Health Insurance Exchange Spending Hits $2 Billion

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The federal government has spent $2.2 billion to help states establish their health insurance exchanges, which require creating websites to let millions of small businesses and individuals in every state buy health insurance from qualified health plans.

Spending to establish these state exchanges, which must be operational by Jan. 1, 2014, exceeded the $2 billion mark with the announcement last week that Arkansas, Colorado, Kentucky, Massachusetts, Minnesota, and the District of Columbia will receive a new round of Exchange Establishment grants totaling $224 million.

The total amount awarded to date in both Level One and Level Two Exchange Establishment grants is $1,899,469,108. The amount awarded to date in Exchange Innovator grants is $249 million, and the total awarded in Exchange Planning grants is $49 million.

In May, the U.S. Department of Health and Human Services (HHS) said it had spent $1 billion over a two-year period toward establishing state insurance exchanges. Since then, grants totaling nearly $1 billion were announced after a U.S. Supreme Court decision in June upheld the constitutionality of the Patient Protection and Affordable Care Act. In August, HHS announced that California, Connecticut, Hawaii, Iowa, Maryland, Nevada, New York, and Vermont would receive a total of $765 million in grant funds for their exchanges. The additional $224 million announced last week means that federal spending on HIXs this year nearly equals the amount spent in the previous two years.

[ Read 5 IT Tips For State Health Insurance Exchanges. ]

"I think the support the federal government has shown is indicative of the opportunity and the challenges of updating, redesigning and rebuilding entire technology systems to facilitate healthcare reform," said Dr. Jay Himmelstein, professor in the department of family medicine and community health at the University of Massachusetts Medical School (UMMS), and co-author of the report, Establishing the Technology Infrastructure for Health Insurance Exchanges Under the Affordable Care Act.

Several states have indicated that the latest round of grant awards will go toward building the IT infrastructure necessary to make their exchange websites operational. For example, Arkansas will use its $18.6 million to continue work to design and implement automation to connect Arkansas Medicaid, and appropriate state-run exchange functions, with the federally-facilitated Exchange Eligibility and Enrollment portal. Funds also will go toward the design, development, and implementation of operations and information systems to support state-operated federally-facilitated Exchange Consumer Assistance functions including outreach, education, and the Navigator Program.

Minnesota’s $42.5 million grant will help the state continue to fund development of its exchange information technology infrastructure, which includes establishing a governance structure within the Minnesota Department of Commerce with full-time staff dedicated to the development of Minnesota's exchange. State officials said the funds will pay for financial management and consulting for financial system development, third-party assessment of internal controls, and consultation contracts for program integrity, as well as IT security assessment and hardware and software requirements.

Colorado will use its $43 million grant to continue efforts to establish the services and systems to launch Colorado’s new health insurance exchange. Specifically, resources from this grant will provide the Colorado Health Benefit Exchange the resources to meet deadlines for certification, testing, and deployment of systems and operations.

In the latest round of funding, Arkansas, Colorado, Kentucky, Massachusetts, and Minnesota received awards for Level One Exchange Establishment Grants, which are one-year grants awarded to states to build Exchanges. The District of Columbia received a Level Two Exchange Establishment Grant, which is a multi-year grant awarded to states further along in building their exchanges.

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