Faced with federal fee, Oregon reconsiders own exchange

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PORTLAND, Ore. (AP) — With a new fee for some states using the federal health insurance portal on the horizon, Oregon says it's looking into running its own exchange again, but with another state's software.

Oregon officials say they're planning to solicit proposals this month for technology that's successfully running an existing health insurance exchange.

The move would be an interesting twist for Oregon, which ditched its problem-plagued Cover Oregon portal last spring and switched to the federal website. Oregonians now use HealthCare.Gov to enroll in coverage, but the state continues to certify insurance plans, do community outreach and education.

The proposed fee concerns four states including Oregon that run federally supported state-based marketplaces. Nevada, New Mexico and Hawaii also abandoned their exchanges due to technology fiascos and switched to the federal portal, but have retained some state functions.

The proposed user fee of 3 percent of the monthly premiums would be paid by insurance carriers who offer plans in those states via HealthCare.Gov. Carriers are expected to pass the new costs on to consumers in the form of higher premiums.

The Department of Health and Human Services says the fee covers the costs of running the federal IT platform. A reduced fee rate of 1.5 percent is being considered for the 2017 benefit year to ease the transition for states, said spokesman Aaron Albright.

The government already charges a 3.5 percent fee on premiums in states that rely on HealthCare.Gov and other services. States that run their own exchange portals don't have federal user fees — but may charge carriers their own fees.

In Oregon, where insurers lost millions on claims over the past two years because they set their rates too low, the new fee could be another setback. Earlier this year, carriers whose medical claims costs were higher than expected were told they would get only a fraction of the money promised under a federal program to help stabilize premiums.

As a result, Oregonians enrolling in plans for 2016 are facing some of the highest rate increases in the country — and rates could reach even higher with the new fee, officials said.

The 3 percent fee means a total cost of $13 million per year for all the carriers, said Patrick Allen, director of Oregon's Department of Consumer and Business Services. That's a high amount, considering Oregon already charges carriers a 2.9 percent fee on premiums for certifying plans, community outreach and other services.

"We always knew the federal government would propose a fee, we knew it wouldn't be free forever," Allen said.

The state, he said, isn't looking to develop an exchange website from scratch like it did with the failed Cover Oregon process. Oregon is fighting in court with its contractor Oracle Corp. to recoup millions it paid the tech giant to construct the glitch-filled exchange.

Instead, Allen said, Oregon would consider using exchange software that has "a demonstrated track record" if it's more cost-effective. Connecticut's exchange has been touted as a national model, and at least one state — Maryland — has adopted it. Oregon is also currently working to adopt the Kentucky eligibility and enrollment system for Medicaid.

Allen declined to comment on specific software, or how much the state would be willing to spend. If the cost of switching proves better for consumers, he said, the software would be paid for through an assessment on premiums.

In New Mexico, where carriers are also charged a state assessment to cover administrative costs, exchange officials said the federal fee would add a "significant and unnecessary" burden to the insurers.

If the fee turns out to be too costly, the board that oversees the exchange will have to consider all options, including dropping the federal platform, officials said. Initial estimates by legislative analysts pegged the cost of a 3.5 percent federal fee at $5 million per year for New Mexico carriers.

Nevada's exchange director Bruce Gilbert said the federal fee would translate to more than $7 million in costs annually for carriers in his state. Like Oregon, Nevada already charges carriers a 3 percent fee on premiums.

"There is widespread agreement... that a 3 percent fee to remain on the federal platform would be excessive," Gilbert said, adding that Nevada will explore "every option available... and do what is most likely to continue to reduce the number of our uninsured citizens."

Both New Mexico and Nevada officials said the fee should reflect the number of enrollees serviced by the federal exchange rather than a percentage of the premium.

In Hawaii, where the federal fee would also apply, officials said they didn't yet how it would affect carriers.

"We would obviously be concerned about it to the extent that it's going to affect the cost of insuring people," said Laurel Johnston, deputy chief of staff to Gov. David Ige.


AP reporters Susan Montoya Bryan in Albuquerque, Michelle Rindels in Carson City and Cathy Bussewitz in Honolulu contributed to this report.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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