May 2, 2014

Health exchange girds for end of federal funding

DENVER – A temporary gap in funding that will occur once federal money runs out for Connect for Health Colorado, the state’s health-insurance exchange, could be filled by using proceeds from a universal fee paid by all insured Coloradans and proceeds from long-term state tax credit donations.

Federal law dictates that state exchanges, including Connect for Health Colorado, must be financially sustainable by the end of 2015, when federal funding ends.
When the exchange opened last fall, $66 million in federal money was used to finance the launch. For 2014, that number was reduced to $60 million, and for 2015, it will drop to $15 million. After that, federal funding will disappear altogether.

Exchange officials have proposed temporarily reinstating a fee once used to fund the state’s high-risk insurance pool. Reinstating this broad market fee for two years, in 2015 and 2016, would generate $26 million for the exchange, allowing it to remain solvent until income from its own operations and tax credit donations grow enough to fill the gap. This is projected to occur by 2017.

SPONSORED CONTENT

Business Cares: March 2024

WomenGive, a program of United Way of Larimer County, was started in Larimer County in 2006 as an opportunity for women in our community to come together to help other women.

The fee, known as the general market health insurer assessment, was used to help pay for Cover Colorado, the high-risk insurance pool that offered insurance to those Coloradans with chronic health conditions who could not get coverage from a commercial carrier. Cover Colorado was shut down last year in the wake of the Affordable Care Act because the ACA requires that everyone be insured, even those with serious diseases.

In 2011, the general market assessment was $38.69 per policy per year, according to state documents. The fees were collected by insurance carriers, who then remitted lump sums to the state at the end of every quarter.

But if the general market assessment mechanism is used to help fund the exchange, the amount would likely be lower than that, said Mike Fallon, a Greeley physician and member of Connect for Health Colorado’s finance committee.

“My hope is to make it as small as possible,” Fallon said. A final decision on whether to put the fee revenue into the exchange could come in the next month, he said.

The fee would be imposed on all Coloradans with insurance coverage, including those who get their coverage through their employer or who purchase an individual plan through a broker, some 875,000 people. Those who are covered through Medicaid or Medicare are exempt.

Right now, those who enroll in coverage via the exchange pay 1.4 percent of the cost of their premium to help finance the exchange, and that could rise as high as 3 percent by 2017, according to the preliminary budget.

Revenue from fees on insurance premiums sold through the exchange is expected to rise from $5.5 million in 2014 to a projected $21.4 million by 2017. At the same time, the exchange would collect $5 million through special state tax credit donations.

These revenues, coupled with a dramatic drop in expenses that will occur as start-up costs are paid off, will allow the exchange to become self-sustaining by 2017.

Many on Connect for Health Colorado’s legislative oversight committee had reservations about using the general market health insurer fee, according to state Sen. Kevin Lundberg, R-Berthoud, who sits on the Senate’s Committee for Health and Human Services, especially because the true effectiveness of the exchange to help the previously uninsured remains unknown.

The exchange has often said it has no data on how many of the 124,000 people who enrolled in coverage were previously uninsured, because a question on that subject during the enrollment process was optional, but many people – both lawmakers and business leaders – wonder how many people are actually newly insured.

Lundberg supported the use of the assessment to fund Cover Colorado, but said he isn’t convinced that it is the best choice for helping to fund the exchange.

Molly Armbrister can be reached at 970-232-3129 or marmbrister@bizwestmedia.com. Follow her on Twitter at @marmbristerBW.

DENVER – A temporary gap in funding that will occur once federal money runs out for Connect for Health Colorado, the state’s health-insurance exchange, could be filled by using proceeds from a universal fee paid by all insured Coloradans and proceeds from long-term state tax credit donations.

Federal law dictates that state exchanges, including Connect for Health Colorado, must be financially sustainable by the end of 2015, when federal funding ends.
When the exchange opened last fall, $66 million in federal money was used to finance the launch. For 2014, that number was reduced to $60 million, and for 2015, it…

Categories:
Sign up for BizWest Daily Alerts