The Center for Medicaid and Medicare in Spring of 2015 published into the Federal Registry a proposed rule for adjusting state user fees for Federally-facilitated Exchanges. Initially there were flat fees charged to states for participating on the Federally-facilitated marketplace (healthcare.gov). However, under the proposed “Notice of Benefit and Payment Parameters for 2017” this is about to change.
The proposed rule covers risk adjustment, reinsurance, and risk corridors programs; cost sharing parameters and cost sharing reductions, and user fees for Federally-facilitated Exchanges. However, today’s discussion will center around users fees and their impact on state-based exchanges.
In 2016 (2017 open enrollment) user fees will be assessed, per member per month at 3.5%, multiplied against the monthly member premium. This is the same 3.5% that was assessed in 2014 and 2015 for usage of the Federally-facilitated marketplace.
State Exchange Options
State-based Marketplaces (SBM), Federal-Facilitated Marketplace (FFM), and State-Partnership Marketplaces are common terms that have been in circulation for several years. In 2013, there were four core types of exchanges: State-based marketplaces (SMB), Federally-Supported Marketplaces (FSM), State-Partnership Marketplaces (SPM), and Federally Facilitated Marketplaces (FFM). Each type of exchange and marketplace functions differently, below we will explore the function of each, before introducing new terminology.
State-based marketplaces (SMB) – the Exchange can be customized to meet state needs and is fully state administered and operated. For example, states using a state-based marketplace includes: California, Colorado, Connecticut, District of Columbia, Idaho, Kentucky, Maryland, Massachusetts, Minnesota, New York, Rhode Island, Vermont, and Washington (as of February 1st, 2016)
Federally-Supported Marketplaces (FSM) – States will have the option to enter into a Partnership with an FFE to support administration and operation of selected functions. For example, states using a federally-supported marketplace includes: Hawaii (moving to FFM), Oregon, Nevada, and New Mexico (SHOP is state-run).
State-Partnership Marketplaces (SPM) – this is a hybrid model where States may assume primary responsibility for many of the functions of the Federally-facilitated Exchange permanently or as they work towards running a State-based Exchange. States may administer plan management functions, in-person consumer assistance functions, or both. For example, states using a state-partnership marketplace includes: Arkansas (SHOP is state-run), Delaware, Illinois, Iowa, Michigan, New Hampshire, and West Virginia (as of February 1st, 2016).
Federally Facilitated Marketplaces (FFM) – “States where an FFE operates without a State Partnership, HHS will carry out all Exchange functions, including consulting with stakeholders and participating in formal consultation with Indian tribes; certifying, recertifying, and decertifying QHPs; determining individuals’ eligibility for enrollment in a QHP through the Exchange and for insurance affordability programs; and supporting consumers, issuers, and other stakeholders through technical assistance and enrollment facilitation resources.” For example, states using a federally-facilitated marketplace includes: Alabama, Alaska, Arizona, Florida, Georgia, Indiana, Kansas*, Louisiana, Maine*, Mississippi (SHOP state-run), Missouri, Montana*, Nebraska*, New Jersey, North Carolina, North Dakota, Ohio*, Oklahoma, Pennsylvania, South Carolina, South Dakota*, Tennessee, Texas, Utah (SHOP state-run), Virginia*, Wisconsin, and Wyoming.
Note: State with an “*” retain ownership of the plan management functions of the marketplace and involved with certification of QHPs available for purchase on the Exchange.
A new term has surfaced is prominent throughout the proposed rule. The term is a State-Based Exchange on the Federal Platform (SME-FP).
State-Based Exchange on the Federal Platform (SBE-FP) – This arrangement would allow a State Exchange “to leverage existing Federal assets and operations by relying on HHS services for performing certain Exchange functions particularly eligibility and enrollment functions. The SBE-FP would also rely on HHS to perform certain consumer call center functions and casework processes, and maintain related information technology infrastructure,” according to the Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2017.
