Financing the Rhode Island Health Exchange

Rhode Island Public Expenditures Council

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Financing the Rhode Island Health Exchange

PROVIDENCE – Today, the Rhode Island Public Expenditure Council (RIPEC) released an analysis of the Governor’s proposed health care premium assessment to fund HealthSource RI (HSRI) operations. The proposed assessment, included in the Governor’s Fiscal Year 2016 budget proposal, would apply to all health insurance plans purchased on the individual and small group markets in Rhode Island. Based on data provided by HSRI, RIPEC calculates that the proposed assessment would generate $11.2 million in revenue in FY 2017 while the federal assessment currently collected in states utilizing the Federally-Facilitated Marketplace (FFM) would provide $8.6 million in revenue if it was collected in Rhode Island. The full report is available here.

The federal Affordable Care Act (ACA) and its subsequent regulations provided states the flexibility to determine whether they would operate a state-based exchange, join the Federally-Facilitated Marketplace (FFM) operated by the U.S. Department of Health and Human Services (HHS), or form regional or partnership marketplaces. Through Executive Order 11-09, Rhode Island established a state-based health insurance marketplace in 2011. As of February 23, 2015, HSRI had registered 30,001 paid enrollments in its individual market and an additional 3,282 paid enrollments through the Small Business Health Options Program (SHOP). Since the ACA was enacted, HSRI has been provided with a total of $152.5 million in federal funds for the construction and operation of HSRI.

The ACA includes a requirement that state-based health exchanges be financially self-sustaining by the end of calendar year 2014; however, Rhode Island received approval from the U.S. Department of Health and Human Services to continue utilizing federal funds through the end of calendar year 2015. Despite this temporary extension, federal funds may not be used to cover operating expenses associated with running HSRI. To fund HSRI operations, Governor Raimondo included a health insurance premium assessment in Article 28 of her FY 2016 budget submission that would generate approximately $11.2 million in revenue during FY 2017.

Under the Governor’s proposal, an assessment would be applied to all health insurance plans purchased in the state in the individual and small group (small employer) markets based on each market’s share of total enrollment through HSRI. Data provided by HSRI indicate that this assessment would equal 3.76 percent of premiums for insurance plans purchased on the individual market and 1.05 percent for plans purchased on the small group market. The Governor’s proposed assessment is intended to be similar to the federal assessment that is collected in states currently utilizing the FFM. Under the federal assessment, the total on-exchange premium in each of the two markets is multiplied by 3.5 percent to determine the amount of revenue that is then collected evenly across plans sold inside and outside of the exchange in the two markets.

The RIPEC report also includes three policy options that are available to Rhode Island policymakers as they consider the future of HSRI. The first option is for the state to retain HSRI by authorizing funding that would allow the exchange to continue operations. The second option is for the state to transition to the FFM and not authorize funding for HSRI. A final option is for the state to move forward on parallel tracks where funding is temporarily authorized for HSRI while a plan to transition to the FFM is simultaneously completed.