But as long as the state is really careful, it could be a good vehicle for revenue.”
That’s an issue already weighing on the minds of Nevada officials. Bawden gives the admittedly outlandish example of one of the state’s legal brothels trying to purchase ad space on the exchange.
“Obviously, that’s something we don’t think taxpayers would appreciate,” he says. "It’s easy to imagine the accompanying headlines."
To avoid such a scandal, Nevada's exchange is hoping to attract advertising partners who would further its mission of extending health coverage to uninsured Americans. Dental and vision insurance plans, which could supplement the more traditional medical coverage that will be sold on the marketplace, could be obvious targets. The details will be ironed out after the request for proposals is finalized and responses are received.
True Exchange Costs Still Unknown
The relative smoothness (or bumpiness) of Nevada’s experience could inform other states’ decisions, Tolbert says, but there's another to-be-determined factor: how much it actually costs to operate an exchange. Right now, with the federal government footing the bill, it’s mostly guesswork, but estimates of exchange operating costs range from $25 million to $60 million or more, according to the Kaiser Family Foundation.
If the exchanges end up being more expensive than states expected or if fewer people enroll in the exchanges than anticipated, that could cause officials to return to the idea of advertisements as a revenue stream.
“If it comes down to a choice between significantly increasing the assessments and looking toward other ways to generate revenue, states could be open to trying something new,” Tolbert says.
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