Is Pennsylvania about to become the 6th state to break off from the HC.gov mothership?

Until now there's only been one state which started out hosted by HealthCare.Gov which has gone on to break off onto their own platform: Idaho, which made the move with no drama back in 2014

In Idaho's case, this was always the plan from the start; they simply didn't have time to launch their own exchange before the 2014 Open Enrollment Period, so they bumped it back a year. Idaho is about to lose that unique status, however, in a big way.

Back in March, the House Democrats held a press event in which they officially rolled out the "Protecting Pre-Existing Conditions and Making Healthcare More Affordable Act", or #PPECMHMAA for short. That's a simply terrible title and an even worse hashtag, so I've simply shorthanded it as #ACA2.0.

The bill is actually a suite of a dozen smaller bills. Nearly all of them are sponsored purely by Democrats, which isn't surprising...but there's one exception:

H.R.1385, the “STATE ALLOWANCE FOR A VARIETY OF EXCHANGES (SAVE) ACT”, introduced by Rep. Andy Kim (D-NJ) and Rep. Brian Fitzpatrick (R-PA), would provide states with $200 million in federal funds to establish state-based Marketplaces. Under current law, federal funds are no longer available for states to set up state-based Marketplaces.

I've noted a couple of times how unusual it is for any Republican to agree to co-sponsor a bill which not only improves the Affordable Care Act, but involves appropriating $200 million to do so.

Of course, Fitzpatrick only won his Congressional race by 2.6 points last year, so it's possible this was just a show vote for him to tout his bipartisan credentials in the general election next year, knowing that the bill will never make it past the Senate anyway. And sure enough, when H.R.1385 came up for the full vote, Fitzpatrick was one of only five Republicans to vote for it.

However, as I've also noted, there may be more to this than that. Set the wayback machine to May 2015, Sherman!

So, the good news is that new Democratic Pennsylvania Governor Tom Wolf, who has already scrapped his predecessor's unnecessarily confusing "alternative" Medicaid expansion plan in favor of regular expansion, has officially submitted a latter to the HHS Dept. stating that yes, if the Supreme Court does rule against the government in the King v. Burwell case, PA will indeed establish their own ACA healthcare exchange.

Yes, that's right: King vs. Burwell, which held the crown for the most absurd anti-ACA lawsuit ever to reach the Supreme Court of the United States until now.

I won't rehash KvB, but the bottom line is that for the first half of 2015, for a reason still too stupid to believe, there was a very real chance that any state which didn't operate their own full ACA exchange would have their Advance Premium Tax Credits (APTC) stripped away entirely. In response, for awhile some states hosted by HealthCare.Gov were scrambling to prepare for the possibility of having to slap together their own state-based exchange on very short notice.

Thankfully, the Supreme Court shot KvB down, and not only did HealthCare.Gov remain intact, it actually gained a couple more states. (Kentucky Governor Matt Bevin shut down the "kynect" exchange in early 2016, and the Hawaii Health Connector was forcibly shut down at around the same time due to gross mismanagement and serious ongoing technical problems.

Since then, however, the situation has changed dramatically. For one thing, with six full years of Open Enrollment under their belts, the state exchanges have had ample time to beta test their systems, find out what works, what doesn't and the best practices to take when designing an exchange platform.

For another, six years of programming advancement have made it much easier to build an exchange "out of the box", so to speak (in fact, I believe Maryland's 2nd successful ACA exchange was essentially an "off the shelf" variant of Connecticut's from the year before, and it's worked fine ever since).

The third factor, of course, is that the cost benefit analysis of a state operating their own exchange has completely flipped around since 2014. At the time, states were spending hundreds of millions of dollars of federal grants to set up exchanges; once that money dried up, it made little financial sense to spend their own money versus simply offloading the work to HealthCare.Gov and having the carriers pay the 3.5% premium user fee.

Over time, however, that made less and less sense. As I noted over a year ago, that 3.5% premium fee remained exactly the same for the next six years...well after the startup costs of HealthCare.Gov (and the subsequent fixes/overhauls to it) were fully amortized. It remained 3.5% even as exchange enrollment increased over 50% and average unsubsidized premiums more than doubled. In other words, as of 2019, the annual user fee revenue has likely more than tripled with little apparent justification.

As it happens, Trump's CMS Dept. recently announced that they're finally cutting the fees down by half a point (from 3 - 3.5% down to 2.5 - 3.0%), but it's still higher than it needs to be.

Between the continuously too-high HC.gov fees and the continously decreasing expenses involved in setting up their own exchanges, I made this prediction just hours after the King vs. Burwell decision:

It's even conceivable--unlikely, but conceivable--that a few years from now, after 1) The ACA has become even more firmly entrenched nationally; 2) the software/technology for running a state exchange has become even more streamlined, simplified, faster, easier to use, cheaper, etc etc; and 3) (hopefully) some changed attitudes/changed administration officials (ahem), a few states on HC.gov now may even decide to go ahead and move onto their own "full" exchange/website after all...completely of their own volition.

I realize that sounds pretty crazy now (since there'd be no financial incentive to do so), but anything's possible...and with King out of the way, at least that's a viable option now.

Well, sure enough, guess what?

February 2018:

Nevada wants out of federal health exchange

Nevada's Silver State Health Insurance Exchange took the first step on Thursday to getting out of the federal healthcare.gov system and build its own exchange.

The Legislative Interim Finance Committee granted SSHIX $1 million from its own reserves to put together an RFP and find a private provider.

