Federally Facilitated Exchanges No Longer Temporary

The administration has gradually moved away from the ACA’s goal of encouraging Federally Facilitated Exchange (FFE) states to stand up their own State-based Exchanges (SBEs). The ACA was written with state-based exchanges as the primary model, and the federal platform was expected to be a temporary solution for most states.

The agency, for example, offers no new encouragement for a state to switch to a state-based model or to preserve SBE status. The agency also proposes making it more expensive for SBEs that want to shift some functions to the federal platform. Some industry observers expect more SBEs will move to the FFE model entirely or move to a partnership model.

State-based exchanges that use the federal platform for some functions would be required to pay 3% of premiums to cover a user fee beginning in 2017, under the CMS issued 400-page Notice of Benefit and Payment Parameters (BPP).  Most SBEs have user fees that are lower than the 3.5% charged by HHS. To ease the transition, CMS’s notice suggests the 3% fee might be phased with a 1.5% or 2% fee in 2017.

Among SBE states, the reception to CMS’s proposed 3% fee for use of the federal platform has not been favorable, and gradually increasing the percentage until it reaches 3% probably won’t help make it more palatable, says Dan Schuyler, a senior director at Salt Lake City-based consulting firm Leavitt Partners. Most SBEs looking to lease federal technology were hoping for a price point of about 2% or 2.5%. He notes, however, that for the fee, SBEs would have access to a package that includes the call center, enrollment technology and eligibility. “CMS is trying to cover its costs, and that’s the best price point, but that’s not enough of an incentive for states to move to that platform.” The 3.5% user fee that carriers must now pay to participate on the federal exchange is not enough to cover the agency’s expenses and will likely increase at some point, he adds.

The authors of the ACA didn’t envision that some SBEs would migrate to the federal platform and, as a result, there is no structure to charge a fee for leasing the technology.

See CMS’s Draft 2017 Letter to Issuers in the Federally Facilitated Marketplaces here. 

Mike Smith
President