LITTLE ROCK — The health insurance exchange that Arkansas is required to have in place by Jan. 1 is getting renewed attention in light of the Obama administration’s offer of an alternative to expanding the state Medicaid rolls.
Gov. Mike Beebe said last week that the federal government is willing to allow Arkansas to use the exchange to provide private insurance to an estimated 250,000 of Arkansas’ working poor instead of putting them on Medicaid.
About 800,000 Arkansans currently lack health insurance. If the state were to opt for adding people earning up to 138 percent of the federal poverty level to the Medicaid rolls, as was originally proposed under the federal Affordable Care Act, state officials say between 150,000 and 250,000 Arkansans above the poverty line likely would buy private insurance through the exchange.
If Arkansas chooses the new option — which has generally been better received in the Legislature than the first option — the number of people who would use the exchange to shop for insurance plans is estimated at between 400,000 and 500,000. That should make the exchange even more beneficial to consumers, according to state Insurance Commissioner Jay Bradford.
"That will make Arkansas a much more attractive market for insurance companies to do business in, because you’re looking at another approximately 250,000 people that would be purchasing insurance on the exchange from a private carrier," said Bradford, a former state legislator and insurance company owner.
"As a small state like Arkansas with our population, we want more competition, more companies to do business in Arkansas, and this gives them more potential to write insurance in the state, so I think that’s a real positive aspect of it," he said.
Under the new option, for three years the federal government would fully fund the premiums of Arkansans earning up to 138 percent of the federal poverty level, or $23,550 a year for a family of four.
By 2020, the state would have to pay 10 percent of the cost, though the state could opt out at any time. Gov. Mike Beebe and some lawmakers have suggested approving a plan with a sunset clause that would require re-authorization in three years.
Beebe announced last year that the state would not pursue a state-run exchange because Republican legislators opposed it. Instead, Beebe advised the Obama administration that the state would opt for an exchange run by the federal government in partnership with the state.
The new private-insurance option has legislators reexamining that decision.
"That dialogue has shifted because of … this new offer," said House Speaker Davy Carter, R-Cabot.
Carter said it is not clear now which type of exchange would best serve the state.
"We still don’t know some of the details on what are the practical differences in the procedures that we will follow under each of the different types of exchanges," he said. "I can’t answer that now. Time will tell."
In any case, it is too late to change course before the exchange launches next year, Carter said.
"That decision was made months and months ago," he said. "We can’t revisit that anyway until next year, I believe. I’m not going to worry about things that I can’t control."
The federal government is covering the cost to set up the exchange, which is supposed to be self-sustaining once it is up and running because of extra fees placed on premiums sold through the exchange. Bradford said enrolling up to half a million people should not require more personnel than originally planned because operation of the exchange will be "mostly automated."
Rep. John Burris, R-Harrison, chairman of the House Public Health, Welfare and Labor Committee, said GOP legislators rejected a state-run exchange mainly because of concerns about the risk to the state if the exchange turns out not to pay for itself.
"I’m comfortable staying on the path we’re on and assessing as it happens," he said. "If it’s self-sustaining, if things are happening the way they say they will, there’s a path back. But we don’t have to go down it yet — and we actually can’t."
Sen. Jason Rapert, R-Conway, chairman of the Senate Insurance and Commerce Committee, said he is not ready to say what kind of exchange he would prefer. He said he wants more information about the type of exchange being pursued by New Mexico Gov. Susana Martinez, which he said has received little attention in Arkansas.
Martinez is seeking to establish an exchange that would be run by a nonprofit entity based in New Mexico.
"It would not be another state government entity," Rapert said.
Bradford has maintained from the beginning that a state-run exchange would be preferable to a federally run exchange because the state could tailor it to suit Arkansans’ needs. The new alternative to Medicaid expansion makes a state-run exchange even more appealing, he said.
"The feds, if they operate the exchange — and that’s where we are right now — they can put up to 3 1/2 percent of tax on Arkansans consumers (who are above the poverty line) in the federal exchange. The governor has told me that he feels like we can operate it at considerably less than that," he said.
The state currently charges insurance companies a 2 1/2 percent tax on all premiums sold in the state. Bradford said he agrees with Beebe that the growth in the tax revenue that would result from insuring hundreds of thousands more Arkansans should be enough to cover the exchange’s costs without the need for any extra charges on consumers — if the state runs its own exchange.
Bradford confirmed that it is too late now to switch to a state-run exchange before next year but said lawmakers could choose next year, possibly during the fiscal session or in a special session, to make the switch in 2015.