Kentucky: If Bevin does kill Kynect, will the state "save money"?
2018 MIDTERM ELECTION
Time: D H M S
One of the arguments Kentucky Governor-elect Matt Bevin has made in favor of killing off the wildly successful, smoothly-operating kynect state-based ACA exchange has been that doing so would "save Kentucky money". The idea is that by shifting everything over to the federal exchange at HealthCare.Gov, the state of Kentucky would save the cost of operating their own exchange.
In one sense, this is true; kynect is currently supported by a flat 1% charge for all premiums on all individual policies sold in Kentucky, both "inside and outside of the marketplace." In other words. whether you enroll in a individual policy either via Kynect or directly through the insurance carrier, they're tacking on a 1% surcharge to your premiums to pay for the exchang to operate. So, yes, dropping kynect would also stop that 1% fee from being charged.
HOWEVER, killing kynect would also mean doing what Oregon, Nevada and Hawaii have done: Moving Kentucky home to mama, so to speak (although in those cases, it was done out of necessity due to hosed technical problems). And guess what?
But as federal funding disappears, state-based marketplaces have to raise their own revenue for operations. Although each state has approached this task differently, most use an assessment on health plans as their primary financing mechanism (see exhibit). This also is true of the federal government, which has established a 3.5 percent user fee on premiums for plans sold through HealthCare.gov.
Yup. Instead of everyone paying 1% whether they enroll on or off the exchange, those enrolling through the exchange only would pay 3.5%.
Kentucky's total individual market was roughly 163,000 people in 2014, including non-ACA compliant policies. This year it's probably a bit larger (170K?), with just over 50% of those folks enrolled via kynect.
Let's say that there's 88,000 people enrolled through the exchange and another 88,000 enrolled off-exchange. Right now, all 176K are paying 1% of their premiums to run kynect. If HC.gov takes over, the 88K off-exchange will apparently not have to pay anything at all...but the 88K on the exchange will have to pay 3.5% (2.5% higher than they are now).
On the one hand, this will have the effect of raising premiums 2.5% for those on the exchange while theoretically reducing them 1% for off-exchange policies, although I suspect that in most cases the carriers will just price them the same either way (they may not be allowed to price the same policy differently, although I suppose they could designate them as 2 "separate" policies?). In any event, it seems to me that this would be a wash.