Minn. estimates health insurance exchange costs at $40M

Health exchange
Surrounded by health insurance exchange task force members, Gov. Mark Dayton discusses health exchange recommendations at the Capitol in St. Paul, Minn., Monday, Jan. 30, 2012.
MPR File Photo/Jeffrey Thompson

Minnesota budget officials estimate it could cost the state as much as $40 million to run its health insurance exchange in 2015.

The state-based online insurance marketplaces are a cornerstone of the federal health care overhaul. State officials are trying to figure out how to come up with the money.

For more than a year, the U.S. government has doled out millions of dollars in federal grants to help states get their insurance exchanges off the ground and operating in 2014.

So far, Minnesota has received about $70 million in federal money to build its exchange — everything from designing the exchange to hiring staff to making contracts with information technology vendors.

But the gravy train stops in 2015 when state exchanges must be financially self-sustaining.

Barb Juelich, the finance director for Minnesota's exchange, told a joint meeting of two state health care task forces Wednesday morning that early estimates put the state's cost at between $30 and $40 million in 2015. She said that figure does not include broker compensations or any net savings — and the exchange is expected to produce health savings. Juelich said there are numerous ways to pay for the exchange.

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"There were eight basic funding options that have been reviewed by the finance work group ranging from a very narrow-focused user fee, really directly focusing on those who purchase through the exchange to more broad-based source such as a general fund appropriation or other type of appropriation," Juelich said.

Juelich said other funding alternatives include a broad-based health care tax to selling naming rights and advertising. She said those options will be discussed in greater detail at a task force meeting in two weeks.

The cost of Minnesota's state exchange is likely to inflame the political divide over the project at the State Capitol. Last week, there was a new political scuffle over $42 million the state recently secured in a federal exchange grant.

On Friday, the GOP speaker of the Minnesota House, Kurt Zellers and Mary Liz Holberg, chair of the House Ways and Means Committee rejected the governor's request to spend the money. They said he wanted lawmakers to authorize hiring 54 new full time employees yet provided limited details about how those employees would be paid for once the federal funding expires.

But their response is basically moot under the applicable legislative procedures, because the governor can effectively ignore their opposition.

For the Dayton Administration and those supporting the project, time is of the essence. The exchange has to begin enrolling people in health plans in exactly one year. Tom Baden of the office that's working on building some of the information technology says the state will make its deadline because it has to, but it will be close.

"This is an incredibly risky time frame," he said. "A project of this size I've seen take four, five, six years, seven years. So our approach is let's leverage as much off the shelf product as we possibly can; let's really manage the scope so that we put up what we have to put up when we have to put it up."

Meanwhile other states such as Oregon, have already rolled out their exchanges for residents to see what their exchanges could look like.

Update December 12, 2012

Minnesota officials have revised their cost estimate for the exchange and currently project the expense to state taxpayers in 2015 would be $42.8 million and $52.8 million in 2016. In addition, the expanded Medicaid program would cost an additional $9.4 million in 2015 and $8.9 million in 2016.