House lawmakers authorize $40 million start-up loan for state health exchange

Allyn HodginsUncategorized

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The State Corporation Commission
The State Corporation Commission seal. Legislation working its way through the General Assembly would establish a state-run health insurance marketplace through a new division within the SCC. (Ned Oliver/ Virginia Mercury)

House legislators finally put a dollar amount on the cost of establishing a state-run health insurance exchange — a cost met with opposition from Republican delegates.

In Thursday’s largely party-line vote, lawmakers approved a budget amendment that would authorize up to $40 million in start-up funding for a state-run health exchange. The money would be delivered through a capital advance or interest-free loan to the State Corporation Commission, the agency tasked with implementing and overseeing the Virginia exchange.

Del. Mark Sickles, D-Fairfax, acknowledged the money would be taken from the state’s general reserve fund. But he assured his colleagues in the House — in response to questioning from Del. Kathy Byron, R-Bedford — that the money would be repaid through fees assessed on health insurance carriers in the exchange.

The House version of the exchange bill, sponsored by Sickles, sets a 3 percent fee on insurance carriers. It allows the SCC to raise the assessment, if necessary, “to ensure that the exchange is fully funded.”

The Senate version of the bill, sponsored by Sen. Jennifer McClellan, D-Richmond, caps the fees at 3 percent. Legislators still have to agree on a final version of the legislation before it goes to the governor’s desk.

“Our side of the aisle, we want people to have health insurance,” Sickles said before the vote. “And that’s the point of this — to get more people health insurance.”

“At the end, it’s not going to cost us money because we charge the insurance carriers,” he added.

Neither version of the legislation estimated the costs of setting up a state exchange, which are “expected to be substantial,” according to a fiscal impact statement from the SCC. In addition to establishing the marketplace, both bills would allow taxpayers to share their financial information with the state’s Department of Medical Assistance Services to determine Medicaid eligibility.

A separate impact statement from the Department of Planning and Budget found that DMAS would likely spend roughly $1 million to update its Medicaid management systems and an additional $9.1 million to absorb the costs of an anticipated increase in Medicaid applicants.

Both those costs are expected to be partially subsidized by the federal government, which pays a share of each state’s Medicaid expenses.

Advocates of the bill are counting on fees and federal assistance to fund the exchange overall. Beyond the potential loan, no general fund (or taxpayer) dollars have been allocated to pay for the legislation. The state’s proposed two-year budget includes $55 million in outside funding to cover operation costs, according to the SCC impact statement — funding that’s expected to come from the new assessments and possible federal grants.

But lawmakers still aren’t sure when the state will begin to collect those fees, Sickles said. The bills give the state just under three years to roll out the exchange, with an anticipated start date of Jan. 1, 2023.

Given the uncertainty, opponents of the legislation weren’t happy with the possibility of a state-funded loan. Byron, one of the most vocal critics, said the state still didn’t have a sense of all the associated costs, including spending on the online insurance platform.

“I have great concerns about taking on this challenge at this time,” she said. “There are risks that come with it, like IT costs, or call centers that go down. All of these things that can take place when we’re managing the exchange on our own.”

The Senate adopted a similar budget amendment later in the day with no debate.