Covered California May Merge with Bankrupt State Obamacare Exchanges

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AP/Paul Sakuma

With major insurers in some states proposing up to 51 percent Obamacare insurance premium increases, liberal Democrats are scrambling to avoid a political and financial disaster. One proposal is to merge California’s financially troubled “Covered California” exchange with the even more insolvent state exchanges, like “Cover Oregon,” which was forced to shut down last year.

Obamacare provided $4.8 billion in federal funding for 13 states to set up their own independent healthcare exchanges. But after just 17 months of operations, spending has frittered away that money and most exchanges are experiencing serious cash-flow problems. The Covered California exchange is already running an $80 million deficit as of April, and the Cover Oregon was shut down in April 2014 and opted to transition to the federal system after blowing through $248 million in federal cash.

Governor Jerry Brown has an opportunity to demonstrate his national stature by offering to lead the merger of the California and Oregon exchanges. Conceivably, he could then propose rolling-up other financially struggling exchanges, like New York and Connecticut exchanges, which are just beginning preliminary joint-venture talks.

Oregon tried to publicly berate Oracle Corporation, the lead website developer for “Cover Oregon,” for the failure of the state exchange due to technology problems allegedly outside of bureaucrats’ control.

But in a lawsuit filed against “Cover Oregon,” Oracle claimed they are still owed $23 million under their contract. According to the Los Angeles Times, the lawsuit noted that hundreds of thousands of Oregonians were enrolled in health insurance by back-office customer service representatives and health insurance agents using the software built by Oracle and a dozen other contractors. But state officials never terminated the temporary administrative workers and switched over so consumers could enroll on their own online.

Although Obamacare premium rates and operating costs seem completely out of control, The Hill reported that there would be merger efficiencies from consolidating call centers and using one standard website platform to keep expenses low. But after Delaware, Maryland and West Virginia commissioned a study on the merits of merging their exchanges in June 2013, the idea was dropped over problems of governance structure and which state’s staff would suffer terminations.

Oregon and Nevada have already shut down their exchanges, and Hawaii Health Connector, after blowing through $205 million in federal cash, is nearing a shutdown after the state legislature rejected an emergency $10 million funding request.

The costs for running Vermont’s Obamacare exchange for a population of only 626,562 is expected to rise to $200 million this year, while California, with 37 million residents, is running an $80 million deficit in just the first four months of the year. Both spectacularly overestimated expected enrollment and are trying to make major cutbacks for advertising, outreach budget and technology services. Neither has announced any public sector job cuts.

That “enrollment problem” may get much worse, given that some insurance companies in several states are asking for shockingly high premium rate increases. New Mexico’s market leader Health Care Service Corp. is asking for an average premium spike of 51.6 percent; Tennessee’s top insurer BlueCross BlueShield of Tennessee wants an average spike of 36.3%; Maryland’s market leader CareFirst BlueCross BlueShield is requesting an average spike of 30.4%; and Oregon’s top insurer, Moda Health, is seeking a 25% spike.



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