Citing costs, Bevin has said he would shut down Kynect; actually, insurance companies pay for it; Medicaid is another matter

By Molly Burchett and Al Cross
Kentucky Health News

The governor’s race between Democrat Jack Conway and Republican Matt Bevin will spotlight the Patient Protection and Affordable Care Act, an issue that affects all Kentuckians at least indirectly.

Conway, in his eighth year as attorney general, says he would have voted for the law. Bevin, who was the most conservative candidate in his primary, has said he would shut down the state’s health-insurance exchange, Kynect, that was established under the law, because it will cost the state hundreds of millions of dollars.

Actually, Kynect is paid for by insurance companies that sell policies in Kentucky. Bevin appears to be referring to the projected cost of expanding Medicaid, another Obamacare-related move that Democratic Gov. Steve Beshear made at the same time he created Kynect. It raised the program’s income limit to 138 percent of the federal poverty level, from 69 percent.

The federal government is paying the entire cost of the Medicaid expansion for the first three years. In 2017, the state will pay 3 percent, gradually rising to the law’s cap of 10 percent in 2020. A study for the state projects that the expansion will pay for itself until 2021 by expanding health-care jobs and generating economic activity and tax revenue.

Bevin has scoffed at those projections. Conway has said the state needs to provide health coverage, but only what it can afford.

As Kentuckians, voters, and consumers of health insurance, you may be asking: What’s going on with Obamacare in the state? Are we able to afford it? Who and what should we believe? While the cost of Medicaid expansion is debatable, it’s becoming clear that Kynect has avoided the problems plaguing other state-run exchanges.

So far, the Centers for Medicare and Medicaid Services has dispensed more than $4.9 billion in grants to help launch state-run exchanges. Kentucky received $253 million for the initial planning and development phases of Kynect. Now its $28 million annual cost is covered by a fee on insurance companies, state officials say.

Despite federal support and their own revenue sources, many of the 17 state-based exchanges are expecting deficits this year and in the future. Many will continue to rely on leftover federal funds to pay for operations this year, report Darius Tahir and Paul Demko of Modern Healthcare. Hawaii announced this week that it would close its exchange and transfer clients to the federal exchange because of continued funding problems.

Kynect officials say it isn’t having such problems because the state has ensured that Kynect is self-supporting through fees on insurance plans.

“The governor committed that the exchange would be self-supporting and would not rely on state General Fund dollars,” said Jill Midkiff, spokeswoman for the Cabinet for Health and Family Services. “Kentucky’s sustainability plan employs an existing assessment on insurers that was previously used to fund Kentucky Access, the state’s high-risk pool, which was closed [since] individuals previously enrolled are now eligible to purchase a plan through Kynect.”

But to transform Kentucky Access into Kynect, Beshear used executive orders that bypassed the General Assembly, where Republicans control the Senate. They have questioned his use of executive powers but generally have not been critical of Kynect.

The fee on insurers is a 1 percent, broad-based assessment on all policies sold by companies offering plans through the exchange. While insurers don’t pass this fee directly to consumers, it almost certainly figures into their calculation of premium calculation and thus is indirectly paid by policyholders. The federal exchange is financed in a similar way, but its fee is 3.5 percent, meaning higher costs for insurers and policyholders.

In most cases, premiums for Kynect policies are reduced by a federal income-tax subsidy that is a key part of Obamacare.

“The vast majority of Kentuckians buying health insurance through Kynect are eligible for some kind of payment assistance or subsidy,” Beshear said in commenting on most health-insurance companies recent requests for premium increases. “That cost will vary from family to family, so talking about rate changes in a vacuum isn’t a very effective way to gauge how much those rate fluctuations may affect policyholders or those shopping for insurance.”

Bevin says he would move Kynect customers to the federal exchange, but the U.S. Supreme Court could rule this month that the tax subsidies are not supposed to be available through the federal exchange. The plaintiffs in the case cite a passage of the law that opponents say was a drafting error and does not make sense when the law is viewed as a whole.

If the court agrees with the plaintiffs, and Congress doesn’t change the law, states using the federal exchanges will see spikes in insurance premiums, and millions of people could be at risk of losing their insurance. Bevin has not said what he would do in case of such a ruling.

Independent Drew Curtis is also running for governor.

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