Kentucky operates its own exchange, Kynect, which has been widely considered one of the most successful state-run exchanges in the country. But new Governor Matt Bevin is transitioning the exchange to the Healthcare.gov platform for 2017. Kentucky will continue to have a state-run exchange, but enrollment will be conducted through Healthcare.gov.
UnitedHealthcare leaving at year-end
At the end of 2016, UnitedHealthcare will exit the Kentucky exchange, including both the individual and small business (SHOP) exchange. They will also exit the individual market in Kentucky outside the exchange, although they will continue to offer small group plans outside the exchange. 2016 is the first year that United has offered plans in the Kentucky exchange (more details below in the rates section).
Kentucky is one of at least 26 states where UnitedHealthcare is exiting the exchange at the end of 2016. Their announcement did not come as a surprise, as United had already said publicly – in November 2015 – that they might not participate in the exchanges in 2017 due to unsustainable losses.
According to a Kaiser Family Foundation analysis, United’s exit will have and impact on plan availability, since they currently offer plans state-wide. But there are no areas in Kentucky where United offers either of the two lowest-priced silver plans, which tend to be the most popular with exchange enrollees (during the 2016 open enrollment period, 60 percent of Kentucky exchange enrollees picked silver plans).
DOI acts to protect broker commissions
Starting in late 2015, many of the nation’s health insurance carriers began reducing or eliminating broker commissions, mostly for plans sold outside of open enrollment (during special enrollment periods triggered by qualifying events) or for benefit-rich plans at the gold and/or platinum level.
The general consensus is that the commission cuts are an effort by insurance carriers to limit sales in general, and/or to limit sales of benefit-rich plans, which tend to attract enrollees with health conditions. In 2014 and 2015, eligibility for special enrollment periods was very loosely enforced by Healthcare.gov and some of the state-run exchanges, and carriers have noted that healthcare utilization among people who enroll outside of general open enrollment is significantly higher than utilization by people who enroll during open enrollment. The eligibility requirements have been tightened up in 2016, but carriers had already begun to roll out their new commission guidelines by early 2016.
Kentucky’s Department of Insurance responded with an “advisory opinion” (which isn’t legally binding on its own) stating that since broker commissions were included in the rates that carriers filed with the state for 2016, they cannot eliminate them now that they’ve already been approved. Their goal is to protect broker commissions, and therefore protect consumer access to the full range of plans available in Kentucky – both on and off-exchange – for anyone who has a qualifying event and/or wants to purchase a benefit-rich plan.
Enrollment lower in 2016
Open enrollment for 2016 ended on January 31. By February 4, Kynect’s enrollment in private plans stood at 93,687. That’s a drop of almost 12 percent from last year’s 106,330 total. At ACAsignups, Charles Gaba noted that Kynect was one of just a handful of states with lower enrollment in 2016 than in 2015, and most of the others had special circumstances, such as newly-expanded Medicaid or Basic Health Programs.
In Kentucky’s case, the drop-off in enrollment is almost certainly related to the fact that on December 18, Kynect’s succesful advertising campaign was shut down after a contract extension was rejected by the state Finance and Administration Cabinet and the prior contract expired November 30. The advertising campaign was funded with $5 million in federal funding, and any unused portion will be returned to the federal government. State outreach directors expressed dismay that the advertising campaign was shuttered mid-way through the 2016 open enrollment period. But it was not unexpected, as newly-elected Governor Matt Bevin had promised to shutter Kynect and switch to Healthcare.gov as one of his first priorities upon taking office.
During the first two open enrollment periods – for 2014 and 2015 – Kynect released regular enrollment updates. But for 2016, they released nothing until after open enrollment had ended. As with the termination of the advertising campaign, the lack of enrollment updates was attributed in large part to the fact that Bevin had vowed to eliminate Kynect and modify the state’s Medicaid expansion – despite the fact that more than 70 percent of Kentucky residents would prefer that Bevin keep Kentucky’s Medicaid expansion without changes.