The Federal platform agreement, states would be required to sign, is forth coming. This is also not a “menu” to choose form. It’s provided as a package for states, all or nothing. Specifically, eligibility and enrollment will be required to be done together and only by HHS. The only exception is the decision to run the Individual exchange and the SHOP exchange with support from HHS. How each exchange operates could be determined separately. Also, under this agreement HHS would retain primary, formal responsibility for overseeing QHPs and issuers. States are required to use the Health Insurance Casework System (HICS) for handling consumer casework and meeting casework resolution timeframes, however, HHS will not be responsible for overseeing casework processes (similar to a State-Partnership Marketplace relationship). State will be required to operate a toll-free telephone hotline to address consumer requests. State will also be required to maintain a simple website redirecting to healthcare.gov and agent and brokers will need to be certified and trained by the state.
Remaining State Options
The remaining states that have not been successful, in standing up their own exchanges, are left with two bleak options.
- Use Healthcare.gov for some exchange functions – state carriers would be required to pay HHS a 3% user fee per member per month. This puts states like Minnesota in a tough spot that already operates on a 3.5% user fee, meaning plan management, consumer outreach, and other federally-required functions would draw from only 0.5% assessment.
- Use Healthcare.gov for all exchange functions – state carriers would be required to pay HHS a 3.5 user fee per member per month. This assessment does not represent the true cost for HHS to provide states with exchange services.
States most concerned over the user fees include: Oregon, Minnesota, Nevada, Hawaii, Kentucky, and New Mexico. These states are desperately searching for alternatives.
Expect User Fees to Climb
What will the future of user fees entail? From “Circular No. A-25 Revised” the amount of user fees charged will be, sufficient to recover the full cost to the Federal Government providing the services, resources, or goods based on marketplace prices. It’s clear that 3.5% and 3% do not cover the full cost of FFM Exchange operations.
In a December 8, 2015 letter to Andrew Slavitt, Acting Administrator for CMS, several House of Representatives Chairman expressed concern that Hawaii, Nevada, New Mexico, and Oregon received more than $700 million in establishment grants only to abandon their exchanges. However, because exchanges have the flexibility to set and collect user fees, Oregon and Nevada are collecting and retaining 100% of fees collected, despite being part of the FFM. States like Oregon and Nevada are providing no administrative services and keeping funds structured to fund FFM operations. The letter to Andrew Slavitt was signed by several chairman including: Kevin Brady, Chairman Committee on Ways and Means; Fed Upton, Chairman Committee on Energy and Commerce; Peter J. Roskam, Chairman and Subcommittee on Oversight Committee on Ways and Means; Tim Murphy, Chairman Subcommittee on Oversight and Investigations and the Committee on Energy and Commerce. In this letter the committee members were strongly questioning, how states are not providing state services, using the FFM, and collecting and retaining assessment funds.
In a second letter addressed to the Honorable Gene L. Dodaro, Comptroller for the General of the United States, on January 13, 2016 four Chairmen demanded answers for the $5.5 billion in total grants (by end of December 2014) with 83% awarded to state-based marketplaces many of which are financially insolvent. The January 13, 2016 letter was signed by Fred Upton, Chairman; Greg Walden, Chairman Subcommittee on Communications & Technology; Tim Murphy, Chairman Subcommittee on Oversight and Investigation; and Joe Pitts, Chairman Subcommittee on Health again asking for answers.
As user fees climb it will be interesting to observe the states reactions and how vendors will compete against unreasonably low FFM assessments that do not represent the full cost of Exchange operation. One thing is for sure, overtime the assessments will eventually uncover the true cost to keep the FFM financially sustainable. It’s ironic that the Feds are delivering a strong message to states, to be sustainable – when they themselves can’t seem to achieve it.
Peter Nichol, empowers organizations to think different for different results. You can follow Peter on Twitter or on his blog. Peter can be reached at pnichol [dot] spamarrest.com.