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On July 2, Governor Tom Wolf signed legislation HB 3, which established the Pennsylvania Health Exchange Fund, a quasi-independent state agency, to launch the creation of Pennsylvania’s state-based marketplace (SBM). 

The state expects to save as much as $60 million in operating costs from no longer relying on the federal platform. Savings from the decreased operational costs and the money that would have gone towards paying the three percent user fee will be used to create a reinsurance fund through a section 1332 waiver. The fund will pay directly for the health care costs for high-cost individuals, which could lower premiums by up to 10 percent and reduce the $2 billion cost for health care premium subsidies to assist low-income individuals. Governor Wolf expects the SBM to be operational as early as January 2021.  

The Commonwealth Fund says there could be more news of other states joining Pennsylvania’s ranks. Its recent report says states facing difficulties using the federal platform have been considering transitioning away from the federal model. 

Federally-facilitated marketplaces (FFMs) have struggled with the Trump administration cutting funding for advertising and consumer assistance and shortening the annual enrollment period. In addition, a 2018 report for the Government Accountability Office found issues with the federal government’s open enrollment management, recommending it takes steps to improve its performance in its consumer experience, enrollment and navigator organization performance. Despite the poor service, the federal government raised user fees for state-based marketplaces on the federal platform (SBM-FPs).  

Against this tumultuous background, states are finding the opportunity to run their own marketplace attractive for several reasons:  

  1. Given federal actions undermining enrollment efforts, states are turning to operating an SBM to regain control. SBMs have authority over special enrollment periods and advertising and outreach, though SBMs are still subject to some federal policy changes. New Jersey, an FFM transitioning to an SBM, cited this instability as one of its considerations: “[the state has been] subject to the whims of the Trump administration and directly impacted by its efforts to damage and destabilize the market.” 
  2. States are also looking to transition to their own marketplace to avoid paying the federal platform’s three percent user fee and instead keep the premium assessment in-state. Nevada, an SBM-FP transitioning to becoming an SBM, claims it will save $19 million by keeping its fee.  
  3. States are also keen to move towards a more personalized website experience, as FFMs and SBM-FPs are forced to use the one-size-fits-all website. SBMs can tailor their own websites to fit their enrollment needs, such as extending the enrollment period. SBMs also get access to data on enrollment, which was another reason New Mexico decided to transition. 

Building an SBM is not without its difficulties. It requires significant time, resources and finances, particularly up-front. But if Nevada, which rolls out its new website next enrollment period, succeeds, we could see even greater momentum towards transitioning to an SBM. 



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