Kentucky to transition to Healthcare.gov for 2017
On November 3, 2015, Kentucky elected Matt Bevin to be their next governor, with 53 percent of the vote; Bevin took office on December 8. He campaigned on an anti-Obamacare platform, promising to dismantle Kynect and transition Kentucky to Heathcare.gov instead. He also initially said that he’d roll back Medicaid expansion in the state, which would eliminate coverage for 400,000 people and throw 160,000 of them into the coverage gap (making them ineligible for Medicaid and also ineligible for premium subsidies). In the final weeks of his campaign, Bevin softened his stance on Medicaid expansion, saying that he’d pursue a Section 1115 waiver instead of eliminating Medicaid expansion in the state.
But in the days immediately following the election, Bevin reiterated his intent to get rid of Kynect and have Kentucky residents use Healthcare.gov instead. And on December 30, he notified HHS Secretary Sylvia Burwell that the state would transition to Healthcare.gov by the end of 2016 (HHS requires a one-year notice for a state to shut down its exchange).
Bevin can shut down Kynect via executive order, as the exchange was created with an executive order from former Governor Steve Beshear. HHS has said they are committed to a “seamless transition” for Kentucky residents, who can expect to begin using Healthcare.gov for the 2017 open enrollment period that begins in the fall of 2016. For 2016 coverage, people in Kentucky will continue to use Kynect, regardless of the impending switch to Healthcare.gov.
But Kentucky will still have a state-run exchange
Although it initially sounded like Bevin’s plan was to entirely dismantle Kynect and switch to the federally-facilitated exchange, his position on that appears to have softened as well. By early March 2016, Kentucky appeared to be on a path towards having a federally-supported state-run exchange (Oregon, Hawaii, Nevada, and New Mexico currently have this model). Under the federally-supported model, the state still technically runs its own exchange, but it uses Healthcare.gov as the enrollment platform.
In the 2017 Benefit and Payment Parameters, HHS clarified that state-based exchanges that use Healthcare.gov are required to – at a minimum – maintain a toll-free hotline to “respond to requests for assistance to consumers in their state” and maintain an “informational website” that will direct visitors to Healthcare.gov in order to enroll in coverage.
HHS also noted that for 2017, the fee for state-run exchanges to use Healthcare.gov will be 1.5 percent of premiums. Through 2016, there has been no fee for state-based exchanges to use Healthcare.gov. Initially, HHS had proposed a fee of 3 percent starting in 2017 (for perspective, the fee in the federally-run exchange is 3.5 percent of premiums). They agreed to reduce it to 1.5 percent of premiums in 2017, but noted that they expect it to be 3 percent of premiums starting in 2018.
Financial impact of ditching Kynect
Governor Bevin and Kentucky Health Secretary Vickie Yates Brown Glisson are claiming that the switch will result in considerable cost-savings for Kentucky, although that point is being contested by Kynect advocates – including former Governor Steve Beshear, who started a lobbying campaign in February 2016 to fight back against Bevin’s efforts to dismantle Kynect and limit Medicaid expansion. Bevin has also said that the cost of the technology shift will only be about $236,000 for the state.
A less-optimistic estimate is that it will cost at least $23 million to transition to Healthcare.gov, and Kentucky taxpayers will have to foot that bill. That added cost would be a necessary expense if Kynect weren’t functioning correctly (as was the case for Hawaii’s exchange before they made the difficult decision to begin using the Healthcare.gov enrollment platform). But Kynect has been one of the country’s most successful exchanges since it opened in 2013.
In addition to the costs for the technology switch – which are apparently quite different depending on whom you ask – there’s the ongoing fee for operating the exchange and the enrollment platform. The state also plans to impose a 0.5 percent fee to cover the state’s portion of the exchange, including plan management, outreach, and the hotline and website. Once the fee to use Healthcare.gov is bumped up to 3 percent starting in 2018, the overall fee will be 3.5 percent – the same as states that use the federally-run exchange.
