By Katie Kerwin McCrimmon
Health exchange managers plan to increase user fees and assessments on Coloradans who buy health insurance in order to fund exchange costs that could soar to $44 million a year.
Previous managers of Connect for Health Colorado had for years said that Colorado’s exchange would be financially self-sustaining this year and would cost $26 million a year to run.
But new financial projections that Connect for Health Colorado managers unveiled Monday morning show far higher expenditures. The board has not voted yet on a new budget, but costs for the exchange’s call center in Colorado Springs alone are expected to balloon to $21.3 million this year, far more than the $13.6 million that had been budgeted.
Exchange managers also may have to spend as much as $5.3 million in additional cash to fix a hobbled IT system that the exchange shares with Colorado’s Medicaid system. Sign-up problems caused major headaches to thousands of customers this year in part because customers must first get rejected for Medicaid coverage before they can qualify for tax subsidies through the exchange. Exchange managers and state officials want to avoid similar problems when the next open enrollment period starts this fall.
In order to stay afloat financially, exchange managers will have to increase fees and assessments on people who buy health insurance, according to planning documents presented to the exchange’s Finance Committee on Monday. (Click here to see the new financial projections.)
For this year, people who buy plans through the exchange are paying a user fee of 1.4 percent on their health insurance plans. In the past, exchange board members balked at increasing those user fees. Now the interim CEO, Gary Drews, is telling board members that past projections were wrong and user fees will have to rise to as much as 3.5 percent. Colorado officials had always said that the state exchange cost far less to run than the federal system, but the federal user fee is also 3.5 percent.
At the same time, Connect for Health Colorado this year and next is authorized to scoop up additional cash from people who buy health insurance outside of the health exchange. The exchange gets to collect $1.25 per member per month from companies that sell health insurance. The fee is known as a “broad market assessment,” and health insurance executives have said they pass the cost along to customers. The broad market assessment affects at least 875,000 Coloradans, while anyone who buys a plan through Connect for Health pays the user fees.
The broad market assessment is slated to net about $14 million for the exchange for all of 2015. The separate user fees are expected to bring in about $5.2 million for the fiscal year, which ends this summer.
Drews told exchange board members Monday that Colorado’s exchange has spent the least of the state-based exchanges and that the entity needs more “investment” and more employees to provide customers with better service.
“We will have to adjust both the revenue and expenditure sides of the budget,” Drews said.
He said Colorado is not alone in its struggles. He said he recently met with leaders of other state-based health exchanges.
“Most of them are also going through very similar turbulence. There are a lot of winds buffeting the organizations. That’s having an effect on our financials every day,” Drews said.
Other state exchanges, however, are part of the state agencies that run Medicaid and are getting some funding from Medicaid to help pay for the exchange. In Colorado, the exchange is a separate entity outside of the state government. Managers here say they are not getting reimbursed for millions of dollars in spending to help people who end up qualifying for Medicaid.
Drews wants to find a way for Colorado’s exchange to qualify for some reimbursements related to Medicaid clients.
“As I look at several other states’ financials, up to one-third of the budget is subsidized by Medicaid reimbursements,” Drews said.
He cited Washington as an example and said for 2017, the state had a total projected budget of $78 million with Medicaid providing $28 million.
Colorado has received nearly $200 million in federal start-up funds. After those run out, former managers had claimed they could manage with $26 million a year, a goal that the updated projections show is far off base.
“It’s important context to recognize the amount of money that it takes to run one of these organizations,” he said.
Among the many complications is how to properly staff the call center. One of the biggest challenges, Drews said, is that most customers wait to sign up until the last day, then all call at once.
That means many people have to wait far too long or can’t get through at all to get help.
“How do we right-size the service center? How do we best manage the Medicaid population that’s coming to us?” Drews said. “We have very significant and expensive budgeting challenges ahead of us in the next few weeks,” he said.
“Even if we were to raise our rates to the level of the federal exchanges (3.5 percent) that would provide between $34 (million) and $37 million that we have to meet. We know that’s going to be a very challenging number to get to,” Drews said.
While some planning scenarios showed total annual budgets holding to $37 million for the next fiscal year, another one predicted spending of $44 million for the following year.
“I think it’s going to be a heck of a feat to balance the three or four variables that make this work,” Drews said.
Managers will have to increase fees and spend wisely on improving systems and service that can entice more customers to sign up.
“Yes, I think we can get there. At the same time, we have to manage cash incredibly well. We are going to be using reserves to fund the organization…. It will take a lot of work,” Drews said.
“We do need to ensure that open enrollment No. 3 goes better than No. 2.”
One thought on “Exchange to hike user fees, assessments to pay rising costs”
Tell me one more time why we don’t hand this thing back to the Feds. Of course there are those who see this as a jobs program and economic development.