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June 2012
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Funding model for state exchanges falling short

By PATRICK CONDONAssociated Press

ST. PAUL, Minn. - The 14 states running their own health insurance marketplaces had all their startup costs footed by the federal government, but they're supposed to pay for themselves starting next year under the federal health care reform law.

In several states, it's not clear whether it will work out that way. Projected enrollments are lower than expected, meaning the insurance surcharges designed to sustain the exchanges might not generate enough revenue in the years ahead without significant changes in the financing model.

Officials in some states are stashing away federal grant money to continue paying for operations beyond the January 2015 target date for financial self-sufficiency. Others are contemplating staffing cuts or boosting insurance surcharges.

To date, the 14 states operating their own exchanges, plus the District of Columbia, have received nearly $3.8 billion to start and operate their health insurance exchanges, according to a state-by-state tally by The Associated Press.

More will be known about the exchanges' financial outlook after a March 31 deadline for people to sign up for insurance or face federal tax penalties, and many states expect pickups in enrollment. But some states aren't waiting.

"What I've begun to do is look at what is actually an extremely conservative, very low-level enrollment and begin to develop a budget that could be supported by that enrollment without raising fees," said Bruce Goldberg, the interim director of Cover Oregon, the exchange in that state.

Goldberg is aiming for a 20 percent spending reduction to cover that state's enrollment shortfall.

In Minnesota, where exchange enrollment is at 85 percent of what once was a worst-case scenario, a recent internal analysis projected an 11 percent deficit in 2015 and 13 percent in 2016 if enrollment doesn't improve.

Officials of MnSure, the state's exchange, have vowed to cut costs to avoid seeking any money from the Legislature during an election year.

Lagging enrollment isn't the only problem. Many states still face potentially expensive fixes to glitchy websites on which customers choose policies. One study suggested that Minnesota's might have to be rebuilt from the ground up. California's exchange is greatly expanding its staff, hiring an additional 350 employees at its call centers in large part because of bottlenecks and long wait times.

Federal grants received by state-run exchanges

The federal government operates the health insurance exchanges in 36 states but is financially supporting those being operated by 14 states and the District of Columbia. Those marketplaces are supposed to be self-sustaining by next January under the federal Affordable Care Act. Exchange officials in some states say they are on track for self-sufficiency, while lawmakers elsewhere are questioning the solvency of their states' exchanges. The amount of federal grant money received to date for all the state-run exchanges is nearly $3.8 billion. The breakdown by state:

State Federal grant

money to date

California $1 billion

Colorado $177.6 million


$164.4 million

District of Columbia

$133.6 million

Hawaii $204 million

Kentucky $254 million

Maryland $182.2 million


$149.7 million

Minnesota $155 million

Nevada $90.7 million

New York $429 million

Oregon $305 million

Rhode Island

$111.5 million

Vermont $203.7 million


$236.4 million

- Associated Press

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