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The federal exchange option

The federal health insurance marketplace serves 38 states, has 8.4 million effectuated enrollees

The federal health insurance marketplace (HealthCare.gov) opened for business in the fall of 2013, and has provided an affordable health insurance shopping platform for millions of Americans.  Admittedly, the federal exchange – along with many of the state-run exchanges – got off to a very rocky start in October 2013. But by December of that year, things were working better, and the exchange was quite functional during the latter half of the six-month initial open enrollment period.

In August 2014, Kevin Counihan, who had served as CEO of the highly successful state-run exchange in Connecticut, was selected to be the CEO of the federally run marketplace.  In the ensuing years, the federally run exchange has continued to grow and improve.

In 2014, there were 191 health insurers selling policies on the federal exchange in 36 states (including states with partnership exchanges, as well as Idaho and New Mexico, both of which had federally supported state-based marketplaces in 2014). In September 2014, HHS issued a report on carrier participation for 2015, noting that the federally run exchange would have 57 additional insurers in 2015 – a 30 percent increase over the prior year. The number of participating carriers remained very stable in 2016; HHS reported that 238 carriers were offering plans across the states that use Healthcare.gov in 2016.

The federally run exchange has also proven to be a cost-efficient enrollment platform.  For 2014 enrollees, the federally run exchange spent an average of $647 per enrollee, which was less than half the $1,503 per enrollee that state-run exchanges spent.

By March 2016, effectuated enrollment across the 38 states using the Healthcare.gov enrollment platform stood at 8.4 million people. And 85 percent of HealthCare.gov enrollees are receiving premium subsidies to lower the cost of their coverage.

In addition, millions of people have enrolled in Medicaid through the federally run exchange, including many who are newly eligible due to Medicaid expansion (19 states have opted not to expand Medicaid however, and a disproportionate number of them are states that use the federally run exchange; among the states with their own exchanges, only Idaho has not expanded Medicaid).

Healthcare.gov does the heavy lifting

There are 27 states that have a fully federally run exchange (seven of them provide plan oversight for the plans sold through the exchange: Kansas, Maine, Montana, Nebraska, Ohio, South Dakota, and Virginia).

In addition, another seven states (Arkansas, Delaware, Illinois, Iowa, Michigan, New Hampshire, and West Virginia) have established partnership exchanges, working together with the federal government to run the exchange.  All seven of them use HealthCare.gov for enrollment, but the states also take on varying levels of plan management, consumer assistance, and outreach.  They are generally counted together with the 27 states that rely fully on the federally run exchange, with all 34 states considered to be using the federally run exchange.

Some of the state-run exchanges also use HealthCare.gov for enrollment. Prior to the 2013 launch of the exchanges, some states wanted to operate their own exchange, but weren’t able to get an enrollment platform up and running in time. Idaho and New Mexico both opted to establish federally supported state-based exchanges for 2014, meaning that while their exchanges were run by the state, they were using the Healthcare.gov enrollment platform, just like the states that rely fully on the federally run exchange.

Ultimately, Idaho was able to transition to running its own exchange by the time the second open enrollment period began in the fall of 2014. But New Mexico has opted to continue to use Healthcare.gov as a supported state-based marketplace.

Oregon and Nevada ran their own exchanges in 2014, but have since become federally supported state-based marketplaces, with both states ditching their troubled enrollment platforms prior to the second Obamacare open enrollment period, and using Healthcare.gov instead. Hawaii operated its own exchange in 2014 and 2015, but transitioned to a federally supported state-based model in time for the 2016 open enrollment period that started in November 2015.

So while Hawaii, Nevada, Oregon, and New Mexico all use the same enrollment platform as the states that rely on the federally run exchange, they’re still considered state-based exchanges. Utilizing Healthcare.gov’s economies of scale and technologically smooth enrollment software simply proved to be a better choice than operating their own enrollment platform.

