As difficult as the launch of Healthcare.gov was initially, it was a smoother ride than many state-run public health insurance exchanges. Facing mounting costs and uncertainty, state-run exchanges may become a rarity, if not in 2016, then the not-so-distant future.
In Nevada, the state switched from Nevada Health Link, one of the biggest state-run exchange failures in 2014, to Healthcare.gov for 2015 with an eye on resuming full state-run operations in 2016. However, after the state measured the cost of switching to a third exchange system in three years, muted interest from vendors and technology concerns, Nevada scrapped its vendor search and decided to stick with Healthcare.gov for the foreseeable future.
It won't be the only state facing such a decision. Oregon also will move to Healthcare.gov for 2015. Despite calls for elimination of the state-run Cover Oregon exchange, it has not been axed yet but an exchange that failed to enroll a single person online and resorted to paper applications seems unlikely to last much longer.
Where does this leave other state-run exchanges in 2015? Well-run exchanges such as California, Washington, Kentucky and Connecticut will not change. Among the other failed state-run exchanges, Maryland will use Connecticut's technology platform to operate. In Minnesota, MNSure has instituted a number of software fixes but concerns about 2015 have not abated.
Idaho is the only state that will switch from Healthcare.gov to a state-run system in 2015. In 2013, Idaho and New Mexico partnered with the federal government on exchange operations because both states started exchange planning too late to be ready for 2014 open enrollment. Not wanting to rush a state-run platform into service, New Mexico will continue its partnership for 2015.
Aside from the six states operating partnership exchanges, some of which plan to shift to state-run exchanges in 2016 or later, there's no incentive for states to run their own exchanges, even in the states where doing so is politically feasible.
If an exchange stumbled, the costs to repair operations are high and the risks remain with the state itself. Even Massachusetts, which was the model for healthcare reform, the move to an exchange that was compliant with the Affordable Care Act had dismal results and high costs. Massachusetts is seeking $80 million in federal funding to rebuild its exchange. Even if the exchange runs smoothly in 2015, the exchange will have cost $224 million. Not only that, all 400,000 people who navigated the labyrinthine site will have to reenroll for 2015.
While expansion of the state-run exchange model will be a challenge at best, regional exchanges could grow. With relatively small populations and the high costs of exchanges, the New England or Great Plains regions would be a logical place for states to partner on regional exchanges. All New England states except Maine have state-run or partnership exchanges. Iowa plans to move from a partnership to a state-run exchange for 2016, making it a possible anchor for the Plains states.
In the long-term, state-run exchanges must be sustainable without federal funding. The cost of running an exchange could lead all but a few to take a hard look at using Healthcare.gov. The dollars involved in building those state-run operations definitely won't lead any states with federally facilitated exchanges to clamor for more control.
Follow Bill Melville on Twitter @BillMelvilleDRG