RICHMOND — Virginia legislators have been advancing a plan to transition from the federal health insurance exchange to the state’s own online marketplace as a way to save money and improve access to affordable insurance.
Legislation would establish a state-based exchange so Virginia residents who purchase individual health plans can shop for coverage. Health officials say they can run the insurance market better than the federal government and reduce premiums for residents.
“We think this will forward our goal of more Virginians having access to affordable insurance plans that really mean something when they get sick or have a catastrophic condition,” said Daniel Carey, Virginia’s secretary of health and human resources.
Under the proposal, the state-based exchange would become operational for enrollment in plans that take effect in 2023.
The Senate passed its bill, Senate Bill 732, from Sen. Jennifer McClellan, D-Richmond, on Friday on a bipartisan vote of 29-10, with eight Republicans joining Democrats. Del. Mark Sickles, D-Fairfax, is carrying the companion bill, HB 1428, which will get a floor vote in the House of Delegates this week.
“We think we can get more uninsured people insured,” Sickles said. “That has a public benefit to everyone in society that people have good insurance.”
With the launch of President Barack Obama’s Affordable Care Act, states had the option to develop and host their own exchanges or let the federal government run exchange for them. Most states use healthcare.gov, but Virginia is among several states that are shifting to state-based exchanges to make insurance more affordable for families strained by rising health-care costs.
The federal and state marketplaces allow for people who don’t have access to affordable insurance through an employer or aren’t eligible for Medicaid or Medicare to shop for individual health plans.
The Northam administration and health officials have been in discussions with various stakeholders for more than a year. The legislation has moved forward with minimal pushback. With lawmakers discussing so many hot-button issues this session, this major piece of legislation hasn’t received a lot of attention.
A new division in the State Corporation Commission, Virginia’s regulatory authority over insurance and other matters, would operate the state-based exchange.
Virginia has a three-year timeline to transition to a state-based marketplace. In the first two years, Virginia will move to a federal-state partnership, so people will still purchase plans on healthcare.gov. This is to allow time for the SCC to build the infrastructure and work out policy choices. The goal is to have the full state-based marketplace for plans effective Jan. 1, 2023.
Savings would come from a 3% user fee insurance companies pay to offer plans on the federal marketplace. With a state exchange, that 3% would go to the state. The legislation calls for an increase in the fee to 3.5% to cover startup costs, but health officials anticipate eventually rolling that back to 3%.
Health officials said the federal government is taking about $86 million in user fees a year, but they say Virginia can operate an exchange for about $45 million.
The savings can be used to help people navigate health insurance plans and enroll.
A state exchange can do a better job at collecting data that Virginia doesn’t have while using the federal marketplace, said Holly Mortlock, senior policy adviser to secretary of health and human resources. For instance, the legislation would include on future tax return forms a box that people will check off to indicate they are insured. The state can do targeted outreach to people who aren’t insured or who have lapsed in coverage and let them know about health insurance options on the exchange.
“Doing that outreach would increase enrollment and stabilize the marketplace as we would be able to get more people on and ensure they maintain continuous coverage,” Morlock said.
Sara Cariano, a policy specialist and lobbyist for Virginia Poverty Law Center, said a valuable part of the state operating its own exchange is that people with fluctuating incomes can have a smoother transition from going back and forth between Medicaid and the exchange.
The states that did early launches of their own state-based exchanges were met with costly problems: call centers were swamped, websites didn’t work, data was inaccessible. States spent millions on fixes that didn’t work. It scared other states from considering a state-based exchanged.
Virginia officials believe they can avoid those failures by learning from them as well as the successes in other states.
“We have learned from other states and we’re in a great position to be able to roll this out well,” Mortlock said.
Several other states are creating their own marketplaces or considering doing so. Mortlock said Virginia has been talking with other states that are in the midst of transitioning to a state-exchange.
“Perhaps we’re behind in waiting to do this now, but there’s some advantage to letting it shake out and learning from mistakes and jumping in now and doing it right,” said Sen. Emmett Hanger, R-Augusta, who is a chief co-patron along with Sen. John Edwards, D-Roanoke, of the Senate bill.
The proposal has generated some support from Republicans, who favor having local control and the belief the state can provide a service better than the federal government.
“It will allow us more ability to tailor the program and we can hopefully save Virginians some money,” Hanger said.
No Republicans have cast a vote in favor of the House bill as it’s moved through committees.
“We’re asking you to take control of our future here and help our low-income population get the insurance they need in a more efficient way,” Sickles told a Labor and Commerce panel.
The instability with the exchange at the federal level makes it a good time to transition as well, Mortlock said.
The Trump administration has cut funding for advertising and assistance to encourage people to sign up in the federal exchange. The administration has also reduced the enrollment period.
“We have the opportunity to make more policy choices that would sustain and protect Virginia’s market,” Mortlock said.