The exchange currently charges a one percent assessment on premiums to fund the exchange, and it’s applied to all individual and group plans sold in the state, on or off-exchange. Initially the plan was that eliminating Kynect would do away with that one percent assessment. But it now appears that Bevin plans to keep that assessment intact, at least for the time being, to fund “transition costs, fund the Kentucky Health Information Exchange and fund “legacy costs” of Kentucky Access, the high-risk insurance pool for which the fee was established.”
The fee that will be charged to use Healthcare.gov will only be assessed based on premiums for plans sold in the exchange. But due to the single risk pool rule in the ACA, the total cost of the fee must be spread across each exchange carrier’s entire book of business, including both on and off-exchange plans. Carriers that only sell off-exchange individual and small group plans will avoid the fee entirely. But it’s not yet clear how long the current one percent fee will continue to apply once Kentucky begins using Healthcare.gov for enrollment. The fee pre-dates Kynect (it used to fund the state’s high risk pool back when health insurance in the private market was medically underwritten), and lawmakers have indicated that they’ll continue to put the money to use elsewhere.
Lawmakers tries to block Bevin’s changes
On February 29, State Representative Darryl Owens (D, Louisville) introduced HB5 and HB6 in an effort to block Bevin’s plans to transition Kentucky to the Healthcare.gov enrollment platform and scale back Medicaid expansion.
HB5 would require the state to continue to operate Kynect (or something “substantially similar), and HB6 would require the state to keep Medicaid expansion as-is in Kentucky, without any of the modifications that Bevin has proposed.
Owens noted from the start that his bills stood a decent chance in the House, which is controlled by Democrats, but that they likely wouldn’t fare as well in the Senate, which is dominated by Republicans. Ultimately, both bills did pass the House in March 2016, but died in committee in the Senate, and did not advance to a vote on the Senate floor.
In March 2016, the Government Accountability Office released a report detailing compromised security incidents on Healthcare.gov between October 2013 and March 2015. The report also indicated that the GAO had studied three state-run exchanges, and found security flaws including “insufficient encryption and inadequately configured firewalls, among others.”
The GAO report didn’t name the three state-run exchanges that they analyzed, but the Associated Press obtained the details in a freedom of information request. The three state-run exchanges were Vermont, California, and Kentucky, but it’s important to note that those are the only three state-run exchanges that the GAO considered; they did not necessarily have more security flaws than other state-run exchanges. The GAO report notes that CMS should implement “procedures for overseeing the security of state-based marketplaces” as the existing protocol only called for testing every three years.
Former Governor Steve Beshear reassured Kynect enrollees that despite the security flaws, nobody’s data was compromised.
2016 open enrollment
Kynect made 2016 plans available for browsing starting on October 16, and opened up renewal for existing enrollees ahead of the November 1 start to open enrollment. Shoppers were able to compare their existing 2015 plan with the various options available in 2016 – including plans from three new carriers.
Kentucky was one of just four states that didn’t allow for an extension past December 15 to get coverage for January 1, 2016, although Kynect did announce that they would work to ensure a January 1 effective date for people who weren’t able to complete their enrollment by the deadline due to technical problems.
Kynect focused their outreach on the 285,000 people who were uninsured in Kentucky in 2015, as well as the 51,000 CO-OP members who had to find new coverage for 2016 (more details below). Kynect also focused extra outreach on 18 counties (mostly in the western and south-central parts of the state) where the uninsured rate was highest. Of the 285,000 people who were still uninsured in 2015 in Kentucky, 43 percent were eligible for Medicaid under Kentucky’s expanded eligibility guidelines.
Kynect also debuted a new plan selection tool for consumers to use during the 2016 open enrollment period. The tool helps shoppers compare medical costs across various plans, and determine which ones would be the best fit for each enrollee.
Kentucky Health CO-OP folds
In October 2015, Kentucky Health Cooperative announced that they would cease operations by the end of 2015, and would not offer plans for sale during open enrollment for 2016 coverage. At that point, the CO-OP had about 51,000 members, all of whom had to secure coverage with another carrier for 2016. Former CO-OP members had a 60 day special enrollment period triggered by loss of coverage, that extended until February 29.
