Exclusive: States quietly consider ObamaCare exchange mergers

A number of states are quietly considering merging their healthcare exchanges under ObamaCare amid big questions about their cost and viability.

Many of the 13 state-run ObamaCare exchanges are worried about how they’ll survive once federal dollars supporting them run dry next year.

Others are contemplating creating multi-state exchanges as a contingency plan for a looming Supreme Court ruling expected next month that could prevent people from getting subsidies to buy ObamaCare on the federal exchange.

The idea is still only in the infancy stage. It’s unclear whether a California-Oregon or New York-Connecticut health exchange is on the horizon.

But a shared marketplace — an option buried in a little-known clause of the Affordable Care Act — has become an increasingly attractive option for states desperate to slash costs. If state exchanges are not financially self-sufficient by 2016, they will be forced to join the federal system, HealthCare.gov.

“What is happening is states are figuring out the money is running out,” said Jim Wadleigh, the director of Connecticut’s exchange, hailed as one of the most successful in the country. “At the end of 2016, everyone has to be self-sustaining.”

Other states are being driven to consider the idea by the King v. Burwell case, in which the Supreme Court will decide whether subsidies are allowed in states that didn’t set up their own health exchanges.

If the court rules against the Obama administration, millions of people in states across the country will lose subsidies.

Some of those states could be interested in joining with other states that have their own ObamaCare exchanges.

“It’s absolutely being driven by the court case,” said Joel Ario, the former director of the federal government’s Office of Health Insurance Exchanges.

Most Republican state leaders have avoided talking about how they would respond to a decision against the use of subsidies on the federal exchange. Behind the scenes, however, many are anxiously contacting states that run their own exchanges.

“In the last seven business days, I’ve probably had seven to 10 states contact me about contingency plans,” Wadleigh said, though he declined to disclose the names of states he’s been talking to. “You can imagine the political backlash that would be if the names got out.”

Wadleigh, who became the CEO of Connecticut’s exchange last fall, said he has been in conversations with many states — some using the federal exchange and some running their own exchanges — about possible partnerships.

“Clearly, we can’t sell the code, which was paid for by federal dollars, but what we can do is have collaborations like joining exchanges, if that’s feasible,” Wadleigh said.

His office met recently with officials from Vermont and Rhode Island to talk about ways to collaborate. A few weeks earlier, the directors of all state marketplaces met in Denver to discuss ways to share services.

That same group will come together again in late July at a conference hosted by the Centers for Medicare and Medicaid Services (CMS).

By most accounts, creating a multi-state marketplace would be a logistical nightmare.

It’s unlikely that states could ever merge the full responsibilities of a marketplace, such as regulating plans and managing risk pools.

But even with a simpler model, like a shared call center or website platform, there are big questions about how states could share those costs and duties.

Jennifer Tolbert, a state health expert with the Kaiser Family Foundation, said “one of the trickiest issues” would be determining a governing structure for multi-state exchanges. 

“I don’t know how that would be resolved,” she said.

These hurdles have been big enough to thwart multiple states from moving forward with their plans. Delaware, Maryland and West Virginia, which commissioned a study on the option in June 2013, have all dropped the idea.

What is more feasible, experts believe, is a technology-sharing system, where multiple states all hire the same private contractor. States could also create a regional call center or outreach team.

"There’s lot of states that are trying to crack this sustainability problem, and there have been times when they’ve talked about regional solutions, but it's really been very early on in those discussions," said Pat Kelly, the director of Idaho's health exchange, Your Health Idaho.

He said sharing some services, particularly technology, could bring big benefits to states, though his own state couldn't do so because it used federal dollars for the contract.

“Is it possible and is it a good idea? Absolutely,” he said. “Every time you can share the costs, it’s going to be more efficient.”

Eventually, it could also involve states that are already on the federal exchange, though that kind of transition would likely take years, said Ario, who has served as the state insurance commissioner for both Oregon and Pennsylvania.

“I think if King goes against the government, there will be a flurry of activity,” added Ario, who is now the managing director at Manatt Health Solutions. “Otherwise, it will be more of a gradual transition.”

He said it could be possible for states in some regions — like the Great Plains, where the politics and populations are similar — to leave HealthCare.gov in favor of their own, more autonomous system.

“You can imagine an SEC exchange,” he said, referring to states participating in the Southeastern Conference college football league. “Maybe they could run an exchange really well.”

The idea is becoming more attractive as more and more states are facing dwindling budgets.

Already, Oregon and Nevada have been forced to scrap their own systems and move to the federal exchange. Hawaii is now nearing a shutdown of its program after lawmakers rejected a last-ditch $10 million funding request.

The costs of running Vermont’s ObamaCare exchange are expected to rise to $200 million this year, while California has made major cutbacks after seeing lower-than-expected enrollment figures. Its latest budget, released last week, scales down the budget for advertising, outreach budget and technology services.

For all states, technology is the biggest cost item and the biggest barrier for states to set up their own exchanges.

The Obama administration, which has given $5 billion in grants to help launch exchanges, has already pushed back the deadline for state marketplaces. Exchanges were initially told to be self-sufficient by 2015.  

Still, while forming larger exchanges could make financial sense for the states, it could risk a political backlash.

The state-based exchanges were included in the Affordable Care Act to calm fears that the law would lead to a new, national system for obtaining insurance similar to a “public option.”

Kevin Counihan, the CEO of HealthCare.gov, said earlier this month that he has been encouraging to share “best practices” among state marketplaces that are struggling.

“Our role is to do everything we can ... to help those states succeed,” Counihan told a group at the Health Insurance Exchange Summit earlier this month.

Wadleigh, who will speak at the CMS-sponsored July conference, said officials have been “very supportive” about his discussions with other states, including multi-state partnerships.

A spokesperson from the CMS declined to answer questions about the exchanges.