With the Affordable Care Act (ACA), there are provisions affording individual states a variety of options to build their own exchanges. States can establish viable marketplace solutions for state residents in an effort to serve them better. This allows individuals to shop for health insurance coverages within these state-based exchanges instead of having to use the federal platform. Over the years, many states have considered the idea of developing their own marketplaces. Some experienced successful enrollment rates and cost savings and continued as a State-Based Marketplace (SBM). But others did not see the immediate value proposition. In addition, the repeal of ACA has failed numerous times and with a President Biden, it is extremely unlikely at this point that it will ever be repealed.
Today’s ACA is getting a surge in support, benefits, and funding as part of the current administration’s American Rescue Plan. Some is in the form of premium tax credit expansions and a provision of $20 million for technology upgrades. It is this turn of events that is inspiring more states to revisit the state-based exchange plan. As a business serving the industry, now is a perfect time to prepare to meet the trending launch of state-based exchanges.
In addition, residents of FFM states paid $1.87 billion in user fees to CMS for the use of HealthCare.gov in 2018. These fees are paid in the form of higher consumer premiums. States that take back control from the FFM have the ability to provide lower-cost alternative to HealthCare.gov, while maintaining local control over eligibility processes, enrollment decisions, and more.
Understanding the Different Types of Exchanges
The Kaiser Family Foundation (KFF) offers some basic definitions to better understand the various exchanges within the overall system.
Federally Facilitated Marketplace (FFM)
In this type of Marketplace, HHS is responsible for performing all the functions of the consumer engagement process and enrollment. Any individuals who live in a state with an FFM apply for premium tax credits and select plans via Healthcare.gov.
State-based Marketplace Federal Platform (SMB-FP)
Some states with state-based exchanges retain responsibility for processes like consumer outreach. But residents of these states will still need to rely on Healthcare.gov for eligibility and official enrollment steps.
State-based Marketplace (SBM)
In these situations, SBM platforms handle every step of the process for the individual market. State residents can check eligibility, apply for, and officially enroll in health insurance plans via marketplace sites managed by each state. However, only two SBMs (Massachusetts Health Connector and HealthSource RI) support payments and extensive noticing requirements. Softheon currently provides the platform for the Massachusetts Health Connector. The data changes often, but as of Q1 2021, there were 15 states with state-based exchanges and 24 federally facilitated exchanges. Several states changed their models in the past, while many others are considering launching new stated-based platforms. Industry experts are predicting an ongoing shift to embrace these state-level options for several reasons that benefit both the states and the residents they serve.
Flexibility & Benefits of State-Based Exchanges
Having these kinds of structural and operational options, along with the infused funding and support to the ACA, states are realizing the attractiveness of offering a state-based exchange. There are cost savings available, making it more lucrative to invest in the exchange infrastructure and customer support necessary for a successful exchange at the state level.
States are leveraging third-party partnership savings, too. Hiring vendors, including those offering software and tech-based solutions like Softheon, is more affordable in today’s market. Many of those costs are dropping due to increased competition. States believe operating a state-based exchange can cost considerably less than it would have in years past – And they are not wrong! Some states are also moving to state-based exchanges because of the increased capacity for controlling functions.
Marketplace functions, managed at the state level, can in some cases provide better individual engagement. Not every state can take on these additional responsibilities. However, there are many whose officials would rather manage the services statewide and not rely on the federally governed platform. In some circles, state officials shared concerns about federal decisions impacting the enrollment process for individuals. Taking back those responsibilities means providing a better exchange offering to the state residents who need it most right now.
What It Takes to Develop a State-Based Exchange
Developing a state-based exchange requires a series of challenging steps – all of which are now well documented and are becoming easier as states continue to convert. There are costs to manage, as well as consumer-level risks. There are new vendors to vet and procure.
Transferring sensitive data from the federal Marketplace to a new state platform requires credentialed data management partners. And there are layers of additional requirements when it comes to cascading information between insurers, Medicaid ecosystems, and the Children’s Health Insurance Program (CHIP). These challenges present unique opportunities for businesses operating within the industry. State officials likely remember the tech nightmares experienced back when the ACA first launched, too.
Today’s solutions will need to be complex and robust. And states looking to explore state-based exchange setup may need to be reminded of recent advancements and successes, even at the federal level. The major tech failures are easier to avoid in today’s landscape, although risk management and redundancies will need to be paramount. Not all states currently want to offer state-based exchanges.
In some scenarios, states may not want to assume the large task of moving to a SBM platform. In other states, the decision might continue to be political. But knowing that federal funds are coming and the economy is making a comeback, state-based exchanges are looking better and better for many states. More importantly, Republican-led states understand that ACA is here to stay and they may be able to craft an exchange that is closer to their ideals and politics.
Today’s tech is better, the costs are more manageable, and the ACA is getting the infusion of funds needed for success.
If you are a state official charged with exploring state-based exchange opportunities and benefits, let Softheon be your guide. We can provide the resources and expertise since much of our state-based exchange services aim to drive comprehensive enrollment experiences and beyond. Get the support and resources your state needs to successfully launch and manage communications, eligibility, support, and membership retention.
Meet the Author Josh Schultz is a Senior Policy Analyst at Softheon, where he advises the company on health policy issues affecting businesses and government health agencies. Prior to Softheon, Josh worked for a non-profit agency assisting Medicare beneficiaries, a technology company, and consulting firms.