The state health insurance exchange’s financial viability hinges on recovering millions of dollars in costs inflicted by Medicaid expansion, officials say, but Connect for Health Colorado wasn’t set up to either count or collect reimbursement.
“We right now have zero in terms of our Medicaid reimbursement,” said Kevin Patterson, the exchange’s new interim CEO. “Zero is not the right number.”
Former interim CEO Gary Drews said recouping Medicaid costs is “the make-or-break piece” of the exchange’s financial puzzle as federal grants run out this year.
The other big piece fell into place Thursday, as the exchange’s board of directors voted unanimously to raise its fees. A charge that insurers pay for each plan sold over the exchange, and pass on to consumers, was more than doubled to 3.5 percent, from 1.4 percent. The increase amounts to $84 a year on a $4,000 insurance plan.
The exchange also hiked an assessment charge it levies monthly on every plan sold on and off the exchange to $1.80, from $1.25. The assessment sunsets after 2016.
But another potential source of revenue — reimbursement from Medicaid — remains untapped.
“We were not set up to receive Medicaid reimbursement,” Drews told a legislative oversight committee Wednesday. “Most of the other states’ (exchanges) have been.”
Colorado missed out, at least compared with the four state-based exchanges closest to it in enrollment size. They have received between $15 million and $25 million in annual revenue to offset the expense of signing up Medicaid recipients alongside those buying private insurance in state marketplaces, according to Connect for Health.
Few other states have expanded Medicaid coverage as Colorado has — enrollment in Medicaid and public children’s insurance grew to 1.2 million, an increase of 433,172, or 55 percent, between late 2013 and February, according to Centers for Medicare and Medicaid Systems data.
Colorado is among the top four states in terms of expanding rolls of Medicaid and Child Health Plan Plus.
“The exchange has been fabulously successful at driving people to Medicaid,” said Sen. Kevin Lundberg, R-Berthoud, a critic of the exchange and the Affordable Care Act.
Patterson told legislators he is taking an aggressive approach on Medicaid recovery with his colleagues in the Department of Health Care Policy and Financing, the state agency that administers the Medicaid program. The exchange staff is still trying to prove to federal and state agencies just how costly Medicaid expansion has been for Connect for Health.
“We want to continue our collaborative (state) efforts to go to our federal partners and pull down the appropriate allocations,” said Health Care Policy and Financing director Sue Birch. “Fed rules always trump.”
Drews and board chair Sharon O’Hara recently told The Denver Post they don’t know why the exchange’s legislative founders and original top executives, now gone, didn’t ask for a Medicaid provision.
“That’s a very good question,” said Sen. Ellen Roberts, R-Durango, chair of the Colorado Health Exchange Legislative Oversight Committee.
“I think no one thought of it when Senate Bill 200 (which established the exchange) was passed,” she said. “It was not presented as a major means to expand an entitlement program, but was sold as a private-sector ‘Travelocity’ for health insurance.”
Roberts, who didn’t vote to create a state exchange, said perhaps Connect for Health has become something different than what legislators envisioned because of federal mandates. “Medicaid expenses are eating our lunch,” Roberts said at Wednesday’s committee hearing.
Under the Affordable Care Act, states were given the option to expand their Medicaid programs in 2014 to cover households earning up to 138 percent of the federal poverty level, as its defined for individuals and families of various sizes.
Colorado was among 29 states and the District of Columbia that opted in. Four more states are considering Medicaid expansion.
Nationwide, the average increase in Medicaid and CHP+ enrollment for the same period was 20.28 percent.
Colorado’s new Medicaid members came through many doors — there are more than 400 places across the state where people can apply online or in person — but Connect for Health’s online enrollment system, call center and other assistance sites were overwhelmed by the volume and complexity of Medicaid cases they dealt with. Call-center costs climbed almost $7 million above budget.
