NCPA - National Center for Policy Analysis

ObamaCare's Failed State Exchanges

March 7, 2014

Federal grants to develop state health exchanges cost more than $1.2 billion, says Peter Suderman, senior editor at Reason Magazine.

$677 million was spent to develop the problem-ridden, but almost twice that was sent to the states in the form of grants to develop their own exchanges. The District of Columbia and 14 states developed their own exchanges, and seven of them are still not performing even close to adequately.

  • Oregon's exchange was the most disastrous of the state exchanges. With a total of $303 million in federal grants (the government thought that Oregon's exchange would be a model for all other states), the launch was delayed first for weeks, and then for months. Reports surfaced that independent consultants warned that the site was unworkable before launch, but the Oregon Health Authority actually withheld their payment in order to keep them quiet. Lawmakers have called for a federal investigation.
  • Maryland received $157.2 million in federal dollars for a site that failed almost simultaneously with its launch. The state terminated its $193 million contract with its IT contractor in February, and the problems are so bad that state officials have announced that they may scrap the site entirely.
  • Massachusetts made the mistake of hiring the same contractor that built the federal exchange, CGI, and the exchange suffered problems from the beginning. Only 5,428 people signed up for coverage during the first three months -- that's less than 1 percent of the state's goal for the first year. All of this after receiving $135.6 million in federal dollars.
  • Vermont's $165.2 million in grants could not keep their exchange site -- also built by CGI -- from failing on its very first day. There are still functions that are not working, including insurance options for small businesses. Newsweek reported this month that CGI actually created a dummy demo site in order to pass inspection. Again, lawmakers have called for an investigation.
  • Minnesota's exchange director resigned in mid-December after taking a tropical vacation amidst site problems and 14 exchange officials were given bonuses even before the launch. Promises that fixes would be in place by 2014 did not hold true, and an outside group has said that problems will not be fixed by the end of open enrollment March 31. In all, the state received $153.7 million in federal dollars.
  • Nevada enrolled only 16,000 out of the 118,000 that the state had expected to enroll during the open enrollment period, with one exchange board member describing the site's failure as "catastrophic." The state received $83.7 million, and officials have now revised their expected enrollee projection down to 50,000.
  • Hawaii's $205 million in federal grants did not seem to go very far. The exchange was taken down for two weeks immediately after launch and enrollment has been very low. Only 4,300 people have signed up, the lowest number in all the states.

Source: Peter Suderman, "ObamaCare's Failed State Exchanges," Reason Magazine, February 27, 2014.


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