Kentucky Health CO-OP’s demise was cemented when the federal government announced on October 1 that risk corridor payments nationwide would be just 12.6 percent of the expected amount. Risk corridors are one of the ACA’s mechanisms for ensuring that carriers are on a somewhat level playing field in the first few years of ACA implementation. In 2014, 2015, and 2016, carriers that experience lower-than-expected claims pay into the risk corridors fund, while carriers that experience higher-than-expected claims receive payouts from the fund. If the latter exceeded the former, the idea was that the government would make up the shortfall. And in the opposite scenario, the government would get to keep the overage.
But in late 2014 – after a full year of ACA claims and after 2105 rates had already been set – lawmakers retroactively made the risk corridors program budget neutral, which means it can only pay out as much as it takes in. For 2014, the risk corridors program ended up about $2.5 billion in the red, which means that carriers got just a fraction of what they are owed. In the case of Kentucky Health CO-OP, that’s $9.7 million, out of $77 million they were supposed to get. Funds were to be paid in December 2015, but once it was determined that they would not be coming, the CO-OP had no choice but to close.
The Kentucky Department of Insurance finalized 2016 rates in July 2015, well ahead of many other states. Initially, rates were approved for eight individual market carriers, but that dropped to seven once the CO-OP dropped out. Despite the loss of Kentucky Health CO-OP, seven carriers in the individual market is more than Kentucky has had since the late 1990s, and it’s an increase from just three carriers offering plans through Kynect in 2014.
All five of the existing individual market Kynect carriers had their rate changes approved without modifications (all changes are averages, rate changes for a particular plan will vary):
- Anthem BCBS = 12.2 percent increase
- CareSource Kentucky = 11.83 percent increase (network is bigger and plans are available in additional counties in 2016).
- Humana = 5.2 percent increase
- Wellcare Health Plans = 10.98 percent decrease
- Kentucky Health Cooperative (an ACA-created CO-OP) = 25.1 percent increase – this is no longer applicable, since all Kentucky Health CO-OP members had to transition to other carriers for 2016.
- A full list of rates that have been filed and approved with the Kentucky Department of Insurance is available here, including small group plans and off-exchange carriers.
In addition to the carriers that were already offering individual plans through Kynect, the exchange added three more carriers for 2016:
- UnitedHealthcare is offering plans statewide
- Aetna has plans available in 10 counties
- Bluegrass Family Health has plans available in 79 counties (out of 120 counties in Kentucky).
UnitedHealthcare and Bluegrass Family Health previously offered only small group plans through the exchange, and Aetna had not previously participated in Kynect.
Kentucky Health Cooperative garnered significant market share in 2014, enrolling 75 percent of Kynect’s private plan customers (the other 25 percent was split evenly between Humana and Anthem, which were the only other participating carriers in 2014). But the CO-OP ended up raising premiums by 15 percent for 2015 because the initial low rates had not been sufficient to cover claims costs (ultimately, the low rates were part of what contributed to the CO-OP’s insolvency).
In 2015, the average Kentucky Health Cooperative premium per member was $310 per month, and that was projected to rise to $388 per month in 2016. Wellcare’s average per member premium was $318 per month in 2015, and Anthem’s average 2015 premiums was $313 per month. CareSource had an average premium of $249 per month in 2015, and Humana’s was $321 per month.
Given the approved rate increases (or decrease, in the case of Wellcare), the demise of Kentucky Health CO-OP, and the introduction of three new carriers, it’s likely that there was considerable shifting in the market share of Kynect’s carriers for 2016. Premium subsidies have offset price hikes for most consumers, but it was particularly important for enrollees to shop around during open enrollment, as opposed to relying on automatic renewal of their existing coverage. Obviously, for enrollees who had Kentucky Health CO-OP, auto-renewal was not possible for 2016.
Five carriers currently provide Medicaid managed care plans in Kentucky, and their contracted were renewed in July 2015: Anthem, Coventry Cares, Passport, Humana, and Wellcare.
