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Oregon Insurance Exchange Could Have $3.5 Million Hole in 2018

The federally facilitated state-based marketplace can balance its books through the end of next year to fund state operations. But as the Oregon Health Authority reduces dollars flowing to the marketplace and a state assessment tax decreases, the state’s role in the exchange will soon be unsustainable.
October 5, 2016

The fourth open enrollment period for the Affordable Care Act opens on Nov. 1, and the operations for Oregon’s portion of the exchange should cover expenses through the end of next year, but a recent report from the Department of Consumer & Business Services indicates trouble down the road, with a $3.5 million shortfall forecast for 2018.

The state marketplace currently takes in $22.8 million and spends $14.4 million, but revenues will decrease to $10 million in 2018, even as expenses remain at $13.5 million.

Since switching from the botched Cover Oregon exchange to healthcare.gov in 2015, the federal government has allowed the state to use its website for free. That changes next year, as insurance plans will get a 1.5 percent assessment in 2017, followed by a 3 percent assessment tax in 2018.

To prevent too heavy a burden on the plans, the state is rolling back its own assessment from $9.66 per plan per month to $6 per plan per month, which works out to an adjustment from about 3 percent to 2 percent.

The state agency projects assessment revenues to decline from $12.4 million to $11 million next year as a result, and further decrease to $8.4 million in 2018.

But the real blow to the state marketplace budget will be the dramatic decrease in funds that have been transferred from the Oregon Health Authority for information technology work.

The Health Authority transfer amounted to $8.2 million this year and $6.4 million is budgeted for next year, but just $930,000 in 2018. Total revenues for that year are projected at just $10 million while expenses remain at $13.5 million.

The expenses cover outreach efforts to microtarget people who are uninsured, particularly young adults and the Hispanic community. The marketplace also sets standards for insurance sold on the exchange and has worked to encourage insurers such as Moda Health and PacificSource to sell plans in more counties.

Enrollment in exchange health plans did exceed expectations in 2016, overtaking the number of individual health insurance plans sold off the exchange. Numbers peaked at 129,000 in March but have since fallen to 125,000 people covered. Dental plans also peaked in March at 18,700 before dropping to 18,200.

But the market will look much different in 2017, with fewer options for consumers to choose from. Lifewise, once the second-largest player in the marketplace, will be gone from Oregon completely. The second of two cooperative health insurance plans, the Oregon Health CO-OP, failed this summer. PacificSource and Moda Health are limiting sales to just the most profitable counties; both are leaving the individual market in Eugene.

Meanwhile, Zoom+ will join Regence BlueCross BlueShield and Health Net Health Plan in avoiding the exchange and only selling directly to consumers or through brokers.

Although the individual health insurance market shares a common risk pool, these three insurers will be able to avoid the lower-income customers who use the exchange for the subsidies and cost more to insure on average. Zoom+ will also now avoid paying the assessment fee for the exchange, although only a few hundred people signed up for their coverage.

“Unfortunately, the individual health insurance exchange is still in a formative stage where there remains too much instability for insurers,” according to a Zoom+ spokesperson in an email. “This is reflected on both a national and local level as we see companies from Aetna to the CO-OP to UnitedHealth exiting various markets. This instability stems from factors like the risk adjustment program, which is an arbitrary process that often ends up burdening smaller players.”

In the small business market, Oregon appears stuck without an online marketplace for the foreseeable future. The federal SHOP exchange is incompatible with Oregon’s small business market because of the state’s unique composite rating system, which spreads the risk of the entire pool across the small business market, regardless of age, gender or other factors.

But the state cannot afford to set up its own online exchange. A federal waiver might allow for a creative solution, but until then small businesses will have to offer their employees health insurance up-front, and then be reimbursed by the state on the back end to access their federal subsidy.

Chirs can be reached at [email protected]

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