Obamacare train wreck continues: States are trying to figure out how to pay for their exchanges

States that opted to create their own Obamacare exchanges aren’t going to be able to rely on funding from the Obama administration to operate their health insurance websites in 2015 as well as future open enrollment periods, leaving them to looking for other ways to keep the costly systems up and running smoothly.

Sarah Kliff at Vox explains that the 15 states that plan to operate exchanges when the next open enrollment period opens later this fall will have to find a way to find the websites, including levying a tax on health insurers and/or dipping into their general funds:

Most state exchanges plan to rely, in least in part, on charging health insurers a fee for selling coverage. So far, the fees set for 2015 range from 1 percent of the monthly premium in the District of Columbia and Vermont to 3.5 percent in Minnesota. Some states also charged fees in 2014, in order to begin generating revenue further in advance, while others are implementing them for the first time.

Figuring out the right level for the fee is a difficult task that involves a lot of predictions about what Obamacare will look like in 2015.

“It’s not just anticipating how many people will enroll but also how much premiums are going to be,” Avalere’s Carpenter says. “The question of long-term sustainability is certainly going to take some time to figure out.”
Some states are turning to their legislature to help foot the bill for the new insurance exchange. New York State of Health, for example, will rely completely on appropriations from the state to finance its web portal.

Kliff notes that other states plan to use leftover grant funding or other creative means to come up with the funding needed to operate their exchanges. The tax idea is just bad policy. Health insurers will, of course, just pass the tax off to consumers, as they’re already doing with Obamacare’s tax hikes. That makes already expensive premiums that much more expensive.

States that rely solely or partially on appropriations will either have to cut spending elsewhere to find the money to pay for the exchanges, raise taxes, or some mix of the two. That’s not a rosy scenario for taxpayers.

Should it get too costly, however, more states could decide to drop their exchanges, leaving it up to the federal government to bear the load through HealthCare.gov, which is currently going through an overhaul. Oregon, for example, has already abandoned its exchange, and Massachusetts could be next.

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