2015 enrollment data
106,330 people had selected a private plan through Kynect by February 21. That total did not include the people who enrolled during Kynect’s special enrollment period (SEP) for people who realized – after open enrollment ended – that they owed a tax penalty for not having insurance. Kentucky’s SEP ran from March 2 through April 30, and the exchange enrolled another 3,047 people in private plans during that time. The individual mandate, which requires most people to have health insurance, went into effect Jan. 1, 2014. However, many people weren’t aware of the mandate and only learned of it when they filed their 2014 taxes. Consumers couldn’t do anything about the 2014 penalty at that point, but the special open enrollment period allowed them to minimize the 2015 penalty that will be assessed when tax returns are filed next spring.
Open enrollment ended on February 15, but the exchange granted an extension to February 28 to anyone who made a “good faith” effort to enroll by that date, but was unable to finish due to trouble with the website or getting through to the call center.
But not everyone who enrolled ended up paying the initial premium (which meant the coverage was never actually in-force). And some people cancelled their coverage soon after it began. By the end of June, 88,904 people in Kentucky had in-force private plan coverage through Kynect. 69.8 percent of them are receiving premium subsidies, and 38.1 percent have silver plans that include cost-sharing subsidies (only available to enrollees with incomes up to 250 percent of the poverty level).
An additional 152,529 people had enrolled in Medicaid through Kynect between November 15 and February 21. Medicaid enrollment continues year-round.
In terms of retaining 2014 enrollees, Kynect re-enrolled 94.4 percent of their first-year insureds. That’s far higher than the nationwide averages (69 percent retention among state-based exchanges, and 78 percent for Healthcare.gov exchanges)
Enhancement for 2015
Even though Kentucky’s state-run marketplace was already one of the nation’s most successful exchanges in 2014, officials worked hard to make improvements and updates for 2015 open enrollment.
Kynect met with brokers, insurance carriers, and Kynectors (navigators) to get feedback and learn what areas need improvement. Enhancements include:
- The call center increased the number of customer service representatives from 185 at the start of the first open enrollment period to 400 for the start of the 2015 open enrollment period. The call center also expanded operating hours and underwent a systems upgrade to reduce wait times and enable more efficient operations.
- More agents, brokers, and Kynectors are participating in the 2015 open enrollment.
- Kynect debuted a mobile app to enhance outreach and customer service, especially for the under-35, “young invincible” population. The app allows users to check plan options and see rates, and then complete their application on the Kynect website. As of Feb. 19, more than 8,500 people had downloaded the app.
- Kynect launched a full-service enrollment center at the Fayette Mall in Lexington. Through Feb. 19, nearly 7,600 people visited the center and nearly 6,000 people applied for new coverage.
Penalties will rise
Those who are uninsured more than two months of the year may have to pay a penalty, and the penalties have increased again for 2016.
Those who don’t qualify for an exemption will have to pay the greater of:
- 2.5% of annual household income above the tax filing threshold. The maximum penalty under this calculation method is the national average premium for a bronze plan, which the IRS announced would be $2,484 for 2016 ($12,420 for a family of five).
- $695 per adult or $347.50 per child under 18. The maximum penalty per family using this method is $2,085.
Use the healthinsurance.org penalty calculator to see how much you may owe.
Grandmothered plans allowed in Kentucky
Transitional, or grandmothered, health plans are allowed to renew in Kentucky until October 1, 2017, and remain in force as late as December 31, 2017. Renewal is at carrier discretion however, and transitional plans are not required to renew – carriers can choose instead to replace them with ACA-compliant plans. About 14,000 people in Kentucky were on plans – mostly from Humana – that were terminated at the end of 2014 because the carrier opted to switch to only ACA-compliant plans.
The extension of grandmothered plans contributed to higher-than-expected claims costs for ACA-compliant plans in 2014 and 2015, since the people who remained on grandmothered plans were healthy enough to get those plans – despite medical underwriting – between 2010 and 2013. Since those individuals have not transitioned to ACA-compliant plans yet, the overall risk pool for the ACA-compliant plans is sicker than expected.
According to the Kentucky Department of Insurance, there were still more than 38,000 people with individual market transitional (grandmothered) plans as of April 2016, and more than 86,000 with transitional small group coverage.
