Will State Exchanges Go Bankrupt?

For those states that are running their own health insurance exchanges there is another problem to consider other than site performance. The exchanges were established though federal government grants with the understanding that they would be self sustaining by 2016. Most have established a user fee based on sold policies (e.g $3.50 per policy). While some of the state exchanges have been more successful than the federal exchange, most are not meeting their enrollment projections leading to a shortfall in fee revenue.

A recent article in the Denver Post by Michael Booth (h/t Reason.com) illustrates the problem. If enrollment does not increase to meet budgetary projections what will be the strategy for the exchanges? There seem to be three possible scenarios:

  • decrease spending (marketing, staffing, etc);
  • increase fee levels; or
  • get funding from state general funds.

None of these will be popular.