Washington health care exchange faces looming budget cut

SEATTLE – Next year, Washington’s health insurance marketplace will have to be run on less than a third of the money officials now have at their disposal.

Washington and the 13 other states running their own health insurance marketplaces all had federal grants to pay for startup costs. Now the Washington Health Benefit Exchange will have to transition from federal grants totaling almost $150 million in 2014 to state dollars allocated by the Legislature: $40 million in 2015.

A preliminary budget analysis by exchange officials makes some suggestions about how that might work: by putting zero dollars in marketing and advertising, spending nothing for computer and software upgrades, and slashing budgets for administrative and building needs.

“We’re going to be running a much leaner machine in 2015,” exchange spokesman Michael Marchand said.

That projected budget cut isn’t the only financial challenge for the exchange going forward. Where the $40 million is expected to come from may also pose a problem.

The Legislature voted last year to pass along the proceeds of an existing 2 percent state tax on health insurance policy sales through the exchange. That would add up to $40 million, but only if sales projections are met.

The exchange is already behind its goals for getting people signed up for insurance, raising questions as to how it would meet its projections in 2015 without a marketing and advertising budget.

The Washington exchange set a goal of selling private insurance to 280,000 people by Jan. 1, 2015.

Their first goal called for 130,000 private policies sold by January 2014. Nearly 90,000 private polices have been sold, while another 88,000 people have signed up for insurance but haven’t paid their first premium.

Marchand said they are confident they’ll make the sales needed to bring in the dollars for next year because February and March are expected to be big months for insurance sign-ups.

The exchange will also get more than $20 million from another state source – the high-risk insurance pool – but that money will come to the exchange gradually over the next few years.

Marchand said they aren’t expecting or counting on more money from the federal government, although some other states have been advocating for more.

“We feel it’s very, very important that we get to a model of self-sustainability quickly,” he said.

In addition to the initial $150 million in federal dollars, Washington applied for and received another grant for $86.4 million last month, to improve call center operations, upgrade technology and do some evaluation work with a focus on marketing and outreach.

Those dollars are supposed to be spent in 2014, Marchand said, but lawmakers from both parties doubt that is possible or necessary.

State Sen. Karen Keiser, D-Kent, said she expects some money from the new grant will be left over for spending next year.

Keiser, a member of the Senate Health Care and Ways and Means committees, isn’t worried about the exchange’s financial picture, in part because the need for money won’t be as great. Expensive set-up costs and the most urgent marketing needs are past.

Keiser is pleased with how many people have already signed up for health insurance and expects that positive trend will continue.

“I don’t think that we’re going to have any kind of crisis with financial sustainability with the route they’re on now,” she said.

Sen. Randi Becker, R-Eatonville, said she thinks the health exchange might want to give some of the state dollars back after receiving that additional $86.4 million grant.

Becker, who is a also member of both the Senate Health Care and Ways and Means committees, expects the Legislature will look again next year at the exchange budget.

“There’s not enough data yet to determine what the true costs are going to be,” she said.