That’s in addition to grandfathered plans. As of March 2105, there were 25,491 people in Kentucky who still had coverage under grandfathered plans in the individual market, and 19,595 with grandfathered group coverage (this included 4,571 people on grandfathered small group plans, and the rest on large group plans).
Impressive coverage gains
Kentucky realized a particularly sharp decline in its uninsured rate following the launch of its health insurance marketplace and expansion of its Medicaid program. The percentage of people without health insurance dropped from 20.4 percent in 2013 to 9 percent in the first half of 2015, according to the Gallup-Healthways Well-Being Index. Only Arkansas had a larger percentage point drop.
According to official US census data however, Kentucky’s uninsured rate was only 14.3 percent in 2013, but had dropped to 8.5 percent in 2014.
Kynect officials said about 75 percent of those who signed up for coverage in 2014 did not previously have insurance. To help people who have little experience with the health care system or health insurance, the exchange has worked to create a consumer guide called “How to Kynect” and is providing it to new enrollees in order to help them learn how to select a primary care doctor, when to seek health care, when to visit the ER, how to use the pharmacy benefits on their plan, and understand insurance terminology.
History of Kentucky’s exchange
Kynect is considered one of the nation’s best marketplaces. More than 521,000 people obtained health insurance coverage through Kynect in 2014 — either private health insurance or Medicaid. During the 2015 open enrollment period, another 55,855 people enrolled in Medicaid through Kynect (Medicaid enrollment continues year-round), and 27,000 additional people signed up for private insurance through Kynect for the first time.
One sign of Kynect’s success is widespread awareness: a poll from late 2014 shows that nearly 80 percent of Kentucky residents had heard of the exchange and nearly 52 percent of Kentuckians between the ages of 30 and 64 said they knew “a lot” about it.
Another sign is the Beshear administration’s inclusion of Knyect in its list of top accomplishments of 2014. The state’s uninsured rate dropped nearly 8 points, and the newly insured were taking advantage of their coverage. The state reported that in 2014, 26,000 more people would have cholesterol screenings, 7,000 more women would have mammograms, 10,000 more women would have pap smears, and 14,000 more people with depression would be treated.
Kynect was one of the few marketplaces established through an executive order. Beshear’s order to establish the exchange in July 2012 followed months of seeming inaction on the exchange by the executive and legislative branches in the state. Kynect is part of the state’s Cabinet for Health and Family Services, and it is overseen by 19-member board appointed by Beshear.
Then-Governor Steve Beshear went against public sentiment in deciding the state would run its own marketplace. In an article in The New York Times, Beshear urged state residents to set aside politics and use the marketplace to get insured. “You don’t have to like the president; you don’t have to like me. Because this isn’t about him, and it’s not about me. It’s about you, your family and your children.”
Kentucky spent about $11 million on outreach and marketing for 2014 open enrollment, and it trained 5,000 people to support enrollment — including state employees, insurance agents, volunteers and representative of various community groups and social service organizations. These outreach efforts drove Kentucky’s enrollment totals.
While the federal marketplace, HealthCare.gov, and multiple state-run marketplaces had significant technical problems in 2014, Kynect ran well from the start. Experts say those in charge of implementing Kynect made good choices. They kept the design simple and worked with well-qualified and experienced vendors.
There is still room to improve however. According to a report issued by the National Health Council in July 2015, Kentucky is an average-performing state in terms of how patient-centered the health insurance market is. The report gave Kentucky a low score for how easy it is for consumers to compare and understand plans sold through Kynect, and on all other metrics, Kentucky received an average score. Very few states received high scores.
Kentucky health insurance exchange links
Kynect – Kentucky’s Healthcare Connection
Consumer site for Kentucky’s marketplace
Kentucky Health Benefit Exchange
Administrative site for Kentucky’s marketplace
Kentucky Health Insurance Advocate, Kentucky Department of Insurance
Assists people insured by private health plans, Medicaid, or other plans in resolving problems pertaining to their health coverage; assists uninsured residents with access to care.
(877) 587-7222 /DOI.CAPOmbudsman@ky.gov