Kentucky implemented one of the most successful state-based exchanges in the country in 2013, and Kynect has served the people of Kentucky for three years. But Republican Governor Matt Bevin campaigned on an anti-Obamacare platform, and began the process of dismantling Kynect shortly after taking office in January 2016. Bevin’s plan is for Kentucky to have a state-based exchange using the federal platform — just like Hawaii, Nevada, Oregon, and New Mexico. And he wants that to take effect as of November 1, 2016, when open enrollment for 2017 coverage begins. CMS is working with Kentucky to implement this change, but HHS Secretary Burwell noted in a July 2016 letter to Bevin that the transition timeline is “highly aggressive” and that it’s uncertain whether the transition will be completed in time for Kentucky residents to begin using Healthcare.gov in November 2016.

All told – including states with partnership exchanges and federally supported state-based exchanges – Healthcare.gov will be enrolling consumers in at least 38 states (39 if Kentucky’s transition is completed on time) during the 2017 open enrollment period (November 1, 2016, through January 31, 2017).

A changing carrier landscape

Prior to 2014, many people looking to buy individual health insurance had few options. A 2011 study by the Kaiser Foundation found that the individual insurance market was dominated by a single insurance company in 30 states and the District of Columbia.

The American Medical Association (AMA) also conducted a series of studies analyzing competition among health insurers, and found similar results. A 2012 AMA study determined that in nearly 40 percent of US metropolitan areas, a single insurance company had at least half of the market share. The same study also found that a single carrier had at least 30 percent of the market share in nearly nine out of ten U.S. markets.

Although 2014 ushered in a new era of guaranteed-issue individual health insurance – a dramatic change from the medically underwritten markets that existed in most states prior to 2014 – some states still had relatively few carriers offering coverage, particularly in the exchange.

In 2014, West Virginia and New Hampshire had only one participating exchange carrier, and several other states – Alabama, Wisconsin, North Carolina, Florida, Mississippi, and Arkansas – had only one carrier in at least a portion of the state (all eight of those states either rely fully on the federally run exchange, or have a partnership exchange model). In 2015, West Virginia still had just one carrier, although they gained a second carrier in 2016. New Hampshire now has five exchange carriers, and the other six states each gained at least one additional exchange carrier in 2015.

But carrier participation has started to decline in 2016, and several states are likely to have a single carrier in their exchanges in 2017. UnitedHealthcare, Humana, and Aetna are all scaling back their exchange participation in 2017.

Wyoming became the only state in the country with just one carrier in its exchange in 2016, and they will continue to have a single carrier in 2017. Several other states are seeing a decline in the number of carriers participating in the exchange in 2017. Alaska, AlabamaOklahoma will each have just one exchange carrier in 2017, and in Pinal County, Arizona, no carriers were planning to offer exchange coverage for 2017 as of August 2016.

Multi-state plans were available in 31 states in 2014 and in 36 states by 2015. But by 2016, multi-state plans were only available in 33 states. They were originally slated to be available in all states by 2017, but HHS noted in early 2015 that they are being flexible about that target, given the challenges that insurers face in expanding rapidly into multiple states. Multi-state plans were created through the Affordable Care Act to address the lack of competition in the individual health insurance market. Multi-state plans are operated by the Office of Personnel Management, which is the entity that runs health insurance programs for Congress and federal employees.

Long-term success

Healthcare.gov was created to fill a need when more than half the states decided that they didn’t want to run their own exchanges – either because they didn’t think it would be financially or technologically feasible, or because they were simply opposed to the ACA and didn’t want to participate in any activities that helped to implement the law.

But with three years of enrollment in the books and many hurdles overcome, Healthcare.gov has proved to have staying power, and has also become a feasible solution for states that have run into problems with their own exchanges. In late 2013, the federal exchange’s glitchy website was the butt of many jokes and the cause of many headaches. But it has become an integral part of the individual health insurance market in two-thirds of the states, gaining more insurers and insureds with each passing year.

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