Will Pennsylvania Take Over the Insurance Exchange?

Pennsylvania is considering taking over the online exchange that’s been operated by the federal government for individual Affordable Care Act policies since it began in 2014. The motivation is to cut health care costs.

The Republican and Democratic floor leaders in Pennsylvania’s House of Representatives have sponsored legislation that would create an authority to operate a state-based exchange.

Under the bill, which was introduced as HB3 on June 4, 2019, Pennsylvania could apply for federal reinsurance funding to help pay for high-cost claims. The administration of Governor Tom Wolf (D) says it can operate the exchange more efficiently and economically than the federal government and use the resulting savings to qualify for extra federal funding for a reinsurance program that helps cover certain high-cost claims.

Governor Wolf is pressing for HB3 to pass the Republican-controlled Legislature in June in the hope that its savings measures can take full effect in 2021. The Wolf administration’s analysis shows that, if adopted, the state-operated exchange could allow consumers to see premiums that are 5% to 10% lower than what they would otherwise pay.

In addition to its high-level support in the House, the legislation is backed by the Pennsylvania Chamber of Business and Industry, the Hospital and Healthsystem Association of Pennsylvania and the Pennsylvania Association of Community Health Centers.

According to the Kaiser Family Foundation, seven other states have already taken the step of starting their own reinsurance programs. Pennsylvania officials project that the expected premium reductions would benefit more than 400,000 consumers.

Seventeen states currently operate their own exchanges, although five rely on the federal government for certain services, such as eligibility determinations and enrollment.

Sabrina Corlette, a research professor at the Center on Health Insurance Reforms at Georgetown University, said Pennsylvania would be the first state to pay for the state share of the reinsurance program by capturing savings from running its own exchange. Most other states have imposed an assessment on hospitals or insurance companies, Ms. Corlette said.

While states at first struggled with running their own exchanges in 2014, operating them has become cheaper and simpler as information technology systems have improved and become standardized, Ms. Corlette said. Running its own exchange also gives the state more control over how it runs, Ms. Corlette said.

HB3 was initially considered by the House Insurance Committee and was reported out to the Rules Committee on June 5, where it awaits further action.