Challenges in Adopting a State-Based Health Insurance Marketplace

As several states look to launch a state-based health insurance marketplace (SBM), experts warn that policymakers should weigh the decision carefully and pursue a marketplace only as part of a well-developed plan to expand coverage, according to a recent report from the Center for Budget and Policy Priorities (CBPP). 

Under the ACA, each state must either operate its own marketplace or rely on the federal marketplace to handle exchange functions. Most often, the federal government runs the marketplace in states and the Healthcare.gov platform handles eligibility and enrollment functions. 

Thirteen states run their own SBMs, which means they control all functions and have their own systems for conducting eligibility and enrollment. And another six states are split between SBMs or SMB-FPs, which control many marketplace functions but rely on the Healthcare.gov platform to conduct eligibility and enrollment. 

State policymakers believe establishing SBMs will save money, gain control over marketplace functions, and protect their residents from federal actions eroding the marketplace. Authority over their marketplaces will allow for improved operations, coordination across programs, and outreach marketing, the announcement highlighted. 

This SBM transition comes with numerous roadblocks including technological challenges, which officials may be familiar with due to technology failures when the ACA marketplace first launched. HealthCare.gov and the Federally Facilitated Marketplace (FFM) currently face complex functions but perform with reasonable when conducting email outreach to consumers and addressing data-matching issues.

But states that avoid technology failures to ensure an extremely low spending price may be offering consumers a worse experience than they currently have. 

Therefore, experts stress that states must acquire services from one or more vendors, transfer data from the federal system, ensure that their new marketplace can share information with Medicaid and the Children’s Health Insurance Program (CHIP), communicate with insurers, and maintain enrollment of current marketplace consumers. 

The report presented seven recommendations for states that will move forward with SBM transitions. Although states differ about where they want to invest their time and money, experts presented a few important parameters to consider when making the shift. 

The first recommendation was to set targets for increased enrollment that span all state health insurance coverage programs, which can prevent states from focusing too narrowly on cutting costs or minimizing disruption. And to increase take-up of healthcare coverage and drive individuals to the SBM when they need coverage, states should invest in marketing, outreach, and enrollment assistance. 

Additionally, a “no wrong door” eligibility system would allow individuals to submit one application and then be easily enrolled in an appropriate program. One way to achieve “no wrong door” is to integrate the SBM’s eligibility process with other healthcare programs, including Medicaid, the report highlighted.

Although low costs is one reason states switch to an SBM, savings are not 100 percent guaranteed. Therefore, states must avoid focusing on cost when implementing SBM and instead look at longstanding exchanges, including FFM, spend per enrollee each year, and what other SBMs plan to spend. 

Low spending SBMs may deliver high-quality services to consumers or make vital improvements, but this remains to be seen. Ultimately, states will need to ensure that sufficient funds are available to make additional improvements in the future and deal with unexpected costs. 

Furthermore, experts touched upon four additional recommendations for SBM states including:

• Matching the FFM’s user experience

• Ensuring high-quality services and achieving the state’s goals for the transition 

• Protecting consumers from average health plans 

• Leveraging SBM to advance broader policy changes such as additional subsidies and affordable coverage

“As noted, shifting to an SBM is a significant undertaking. States should not take this decision lightly and should focus on the bigger goal: increasing affordability and reducing uninsured rates among their residents,” the report concluded.