Some 180,000 people could buy health insurance through a state-run exchange in 2014 and that figure could double the following year, Maryland health officials told a Senate committee Thursday.
Gov. Martin O’Malley’s administration is backing legislation to firm up more aspects of the exchange mandated by President Barack Obama’s Affordable Care Act. Determining the way the state will pay for the exchange, however, will wait until next year, the officials said.
Rebecca Pearce, executive director of the Maryland Health Benefit Exchange, said initial estimates indicate the exchange would cost $30 to $40 million to run in the first year and between $45 million and $60 million in the second.
The exchange’s board of trustees recommended the state examine both “broad-based” health industry fees and transaction-based “user fees” to pay for the exchange.
Maryland officials expect to receive federal dollars to run the exchange in 2014. The system must be self-sustaining in 2015.
“A broad-based assessment on the health care world would be very small compared to to the benefit of the exchange,” Health and Mental Hygiene Secretary Joshua M. Sharfstein told the Senate Finance Committee.
Sharfstein said the state expects the federal health care law that mandated states set up exchanges would provide about $500 million per year in subsidies to subsidize insurance for low-income Marylanders.
Senate Minority Leader E.J. Pipkin, R-Upper Shore, said he worried the bump in the number people with health insurance would cause prices to spike for everybody.
“One of the basic rules of economics is that if you increase the demand but don’t increase supply, prices are going to go up,” he said. “This is a lot of people to add to the system at once. It looks like we’re on a collision course, off the drawing board and into the real world.”
Sharfstein agreed, but said the law includes provisions including higher Medicaid reimbursement rates to attract new doctors and health care providers.
“The immediate way to lower [health care] costs is to get more people insured and reduce the amount of uncompensated care,” said Sharfstein.
Some 730,000 people in Maryland are uninsured, according to Pearce. That represents about 13 percent of the state’s population.
Last year, lawmakers decided the exchange would be a public corporation and an independent unit of state government, an issue watched closely by businesses interests worried that control would be buried in a sluggish state bureaucracy.
The exchange will revisit that issue in 2016 to determine if it should transition away from state government and become a nonprofit.
This year, the administration’s legislation would define the role of “navigators” that would assist consumers shopping for health care coverage. The bills also call for the exchange to split up the individual and small group markets.
Pearce said the exchange will apply for a federal grant by June to pay for a marketing effort to bring individual and small business customers to the exchange.
The state, however, is operating on a playing field cratered with uncertainty.
Republican presidential hopefuls have vowed to overturn Obama’s signature social legislation, the Supreme Court will hear arguments on the constitutionality of parts of the law in March and the GOP-held House of Representatives is unlikely to approve funding for the law.
“To me, it wouldn’t make a whole lot of sense to get this [marketing] grant, develop a plan and roll it out before the November election,” said Finance Committee Chairman Thomas M. “Mac” Middleton, D-Charles. “Things could be a lot different then.”
Pearce said the marketing effort would take shape closer to the open enrollment date in October 2013.
“It’s hard to plan in advance for a lot of different contingencies,” said Sharfstein. “We have a lot of confidence the law will be upheld. We’re trying to be where we need to be, but not further.”