RI must find unexpected $4.6M to fund Obamacare

PROVIDENCE, R.I. (WPRI) – The head of Rhode Island’s HealthSource RI Obamacare marketplace revealed Thursday state lawmakers need to come up with $4.6 million to fund its operations in the next state budget, while urging them not to scrap the local system for the federal HealthCare.gov one.

HealthSource RI executive director Christine Ferguson made the disclosure in a briefing with reporters. She said the federal government has asked Rhode Island to chip in $4.6 million toward the marketplace’s revised $55 million proposed budget for the 2014-15 budget year, rather than rely solely on federal dollars.

Ferguson’s comments came amid a growing debate in Rhode Island about whether the state should refuse to fund HealthSource RI in the state budget and instead switch over to the federal HealthCare.gov website. While that is happening in other states with locally run marketplaces, in those cases it’s usually because the state-run system failed to work.

“Rhode Island is likely to be on the vanguard of a second round of state-based exchange closures as infrastructure cost becomes more transparent – and less appealing – to taxpayers and policymakers,” Josh Archambault, a senior fellow at the Florida-based Foundation for Government Accountability, wrote in a Forbes.com blog post Thursday.

Ferguson said Obama administration officials are “not pleased” that the idea is gaining traction in Rhode Island. “They view us as one of the biggest success stories,” she said, adding: “They are not happy about the idea of having made investments and then having us turn around and say, ‘Oh, sorry, we didn’t mean it.’ That has implications to taxpayers as a whole. Nothing’s free.”

House Finance Committee Chairman Raymond Gallison confirmed Ferguson recently informed him about HealthSource RI’s request for $4.6 million. “The viability, functionality and long term sustainability of the state’s exchange remains under careful review by the House Finance Committee,” he told WPRI.com in a statement.

Rhode Island was already facing a projected shortfall of $67 million in the 2014-15 state budget that Gov. Lincoln Chafee proposed in January thanks in part to soaring Medicaid enrollment and unplanned raises the governor has since awarded state workers.

Ferguson estimated that if Rhode Island scraps HealthSource RI and switches to HealthCare.gov, the federal government would fund it by charging a roughly 1.9% fee – for a total of about $17.3 million in 2016 – on all Rhode Island small businesses and individuals whose insurers sell coverage on HealthCare.gov, regardless of whether they themselves use it.

“That money would go to the federal government,” Ferguson said. She added: “We would have no ability as a state, we would have no tools – none of the investment that is being made now – to work on the market. … Yes, it doesn’t come through the legislature, but people would be actually sending their money to the federal government and getting very, very limited value.”

Ferguson said Rhode Island could keep HealthSource RI and maintain local control for the same amount of money as residents will spend if the state switches to HealthCare.gov, though she also said it’s still up to state lawmakers whether to fund its budget through general tax revenue, a fee on insurance plans, or some other mechanism.

As of late March, the federal government had granted HealthSource RI $111 million in startup funding, of which $89 million had been allocated and $45.8 million had been spent, a spokeswoman told WPRI.com at the time. HealthSource RI has since received an additional federal grant of $30 million, and has a pending request for more, Ferguson said Thursday.

A bipartisan group of House and Senate lawmakers filed bills in both chambers in March to block the state from paying for HealthSource RI – which Chafee established by executive order in 2011 – once the federal startup funding for it runs out.

The Providence Journal editorial board came out in favor of that proposal this week, writing: “If Rhode Island is to move forward, its leaders will have to spend more frugally. This seems one area ripe for cutting.” The editorial described state-run marketplaces as expensive “luxuries.”

Chafee has largely washed his hands of the debate, saying earlier this year that the question of how to fund HealthSource RI should be directed to the various candidates who are running to succeed him as governor.

Lt. Gov. Elizabeth Roberts, a Democrat who is a strong supporter of HealthSource RI and other state health programs, argued that the proposal to give up on HealthSource RI and switch to the federal HealthCare.gov system “is ill-conceived and is a disservice to Rhode Island families and small businesses.”

“A federal exchange lacks accountability to Rhode Islanders and their health care needs and jeopardizes the stellar customer service that HealthSource RI users have come to expect,” Roberts told WPRI.com in a statement. She said “a move to the federal exchange would not be free; it would cost Rhode Islanders whatever the federal government chooses to charge with no accountability in where and how those funds are spent.”

Blue Cross & Blue Shield of Rhode Island, the state’s largest health insurer, doesn’t have a position yet on whether the state should switch to the federal system, spokeswoman Stacy Paterno told WPRI.com. Blue Cross is “evaluating what the potential impact would be for BCBSRI if the state chose to go to the federal exchange,” she said.

Gary Alexander, who served as Rhode Island’s secretary of health and human services under former Gov. Don Carcieri, argued in a research brief released Thursday by the Rhode Island Center for Freedom and Prosperity think tank that the state can’t afford HealthSource RI.

“Largely without public input, elected and appointed Rhode Island officials have committed the Ocean State to massive and unnecessary expenditures for operations and benefit distribution,” Alexander wrote. “Passing the state’s health benefits exchange under the federal Affordable Care Act back to the federal government would eliminate a looming $23 million annual expense.”

Alexander also suggested the state should halt the so-called Unified Health Infrastructure Project (UHIP), a $209-million technology system currently being built to coordinate sign-up for social services. The Chafee administration describes UHIP as “the largest-scale information technology project ever undertaken by the State of Rhode Island.”

In addition, Alexander noted that HealthSource RI is not offering any insurance plans that do not cover abortion, which he said “appears to be an intentional choice by the state leadership running the exchange.” The federal website is more likely to offer a plan that does not cover abortion, he suggested.

Ferguson recently sent a letter to the director of the U.S. Office of Personnel Management asking that the new multi-state health insurance plans the federal government is organizing be offered in Rhode Island next year, HealthSource RI spokeswoman Dara Chadwick told WPRI.com. One of those plans is required to exclude coverage for abortion.

When the Affordable Care Act passed in 2010, the Obama administration and the law’s architects expected most if not all states would set up their own marketplaces. But widespread wariness of the law led most states to refuse to do so, leaving the federal government to handle the job through the initially botched HealthCare.gov website.

Roughly 100,000 Rhode Islanders have used HealthSource RI to sign up for insurance since it opened in October.

About two-thirds of those people signed up for Medicaid, the government insurance program for low-income Americans, while about 28,000 individuals signed up for private coverage, nearly all through Blue Cross. Some small businesses are also using HealthSource RI to buy coverage for their employees.

Ferguson confirmed Thursday that UnitedHealth Group has filed a request to sell insurance plans to individuals through HealthSource RI starting this fall, giving Blue Cross a new competitor. Neighborhood Health Plan of Rhode Island, which is already selling to lower-income individuals this year, has filed to sell plans to people of all incomes, she said.

Ted Nesi ( tnesi@wpri.com ) covers politics and the economy for WPRI.com and writes the Nesi’s Notes blog. Follow him on Twitter: @tednesi

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