WA: Three Questions Facing the Exchange

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Proponents would argue that Washington’s state-based exchange is a national leader, noting that It has performed at the top of the class among state and federal exchanges in terms of enrollment and functionality.

Opponents would argue that, regardless of past performance, there continue to be red flags that could undermine its future. The Washington exchange has some significant problems, critics note, which threaten its long term sustainability.

With open enrollment now three-quarters complete, here are three key questions which I’m hearing discussed in some circles, but about which I expect we will hear more from advocates over the next six months.

Will the exchange attract enough enrollment to be sustainable?

Under the ACA, state exchanges must be fully self-sustaining by Jan. 1, 2015.  In practice, that means they can’t receive any federal support, but can receive state support.

The Washington exchange is funded by an appropriation from the state legislature.  That funding comes in two parts:

1.  Taxes on premiums collected from health plans in the exchange.

2.  Additional fees on health plans to make up the difference between the premium tax revenue and operational costs.

Since both of these costs are added to the price of insurance, the more insurance products sold through the exchange, the more the operational cost of the exchange is spread out among consumers.

Consequently, the more plans that are purchased inside the exchange, the cheaper those products will be for consumers.

However, exchange enrollment is through Jan 1 is down about 30% from mid-range estimates.  The mid-level projection was that 130,000 would enroll in QHPs by Jan. 1, 2014.  According to the latest figures, released Feb. 11, nearly 91,000 have enrolled so far in QHPs.

Can the exchange close the gap in time for the end of open enrollment on March 31?

If not, there will be fewer consumers in the exchange to spread costs, which could make the pricing of the exchange products more expensive than they need to be and in turn could depress market activity there.

Can the operational problems be fixed before federal funding runs out?

At this point, four and a half months into the open enrollment period, one might expect that things had been smoothed out on the technology side.  Assuming the website is working more smoothly, one could expect that call center volume would decrease.

However, the opposite is occurring.

In a Jan. 29th Senate Ways and Means Committee hearing, exchange officials explained that they have more than doubled the number of customer service representatives (CSRs), but are still struggling with high and growing call volumes.

Regarding call volume, Exchange CEO Richard Onizuka noted that the call center’s “abandon rate is still decreasing, but (the call center is) still deferring calls.”  On a single day, he said the exchange received about 49,000 calls, most of which were “deferred,” meaning callers were told to try back another time.

Onizuka acknowledged that many of the calls continue to be driven by problems consumers encounter with the website.

“We’ve had up to 10 times the projected volume in the call center.  We think a lot of those calls are driven by system issues – they can’t get through the system.”

Frustrated consumers continue to bombard the HealthPlanFinder Facebook page with complaints detailing their inability to make basic changes online, or get a person live on the phone.

Some of this is simply because the process of buying insurance is new to some consumers, and they need help to get through enrollment.  Some of this is because of technical issues with the website.

Because the website not functioning as well as anticipated, it is generating a call volume that is much higher than expected.  Those high number of calls are diverting resources away from fixing website bugs – which in turn would ease the call volume.

It’s a viscous cycle that appears to be harder to get out of than was foreseen.

What will be the operational impact of cutting the annual Exchange budget from $150m to $40m?

Current federal funding has provided the exchange with about $153 million for 2014, with about $128 million of those funds going to “consulting” and other outside contracts related to start-up activities.

Those costs are generally one-time costs related to start up activities, marketing/advertising, and call center operations.  This amount is in addition to the $85m budgeted in 2013.

With a fixed budget of about $40m set by the legislature for 2015, a recent AP article raised the question of how well the exchange will be able to function on a budget one-third of the size of the previous year.

A very preliminary budget analysis by exchange officials makes some suggestions about how that might work: Put zero dollars in marketing and advertising, spend nothing for computer and software upgrades, and slash budgets for administrative and building needs.

“We’re going to be running a much leaner machine in 2015,” exchange spokesman Michael Marchand said.

The article seemed to capture this vicious cycle the Exchange may be caught in.

The exchange already is behind its goals for getting people signed up for insurance, raising questions as to how it is supposed to meet its projections in 2015 without a marketing and advertising budget.