What does a state-based health insurance exchange mean for Maine?


Last week, Governor Janet Mills announced that Maine will pursue a state-based health insurance marketplace using the federal IT platform (SBE-FP). A health insurance exchange is a virtual marketplace where consumers and businesses can shop for and purchase health insurance coverage.

For the last five years, Maine has relied upon the federally facilitated exchange (FFE) to maintain a health insurance marketplace. According to Governor Mills, a switch to the SBE-FP model would give the state more control over marketing, education and outreach while continuing to use Healthcare.gov, the federal IT platform, as the website for consumers to shop for and buy insurance.

“By pursuing a state-based marketplace, we will be putting ourselves — not the federal government — in the driver’s seat when it comes to helping consumers and small employers understand their options for affordable coverage, and we will better insulate ourselves from the attacks on healthcare that are coming out of Washington,” Mills said.

However, it appears the governor intends to eventually transition Maine to a fully state-based exchange, whereby the state would be responsible for operating and administering its own marketplace and IT platform. According to a 2018 report from the Congressional Research Service, 34 states rely on the FFE, 12 operate their own SBE and five have a SBE-FP. 

According to the Maine Department of Health and Human Services, the state would collect a portion of the fees already levied on health insurers that offer plans through the federal platform. The federal government currently collects three percent of total premiums paid to health insurers under the current arrangement.

Under an SBE-FP arrangement, the federal government would collect 2.5 percent and the State of Maine would collect the remaining 0.5 percent from insurers to support state-specific marketing and outreach. If the state decides to implement a fully state-based exchange, insurers would not have to pay a fee to the federal government. Even if the federal fee disappears, the fee levied by the state would likely increase because it would be assuming the cost of running the entire exchange.

If the governor and legislature decide to adopt a fully SBE, problems could arise from administrative costs being shifted from the federal government to state government. When Oregon tried to establish its own exchange, the state wasted $300 million federal taxpayer dollars and finally decided to use the federal IT platform.

Similarly, New Mexico’s attempt to create its own platform fell on its face. BeWellNM cost taxpayers approximately $85 million before the New Mexico Health Exchange Board decided to transition from the SBE model to the SBE-FP model, allowing them to rely on the federally-run Healthcare.gov platform. In other words, trying to become an independent state exchange could be costly to Mainers. 

In addition to the fees mentioned above, the state would have the authority to use other state funding for enrollment and administrative efforts. According to the State of New York’s Open Budget tool, more than $53 million was appropriated to the New York State of Health Account for fiscal year 2019-20, which primarily funds the state’s exchange. While the State of New York relies solely on state appropriations to fund its exchange, states that experience a deficit between the amount collected through fees and the amount spent on the exchange would need to find a way to make up the difference.

If Maine began relying solely or in-part on state appropriations, Mainers could be on the hook for millions to maintain and administer a state-based exchange. While the potential for the state to operate its own exchange sounds rosy on the surface, there is certainly potential for expensive errors. 

It would be less risky to rely on the Healthcare.gov platform than to create a fully state-based exchange for which state taxpayers may be solely responsible to foot the bill. Governor Mills should truly consider the potential costs of transitioning to a fully state-based exchange before we move in this direction.


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