Setup costs mount for ObamaCare exchanges

Setting up the central piece of President Obama's healthcare law has cost the administration more than twice as much as originally intended.

The Health and Human Services Department (HHS) said in budget documents Wednesday that it expects to spend $4.4 billion by the end of this year on grants to help states set up new insurance exchanges. HHS had estimated last year that the grants would cost $2 billion.

The department also is asking Congress for another $1.5 billion to help set up federally run exchanges in states that do not establish their own.

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The request for extra money comes at a critical time — exchanges are supposed to be up and running in every state by October. But it is also sure to meet hostility in Congress, which just last month denied HHS's last request for additional funds.

HHS Assistant Secretary for Financial Resources Ellen Murray punted Wednesday when asked about the consequences if Congress also denies the new request.

The department is "determined to make them work," she said of the exchanges.

Exchanges are intended to function as one-stop shops where consumers can compare and buy private insurance plans if they don't get coverage through their employers. Each state's exchange will determine whether customers are eligible for Medicaid or a subsidy to help pay for private coverage, and policies sold through an exchange must meet certain criteria.

The healthcare law did not provide any funds specifically for HHS to set up a federal fallback exchange because lawmakers envisioned most states setting up their own marketplaces.

But Republican governors have largely refused to implement any part of the law; only 17 states and Washington, D.C., have been conditionally approved to run their own exchanges.

HHS will have to run all or part of the operations in the rest of the states.

HHS has scraped together about $1.5 billion to set up the federal exchange during this fiscal year, drawing from other programs and general implementation funding.

Murphy said HHS expects to spend about $2 billion next year on the federal exchange — the $1.5 billion it has requested from Congress, and another $450 million in fees collected from insurance companies.

She did not say Wednesday whether HHS could continue pulling together money from other sources if Congress doesn't come through with extra funding.

Of the $1.5 billion HHS is asking for, the majority would pay for basic operational functions of the federal exchange. Roughly $550 million is for education and outreach — efforts to ensure that people enroll in the new coverage options available to them.

The administration made a similar, slightly smaller request last year, but Republicans wouldn't allow more implementation funding to be included in the recently passed continuing resolution, which funded the government through the end of this year.

HHS Secretary Kathleen Sebelius said at a press conference Wednesday that implementation funding is an "ongoing conversation with Congress" and said Republicans should stop fighting the implementation effort.

"I'm hoping Congress will see that this is the law of the land," Sebelius said.

HHS has also spent far more than expected on grants to the small group of states that are setting up their own exchanges.

The administration expects to have spent a total of $5.7 billion on grants to those states by the end of the next fiscal year, according to budget estimates first reported by Bloomberg News.

HHS said its grants by the end of this year will likely total about $4.4 billion. Last year, it had estimated that grants over the same time period would add up to just $2 billion.

HHS does not need congressional approval to fund state-based exchanges. The healthcare law allows the department to draw as much as it needs for state grants.