NJ Not Alone in Switch to State-Based Health Insurance Exchange

Lilo H. Stainton | July 11, 2019 | Health Care
Four other states, including Pennsylvania, are moving to take over ACA operation from federal government

Credit: NaLEC
People get help signing up for health insurance through the Affordable Care Act.
When Gov. Phil Murphy signed legislation two weeks ago giving New Jersey full control over its individual health insurance market, he made the Garden State the first to reclaim this role since the system’s author, President Barack Obama, left office.

But New Jersey is not alone in embarking on this transition, and it won’t be the first to roll out its new state-based health insurance marketplace, or exchange. That honor goes to Nevada, which has less work to do and plans to make the shift this fall.

An analysis by The Commonwealth Fund, a foundation dedicated to improving healthcare nationwide, notes New Jersey is one of five states — including neighboring Pennsylvania — that have initiated the takeover of some or all of the tasks involved with operating these systems. The work includes managing and regulating insurance products, marketing these plans and helping customers sign up, and operating an online platform that determines eligibility and serves as an enrollment portal.

Individual health insurance plans, which now cover more than 315,000 New Jerseyans, benefit residents who earn too much to qualify for Medicaid but don’t have coverage through their jobs; currently these plans are overseen by the federal government and sold through the federal platform, healthcare.gov. Obama’s Affordable Care Act — known as Obamacare — involved new quality mandates for these policies and formed a subsidy fund to help qualified customers pay premiums or other out-of-pocket costs.

Murphy, a Democrat, said New Jersey’s transition — which will start with 2021 plans — will give the state greater control over these products and how they are sold, allow it to access troves of additional healthcare data, and provide extra protection against Republican-led efforts to repeal or replace the ACA. These safety measures are particularly important now, given that enrollment in individual market plans declined for two years; it dropped more than four percent for 2019 and experienced an 11 percent falloff the previous year, according to state figures.

A critical move for NJ

“Creating a State-based exchange is critical to ensuring residents have access to quality affordable health coverage,” Department of Banking and Insurance Commissioner Marlene Caride said Wednesday. The system will allow the state to shape the policies and take other actions to stabilize and expand the market, while also providing greater protections against federal instability, she said.

Credit: Edwin J. Torres/Governor's Office
Marlene Caride, commissioner of the Department of Banking and Insurance
“We also have the benefit of lessons learned from states that already have their own exchanges and have operated them for a number of years,” Caride added. “With a State-based exchange, we will be able to set our open enrollment period, which was cut in half by the federal government; to fund outreach and enrollment efforts, with the funding we are currently sending to Washington, and gain access to data that will allow us to conduct more targeted outreach efforts.”

Caride also said that revenue generated through fees on each plan, and now sent to Washington, D.C., can be “better utilized right here in New Jersey” to improve access to coverage and protections. A 3.5 percent tax on individual health plans sold — the same as the current federal rate — is expected to generate more than $50 million to support the state’s work on the program.

While there are clear benefits from a state-based exchange, New Jersey faces challenges in getting the new system up and running, notes Ray Castro, health policy director with New Jersey Policy Perspective and a longtime student of the ACA. Much of it will depend on technology and, while there are now several proven products available off the shelf, Castro said it won’t be easy for the state to build an effective platform in just 15 months.

The process is complicated by the New Jersey law’s requirement that the state also integrate Medicaid enrollment, Castro said — something that hasn’t been incorporated in other state platforms. And state officials must solicit public input on their plans before they issue a request for proposals, scheduled for release this month, he noted, and conduct a study on how they can help reduce premiums — a critical factor depressing enrollment.

The big challenge

“The biggest challenge facing the state will be to make major changes in the exchange to reduce the cost for insurance. Simply establishing a state exchange will do little to reduce consumer costs,” Castro said. “It will be very important that the system work smoothly as soon as the open enrollment starts otherwise enrollment could suffer,” he added; technical glitches with the first version of the federal website caused chaos for the Obama administration.

According to a DOBI spokesperson, the department is now working on an application to create the program that it expects to submit this month to the federal Centers for Medicare and Medicaid Services, which runs the federal system. it is also developing the request for proposals from tech companies to create and run the platform. “Specifically, the vendor would provide an integrated online health insurance technology platform and associated consumer assistance center to support the department’s operation of the exchange,” said Trish Graber, DOBI’s director of public affairs.

Filings compiled by Commonwealth from the other states seeking to run their own systems — Nevada, New Mexico, Oregon and Pennsylvania, all currently led by Democratic governors — show leaders in these jurisdictions have voiced similar goals in switching to a state-based exchange, while also seeing it as an opportunity to save money.

Nevada, which began the process two years ago, anticipates it will save $8.3 million in the first year and nearly $19 million by 2023. Pennsylvania suggests it will collect $88 million through a fee on policies and can operate the exchange — beginning with sales of plans for 2022 — for as little as $30 million, thanks to technological improvements and other advances; that would leave nearly $60 million to improve care for low-income residents, according to a press release from Gov. Tom Wolf’s office.

“This bill is a huge step toward making health insurance affordable and effective for all Pennsylvanians,” Wolf said when signing Pennsylvania’s transition bill, four days after Murphy signed New Jersey’s. “I want Pennsylvania to be a leader on health care reform, and I want no Pennsylvanian worrying about affording the care they or their loved ones need.”

Pennsylvania in same boat

Pennsylvania faces similar challenges as New Jersey, as both were among the 17 states that relied on the federal government for all aspects of the individual exchange operation, from creating plans to signing up customers online. But with their new laws, the two have since joined the 11 states, and Washington, D.C., that now operate their own systems from top to bottom.

Nevada, New Mexico and Oregon likely face an easier lift, as they were among a group of five states that created their own plans and handle marketing and customer service at the state level, but depended on the federal website, healthcare.gov, for eligibility screening and enrollment. Nevada has since hired a tech company that created online platforms in a half dozen states to create its own sales and evaluation system, a process Nevada officials claim is on target to launch November 1, when sign-up for the 2020 plans begins.

New Mexico hired another tech company, a Virginia based firm that said it has worked with more than three dozen states on marketplace products, and agreed to pay it $27.5 million to build and maintain its system for five years; it is expected to be operational for the sale of 2022 plans. Oregon is seeking proposals for its new system and has not set a date for transition, according to Commonwealth.