The Conversation

The Cost of Obamacare State Exchanges

Reason magazine highlights a recent analysis of the cost of setting up and maintaining the Obamacare insurance exchange in California by health consultant Robert Laszewski:

The California exchange, "Covered California," has so far awarded a $183 million contract to Accenture to build the website, enrollment, and eligibility system and another $174 million to operate the exchange for four years.

There's also a $250 million ad budget (over two years) which includes lots of targeted ethnic appeals and celebrity outreach efforts. Adding all of this together, federal grants to California to create, maintain and market Obamacare now total $910 billion. So how does this compare to similar private industry efforts?

For some additional perspective I took a look at what it cost to launch the private insurance marketing site, Esurance. That company sells not only health insurance but also things like homeowners and auto insurance across the country. When I put my zip code into their system along with my age, they offered me 87 different health plans from all the big players in my area. Now granted, the new health insurance exchanges are more complex because they have to interface with Medicaid and the IRS as well as calculate subsidies. But the order of magnitude difference in what it cost to launch esurance compared to the California exchange is pretty big.

Privately funded Esurance began its multi-product national web business in 1998 with an initial $5.5 million round of venture fund investment in 1999 and a second round of $34 million a few months later.

So $40 million for private industry to set up a nationwide car insurance exchange that now also offers home, life, renters and health insurance vs. $910 million for the Obamacare exchange in California alone.


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