October 2018:

NM will operate its own exchange platform starting with the 2021 plan year

New Mexico has a unique exchange; the state runs the small business portion, and while the individual exchange is also technically state-run, Healthcare.gov is used to enroll people in individual insurance (ie, a federally-supported state-based marketplace). But the exchange is planning to establish its own enrollment platform that will be in use by the fall of 2020.

March 2019:

Governor Murphy Announces New Jersey to Transition to State-Based Exchange

Acting to improve health care access for New Jersey residents, Governor Murphy today announced that the State of New Jersey will move to a State-Based Health Exchange for the year 2021. The action will allow New Jersey greater control over its health insurance market and the ability to establish stronger protections against the Trump Administration’s sabotage of the ACA. The Governor has also proposed codifying in state law the protections provided by the Affordable Care Act.

April 2019:

The Oregon marketplace issued a technology RFI to help assess the feasibility of transitioning to a full state-based marketplace https://t.co/RCNrOR0ci4

— Rachel Schwab (@RachelE_Schwab) April 23, 2019

(Note: this one is still up in the air...Oregon toyed with the idea of splitting off in 2016 and again in 2017, so I'm not getting ahead of myself this time.)

...and finally, today (via Marc Levy of the AP):

Pennsylvania moves to take over health insurance exchange

Pennsylvania is moving to take over the online health insurance exchange that’s been operated by the federal government since 2014, saying it can cut health insurance costs for the hundreds of thousands who buy the individual Affordable Care Act policies.

New legislation unveiled Tuesday has high-level support in Pennsylvania's House of Representatives, with the chamber's Republican and Democratic floor leaders as the bill's lead co-sponsors.

A House committee vote was scheduled for Wednesday, underscoring the urgency of the legislation.

The bill is backed by Gov. Tom Wolf, a Democrat, and his administration says it would make two important changes to reduce premiums for the 400,000 people who purchase health insurance through the Healthcare.gov online marketplace.

It's easier for New Mexico, Nevada and Oregon (if they go through with it) to split off since all three already have all of the other elements of a state-based exchange in place (remember, both NV and OR originally had their own technical platform before having to scrap them and move to the mothership; NM was supposed to split off years ago but never got around to it until now). Pennsylvania's situation is closer to New Jersey--both states have always let the federal exchange handle pretty much everything for them, so there's more legal maneuvering which has to be done to break free.

The administration is pressing for the bill to pass the Republican-controlled Legislature this month in the hope that savings measures can be in partial effect in 2020 and in full effect in 2021.

Wow! They're gonna try and have their own exchange operational this November? That's pretty ambitious...Nevada is launching theirs this fall, but they started planning for it nearly a year ago. New Jersey and New Mexico aren't planning on launching their exchanges until next November.

On the other hand, Maryland and Massachusetts were able to completely move everything from their old, broken exchange platforms to brand-new ones in less than seven months, so I suppose they might be able to pull it off, especially if they've been quietly working on it behind the scenes for awhile now, which seems to be the case.

UPDATE: OK, this makes a bit more sense (Heather Korbulic is the director of the Nevada ACA exchange):

I think they may be planning to be SBE-FP for PY20 and a SBE for PY21, you’ll have to confirm with them. Either way @NVHealthLink is a trend setter. pic.twitter.com/JBQNl30HUv

— Heather K. (@HKORB) June 5, 2019

As noted above, there are five "SBE-FP" states which technically already have their own ACA exchanges in place (that is, the legal and administrative side is in place...they have a board of directors, budget, administrative authority, etc.), but which piggyback off of HC.gov, effectively outsourcing their tech platform. Those states collect revenue themselves, then pay HC.gov 3.0% of the premiums (vs. 3.5% for the states without their own exchange authorities).

If Korbulic is correct, Pennsylvania would switch from a "FFE" state ("Federally-Facilitated Exchange") to a "SBE-FP" state (State-Based Exchange, Federal Platform) for 2020, and then to a full "SBE" (State-Based Exchange) for 2021.

One of those savings measures is on the cost to operate the online exchange.

Wolf's administration says the state can operate the exchange for less money than the federal government. Currently, the federal government takes 3.5% of the premium paid on plans sold through the exchange, or an estimated $94 million this year.

The state can operate the exchange for $30 million to $35 million, and use the difference to draw down extra federal dollars for a reinsurance program that reimburses insurers for certain high-cost claims, Wolf's administration says. The state's share would be about 20% or one-quarter of the reinsurance program cost, according to Wolf administration estimates.

Those reimbursements allow insurers to lower premiums across the board within the state's insurance marketplace, health insurance policy analysts say.

Its analysis shows that consumers would see premiums that are 5% to 10% lower than what they would otherwise pay, Wolf's administration said.

This is exactly what led Nevada to move off of HC.gov, and was a major reason for both New Jersey and New Mexico's moves as well. The part about using the savings to pay the state's portion of a 1332 reinsurance waiver is also pretty clever, I should note.

Twelve states built and operate their own exchanges, including determining eligibility and getting policy buyers enrolled with insurance companies. The Wolf administration said four other states are in the process of moving to their own exchange.

I'm assuming the fourth state here is Oregon, which suggests that's more of a done deal than I thought.

In any event, if they're able to successfully pull this off and make it work, by 2021 there could potentially be as many as 17 state-based ACA exchanges operating...which is one more SBE than in the first, insane Open Enrollment Period back in 2013-2014.

UPDATE: Wow...I guess this is a done deal: The PA House Insurance Committee approved the state exchange/reinsurance bill unanimously, 22 to 0. I presume it goes to the full Pennsylvania House floor next.