josh-schultz

The federal government became states’ technology vendor when it enticed four states to use HealthCare.gov by initially offering it for free, while underpricing HealthCare.gov compared to its actual costs for another 34 states.

Four states including Oregon and Nevada tried to stand up their own health insurance exchanges, hiring technology vendors that pushed for expensive custom builds with no proven track record for success. When those vendors failed to deliver functional exchange technology, the four states ditched their faulty software and began using HealthCare.gov – which at the time was offered to them free of charge. By offering HealthCare.gov to those states as a replacement technology solution, the federal government effectively became their technology vendor – enticing states to join with a two-year free trial period.

As the four states used HealthCare.gov at no cost, another 34 states paid federal technology use fees that were intentionally underpriced compared to HealthCare.gov’s actual costs. The federal government intends to continue underpricing HealthCare.gov in these 34 states through December 2017 – even though the Affordable Care Act required all exchanges to be self-sustaining by January 2015. As long as HealthCare.gov continues to be underpricing its services compared to their actual costs, states can’t benefit from private sector vendors who can compete favorably with HealthCare.gov to provide states better functionality and a pricing structure that encourages enrollment success. But this situation is changing in four states.

States faced with HealthCare.gov’s actual costs are given a fair opportunity to consider financially sustainable alternatives for their state marketplaces.

In November 2015, the federal government announced that HealthCare.gov intends to charge new federal technology use fees in Oregon, Nevada, New Mexico and Hawaii that are “reflective of [HealthCare.gov’s] actual costs.” Faced with the full costs of using the federal exchange, Oregon began a procurement for a more affordable state marketplace solution. Nevada is in the same situation and is considering a plan to replace HealthCare.gov with a proven technology vendor whose pricing structure is aligned with enrollments rather than health plan premiums.

Faced with HealthCare.gov’s actual costs, Oregon, Nevada and New Mexico reacted in similar ways by asking for a phase-in of the new federal technology fees and a fairer method for determining fees owed to allow for financial stability for the marketplace and carriers. Nevada asked that HealthCare.gov – because it is now collecting vendor fees – act more like a private technology company than a government agency. Nevada rightly expects HealthCare.gov to partner with states to ensure marketplaces have accurate and up-to-date enrollment information, and that it serve as a single source of truth for all of the marketplace’s health plan enrollments.


Everybody wins when HealthCare.gov is priced for all states at its full and accurate cost.

While the four states facing HealthCare.gov’s actual costs prepare to pay the new technology fees or avoid them by switching vendors, the outcome for the remaining 34 HealthCare.gov states is less certain. HealthCare.gov continues underpricing its technology fees in those states, and they can’t be certain how long this will continue under the next administration. Taking action now will allow all states to ensure their citizens can access affordable health coverage for years to come. Because HealthCare.gov must obtain permission from the White House’s budget office each year it wants to continue underpricing for its services in those 34 states, a new administration may be less amenable to continuing the budget shortfalls associated with HealthCare.gov – which amount to $621 million in 2016 alone.

The state exchange market has matured since those technology vendors failed to deliver functional and sustainable technology in Oregon, Nevada, New Mexico and Hawaii. Private sector alternatives to HealthCare.gov are available and can be a significant cost benefit to states. Moreover, these private vendors can work with a state to configure the exchange in ways that increase enrollments by recognizing that states each have unique needs and programs.

Now that Commercial-off-the-Shelf (COTS) products support the exchanges that are operating smoothly and effectively in states including Massachusetts and Arkansas, states should be allowed to benefit from private sector vendors such as hCentive competing with HealthCare.gov on a level playing field – in every state. Tell us what you think.

Read hCentive’s comments on the federal government’s plans to continue undercharging for HealthCare.gov in 34 states.

Leave a Reply

You must be logged in to post a comment.