Surging Obamacare enrollment during the pandemic will likely be a boon for states that are launching their own health insurance marketplaces.
Obamacare sign-ups spiked after millions of people lost their jobs and work-related coverage due to Covid-19. An increase in enrollees will likely reduce per-person costs for insurers, particularly as more healthy people look to get covered. That in turn could draw more insurers to the exchanges, leading to increased competition and reduced premiums, state health officials and analysts said.
Insurers may be especially drawn to state-based exchanges since states typically spend more money on outreach and marketing and may combine their exchanges with reinsurance programs that lower premiums, as Pennsylvania has done.
The HHS reported that almost a half-million people enrolled in the federal HealthCare.gov exchanges through May after losing their jobs, a 46% increase from the same time period last year. Almost 263,000 people newly signed up for coverage in state-based exchanges since March, according to a report by health-care consulting firm Avalere Health. Only eight of the 12 existing state exchanges that reopened, however, publicly released enrollment numbers, according to the report.
“There could be actually more than 1 million new enrollees to the exchanges currently in 2020" due to the impact of Covid-19, Chad Brooker, associate principal of Avalere, said.
The increase comes as more than a half dozen more states, including Pennsylvania and Virginia, move to create their own Affordable Care Act exchanges for residents to shop for plans.
Pennsylvania will be able to operate its exchange for an estimated $35 million to $40 million in 2021, in contrast to the approximately $98 million being spent on the state’s federal exchange operations, Zachary Sherman, executive director of the Pennsylvania Health Insurance Exchange Authority, said.
State officials cite those cost savings and greater flexibility in operations as the primary reasons for setting up their own exchanges, particularly in light of the Trump administration’s refusal to reopen HealthCare.gov to let uninsured people get coverage during the pandemic.
The administration, which is challenging the constitutionality of the ACA in court, argues that people who lost coverage due to job loss or other major life events are eligible to go to HealthCare.gov and enroll under a federal special enrollment period. They’re also eligible for subsidies to make the plans more affordable.
Twelve of the 13 existing state-based exchanges have held their own special enrollment periods for more people to get covered in the face of the public health crisis. New Jersey and Pennsylvania are slated to open their own exchanges for 2021.
Maine, New Mexico, and Kentucky notified the Centers for Medicare & Medicaid Services that they plan to start their exchanges in 2022. Virginia enacted legislation to open an exchange by 2023. Oregon is also pursuing a state-based exchange.
State officials say the lower costs of operating their own exchanges means they can focus resources on lowering premiums for their growing consumer base and attracting and retaining consumers.
The cost savings will allow Pennslyvania to increase spending on outreach, better enabling it to target young people. That will “improve the risk mix” by increasing the number of healthy enrollees, Sherman said.
The state plans to use the remaining revenue for its new reinsurance program that will start in 2021. Reinsurance programs reduce premiums by subsidizing high-cost claims, and Pennsylvania’s consumers are expected to save 5% in premiums next year as a result, Sherman said.
Exchange enrollment could increase from about 300,000 to 306,000 due to a loss of employer coverage, Sherman said. “The more people we bring in, the more ability we [have] to favorably impact the cost of coverage through the exchange,” he said.
In addition to having more control over outreach, “state-based exchanges have more autonomy over their individual insurance markets,” Marvin Figueroa, Virginia’s deputy secretary of health and human resources, said. State-based marketplaces have refined strategies to maintain stable enrollment and ensure people remain covered when their eligibility changes, he said.
About 300,000 enrolled in the ACA exchange in Virginia during the regular open enrollment period for 2020, Figueroa said. The state currently spends about $91 million in federal user fees, and Virginia expects to reduce that cost to between $45 million and $70 million because it will cost the state less than HealthCare.gov to operate its exchange, he said.
States that operate their own exchanges are charged 2.5% of premiums, while states that use HealthCare.gov are charged 3% of premiums.
New Mexico expects to save at least $1 million in maintenance and operations costs the first year it operates its BeWellnm exchange, scheduled for 2022, Jeffery Bustamante, the exchange’s CEO, said. New Mexico has nearly 43,000 ACA enrollees.
“If we do see that increased enrollment, the costs would go up with it,” Bustamante said. “The big question for us is how is coverage itself going to change” as employer-sponsored coverage changes, he said.
New Mexico will have better access to enrollee data by operating its own exchange, which will ensure better integration between exchange coverage and Medicaid so that people don’t lose coverage when their qualifications change, Bustamante said.
People earning below 138% of the federal poverty level qualify for Medicaid in states that have adopted the ACA’s Medicaid plan, as New Mexico has, while people above that level qualify for exchange plans with premium subsidies in most cases.
An advisory committee in Oregon recommended in 2019 that the state set up its own exchange, according to Chiqui Flowers, administrator of the Oregon Health Insurance Marketplace. About 145,000 people are enrolled in the federal ACA exchange in Oregon, she said.
Covid-19 provides the most striking example of why it would be better for Oregon to operate its own exchange, Flowers said.
“The value of being a state-based marketplace, having your own exchange, can be seen through the other exchanges’ results with their broad-based special enrollment period,” she said.
—With assistance from Alexander Ebert