State health insurance exchange will cost more than earlier estimates

A state health insurance exchange will cost $54 million in 2015 to operate, says the Dayton administration.

The cost comes in at greater than earlier estimates of $30 to $40 million. The state would not have to find the money until 2015, when the state exchanges are required to be financially self-sustaining. But the cost rises to $64 million in 2016. State officials are still weighing how the exchange will pay for itself. Options include user fees, a sin tax, and selling ads.

The exchange, a cornerstone of the federal health care overhaul, will create an insurance marketplace where consumers and small businesses can comparison shop for health insurance policies starting in October of next year. Coverage would take effect in 2014.

The Dayton administration also announced it will seek an additional $39 million to fund development of the state's exchange. If the federal government approve the additional grant, Minnesota will have received a total of about $110 million from the feds.

The new financial details emerged Friday, the day the state submitted its application for the exchange to the federal government.

President Barack Obama's administration last week extended the application deadline until Dec. 14. Many states are behind in their plans for exchanges.

Late Thursday, the Obama administration agreed to a request by Republican governors for more time to decide whether they'll build their own state exchange or use the federal alternative. The administration extended that deadline to Dec. 14, as well.

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.

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