The case for keeping HealthSource RI in Rhode Island

Anya Rader Wallack
Posted 4/21/15

Governor Gina Raimondo believes keeping Rhode Island’s state-based health benefits exchange, known as HealthSource RI (HSRI), here in the state is a key component to providing Rhode Islanders with …

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The case for keeping HealthSource RI in Rhode Island

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Governor Gina Raimondo believes keeping Rhode Island’s state-based health benefits exchange, known as HealthSource RI (HSRI), here in the state is a key component to providing Rhode Islanders with quality, affordable health care.

As the federal dollars funding HSRI’s operations run out at the end of this calendar year, HSRI will need to be self-sustaining by January 1, 2016. Much like the federal health exchange, we have proposed implementing a similar assessment on individual and small group health insurance premiums (both on and off the exchange) to provide the state funding required to operate HSRI.

For the vast majority of individual market enrollees on the exchange, this assessment will be absorbed by the federal government through the federal tax credits available to lower the cost of their insurance premiums.

The federal exchange already has a similar assessment that is spread across the entire individual and small group markets (both on and off the exchange). Since the federal government also levies an assessment on premiums, Rhode Island ratepayers and taxpayers will bear the cost in either the federal exchange or the state-based exchange. However, Rhode Island will have much more local control and other advantages with a state assessment. In a move to the federal exchange, the premium assessment for a Rhode Island small business would vary by insurer’s market share and could be as large as 3.5 percent for some plans. In comparison, HSRI estimates a premium assessment of approximately 1.0 percent in the small group market, regardless of the insurer’s market share (3.7 percent on the individual market).

Some critics claim the proposed assessment by the Governor will drive Rhode Island small businesses across state lines. However, a business cannot avoid the assessment by moving across state borders, and likely would pay more in doing so. Massachusetts and Connecticut also have chosen to fund their exchanges using premium assessments, and at a higher cost.

In addition to the cost of the federal assessment, there are other costs the state would have to bear to have a federally facilitated exchange. Those costs come, in part, because the state still would have to maintain a parallel system to handle Medicaid eligibility and enrollment. In addition, potentially millions of dollars will be borne by insurers to link their technology platforms to the federal exchange, a cost that likely will be passed along to ratepayers. In short, a transition to the federal exchange is far from free.

After only a short three months on the job, I believe there is a strong case for keeping HealthSource RI in Rhode Island. The Governor’s budget funds HSRI at a significantly reduced level compared to prior budget proposals and shifts HSRI to a self-sustaining entity supported by state-level funding as required by federal law. As the new HSRI director, I have already reduced spending in several areas, starting with my own salary, and including reductions to advertising, data analysis and contracted personnel.

Under the federal Affordable Care Act, states were given the choice of relying on the federal exchange or creating a state-based exchange. After an in-depth public process, Rhode Island opted for the latter with several goals in mind: enrolling in coverage as many uninsured Rhode Island residents as possible; connecting them with insurance premium tax credits to make their coverage more affordable; and connecting them with Medicaid if they are eligible.

HSRI has seen success in connecting over 33,000 Rhode Islanders with coverage during the open enrollment period that ended in mid-February. Also by way of purchasing coverage on the exchange, Rhode Islanders who needed it most received roughly $67 million in federal tax credits to help make their premiums more affordable.

Rhode Island also developed a program for small businesses with 50 or fewer employees, known as “SHOP,” to help employers enroll employees in coverage, to assist with access to employer tax credits, and to offer the benefits of a “full employee choice” model. The full choice model enables employers to contribute a chosen dollar amount toward coverage and lets employees choose the plan on the exchange that best suits them and their families. SHOP connected 487 Rhode Island employers with coverage over the course of the year for an additional 3,477 covered individuals (employees and their families). Over 79 percent of these Rhode Island small businesses selected the full choice model. A move to the federal exchange means there will be less choice for employers and their employees because the employer program at the federal level is not fully functioning and does not offer full employee choice.

Rhode Island will also lose local jobs and a more responsive and local customer service center if HSRI moves to the federal exchange. There will be no state-based contact center or walk-in services for Rhode Island enrollees.

And lastly, if we abandon HSRI for the federal exchange, approximately 23,600 Rhode Island households may lose insurance premium tax credits, depending upon the outcome of the pending Supreme Court case (which questions whether federal exchanges may provide tax credits to enrollees).

Keeping HealthSource RI as a state-based exchange makes good economic sense by helping Rhode Island’s families and small businesses gain access to quality health coverage at a price that Rhode Island can afford.

Anya Rader Wallack is Director of HealthSource RI.

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