States with faulty Obamacare websites consider joining federal government's HealthCare.gov

By Caroline Humer

(Reuters) - A few U.S. states whose newly created Obamacare insurance exchanges were stalled by technology failures may join the federal government's HealthCare.gov marketplace for next year, while only two states that relied on the administration plan to go it alone.

Exchange officials in Oregon, Maryland and Massachusetts are weighing whether to enlist new private technology contractors or to turn to the federal government after faulty exchanges slowed enrollment in their states to the lowest rates in the country.

The reshuffle would mean the federal government would continue to remain responsible for enrolling millions of people in coverage under President Barack Obama's healthcare law in most of the country next year, a far cry from its goal of independent marketplaces in all 50 states.

Of the 36 states that signed up residents via HealthCare.gov for 2014, Idaho and New Mexico say they will run their own online enrollment for 2015, according to spokespeople in those states. Enrollment for next year begins in November.

Political opposition to the law in many states prevented the creation of more state-based exchanges and has continued to threaten the program. Republicans have sought to defund it, even shutting down the government last year in an attempt to do so.

"I don't have any indication that the feds are pushing back, except I know that it has to be in their interest to have the states running as many state marketplaces as possible," said Linda Blumberg, a health economist at the Urban Institute.

Blumberg drew a distinction between states like Idaho, which relied on the federal government solely for its technology platform but oversaw bigger aspects of its marketplace, including enrollment outreach and regulation of the insurance plans sold in the state. Other states using HealthCare.gov have left oversight of virtually their entire marketplace to the Department of Health and Human Services.

"I think they'd be very happy if Illinois became a state-based marketplace, but I don't think it has to do necessarily with the IT system," she said, referring to a state that has relied on the federal government for more than technology.

The Center for Medicare and Medicaid Services, the U.S. government agency responsible for overseeing the exchanges, did not have an immediate comment on the possible moves.

"CMS is committed to providing technical assistance and feedback to state-based marketplaces," CMS spokesman Aaron Albright said. "We are working closely with states to support their efforts to successfully implement their marketplace."

EXCHANGE IN A BOX

State-run exchanges have a few options to consider for fixing their problems before turning to the federal government.

Connecticut, a state whose exchange worked mostly smoothly in the first year of Obamacare enrollment, has had discussions with five states about selling its technology as an "exchange in a box," the head of its exchange said. It could handle an entire exchange, or just do the back-office work of calculating government subsidies for individual Obamacare plans and sending transaction forms to insurers.

"States pretty much have to make a decision now," Kevin Counihan, Access Health CT chief executive officer, said earlier this month.

Beyond 2015, the picture starts to blur. Arkansas and Illinois are considering building their own exchanges but have no definite plans for 2016.

"It is somewhat unclear whether more states will move in the direction of running their own marketplaces," said Jennifer Tolbert, director of state health reform at the Kaiser Family Foundation. "We may need a little more time for things to settle out."

States that are already using HealthCare.gov, which started off severely hobbled by technology problems, have a reason to stay now that it is working well enough, she said. As many as 6 million people are expected to sign up by the time 2014 enrollment ends on March 31, with the number surging to 22 million by 2016.

States that run their own marketplaces receive hundreds of millions of dollars in startup money from the federal government to build the exchanges, but after that they bear the financial responsibility and must prove they can operate at a self-sustaining level within a short time.

Idaho and New Mexico had always intended to run their own exchanges but were caught short in planning and last spring said the federal government would sell their plans on HealthCare.gov. Both states have contracted with small, privately held Silicon Valley technology firm GetInsured to build their individual state marketplaces in time for 2015. The company also runs an online health insurance marketplace, Getinsured.com.

In Hawaii, a state whose exchange technology did not work for many months, keeping enrollment to a trickle, officials said the state would stay the course as a stand-alone exchange.

Hawaii is not considering the Connecticut offering or moving to the federal marketplace, since its exchange has been constructed to meet the requirements of its state health laws, spokesman Bobby Lambrix said in a statement.

If Oregon, Massachusetts or Maryland decide on a federal option, it is likely to be just technology and not a wholesale shift, said Chad Shearer, deputy director of the Robert Wood Johnson Foundations' state health reform assistance network.

"It's almost as hard to go the federally facilitated marketplace as it is to fix what they've got," he said. "I think states are interested in using pieces of the (federal) technology."

(Reporting by Caroline Humer; Additional reporting by Sharon Begley; Editing by Michele Gershberg and Douglas Royalty)