High Costs, Low Enrolment Plague State Health Insurance Markets

State-run health insurance markets are grappling with high costs and disappointing enrolment, leading them to either turn to the federal government or collaborate with other states.

State markets have benefited from federal taxpayers’ money, which provided almost $5 billion in startup grants so these markets could become self-sustaining. However, most of this money has been spent.

Currently, twelve states plus the District of Columbia fully control their health insurance markets. According to experts, about half of them face financial difficulties.

The most recent scenario was the one in Hawaii, where the state marketplace was unable to sustain itself. It has already spent about $139 million of the $205 million grant it was awarded, but has only 8,200 customers for individual coverage this year. Now, the state’s insurance market is turning over its 2016 operations to the federal HealthCare.gov.

Similar situations occur across the nation. For example, in Minnesota, MNsure enrolment has not met projections, and the budget has had to suffer repeated cuts to stay afloat. In Vermont, policymakers are debating whether to abandon its state exchange, troubled by technology problems and the possibility of high taxes. In Maryland, federal audit points to the misallocation of exchange establishment grant money, which the state allegedly used to pay for costs.

Hawaii is actually the third state so far whose exchange is turning over to the federal sign-up system. It follows Nevada and Oregon, which both turned over their markets last year.

Experts say that the downside and pressure is gone for states turning to Washington. This is because the Supreme Court has ruled that the Obama administration, through HealthCare.gov, can continue to subsidize premiums in all states.

Another option for struggling state insurance markets is to join forces with others. There has been talk of “shared services” – states could pool their resources for functions such as labor-intensive call centers. This way, they could still control their own insurance plans oversight, marketing, and consumer education.

The insurance industry, meanwhile, has expressed that it would welcome consolidation.