The federal government’s policy of “no wrong door” at enrollment — everyone can go through the Connect for Health portal for private insurance or Medicaid — forced a lot of people into a revolving door between private and public insurance. It slowed down many applicants and trapped others in a flawed computer interface between the exchange system and Medicaid’s. The shared eligibility system costing the exchange more than $5 million to fix.
“It’s a big social experiment,” Drews said. “We didn’t know which doors people would come through. Now we have a better idea.”
During the 2014 and 2015 open-enrollment periods for the exchange, roughly 235,000 Medicaid recipients signed up — through the Connect for Health online enrollment system and other Medicaid portals.
The state exchange expects to have enrolled or re-enrolled almost 143,000 people (and to have retained just more than 111,000) in private insurance by the end of this fiscal year, June 30.
Supporters of Medicaid expansion, even the Congressional Budget Office, predict it ultimately will save states millions.
Colorado’s current federal match for most Medicaid health care expenditures is 50 percent, but the federal payment increased that for the newly eligible populations to 100 percent in 2014 through 2016. It’s set to gradually decline to 90 percent in 2020 and subsequent years.
The additional cost to states in Medicaid payments, the Congressional Budget Office estimates, is a 2.8 percent increase in what they would have spent on Medicaid from 2014 to 2022 without health care reform. But it does not reflect savings that states will realize in their health care spending on the uninsured, the CBO said.
Studies show states that expanded Medicaid will save money because they are now allowed to use federal money instead of state funds to provide health care to prison inmates, pregnant women, and people with disabilities, breast and cervical cancer, and HIV/AIDS. Colorado will save an estimated $10 million in fiscal year 2015, according to the Robert Wood Johnson Foundation.
The foundation’s report examined the total fiscal effects of expansion in eight states, including Colorado. It found expansion states collectively would save or collect $1.8 billion by the end of 2015. And Colorado, the report said, would see an estimated budget boost of $128 million by 2025-26.
Yet Medicaid expansion has been costly to the state health insurance exchange in ways not foreseen.
The exchange’s more than 50 assistance sites, community organizations and other venues where trained people offer in-person help as coverage guides, reported enrolling 27,465 people in Medicaid or Child Health Plan Plus. They enrolled 15,566 in the private marketplace.
During 2015 open enrollment, exchange officials say, the biggest troublemaker, in terms of clogging the online system and devouring call-center time, was the exchange’s shared eligibility system with Medicaid.
Exchange officials have estimated that 40 percent to 45 percent of calls to customer service during the last enrollment period were directly attributable to Medicaid consumers, which Birch disputes until better documentation is provided.
“We have some healthy tension going on,” Birch said. “We’re up to that. If I had to do it all over again, I would have had minimal (technology) vendors involved.”
Fixes to the online eligibility system the exchange shares with Medicaid is going to cost the exchange more than $5 million in the near future. Birch and exchange officials say they are on track to rebuild and test the system before the 2016 open enrollment begins Nov. 1.
Conflicting federal policies as to when income is reported and how it is treated by the exchange versus by Medicaid stalled applications, Birch said. The eligibility issues created a push-pull between the entities as officials tried to sort out stuck applicants.
Dick Cauchi, health analyst with the National Conference of State Legislators, said the exchange-Medicaid interface has been “a thorny issue” nationwide from the beginning.
Despite the problems, Birch said, Colorado was first in the country to drive technology that enabled most applicants to know immediately whether they qualified for Medicaid or what their tax credit would be for purchasing an exchange plan. During 2015 enrollment, 60 percent to 80 percent of people applying for Medicaid or tax credits received real-time determinations.
Most holdups took a week or a few weeks to resolve, Birch said, but 7 percent to 10 percent of applications had significant problems that sometimes took months to untangle. And, often, problems began with user errors.
“People don’t realize families can be incredibly complex. People don’t understand the magnitude of complexity,” Birch said. “But I don’t think the public realizes the number of folks that have gotten through without any challenges whatsoever.”
Electa Draper: 303-954-1276, edraper@denverpost.com or twitter.com/electadraper
