It cost $183 million in federal grants to build Connect for Health Colorado’s website, which offers Coloradans health insurance plans and tax credits under the Affordable Care Act. To from that expensive online infrastructure now would be foolhardy.
But Sen. Jim Smallwood, R-Parker, is right that it’s also foolhardy to continue to throw “good money after bad.” His would save the state about $2.5 million in the first year, and about $5 million every year after, by doing away with Connect for Health Colorado and sending the state’s insurance buyers to the federal marketplace.
There’s a better way to achieve Smallwood’s goal of saving taxpayer dollars, however.
Instead of shutting down the nonprofit that runs Connect for Health Colorado, the state should shut down the tax credit program that is currently subsidizing the exchange with $5 million in taxpayer money every year. The nonprofit could continue to operate the exchange without the subsidy.
That subsidy is generated by donations from insurance companies to the exchange. An insurance company then gets all of the money it donated back through a tax credit that reduces state revenue. The entire tax credit program is capped at $5 million a year.
Connect for Health Colorado’s website went live in October 2013, and it has taken until this year for the nonprofit to begin to break even. CEO Kevin Patterson said the exchange will be cash positive in 2017. He said the nonprofit has budgeted for 36 months and is in good financial shape even without a fee on all Colorado insurance plans that had been charged in 2015 and 2016.
Yes, the exchange is expensive — it costs about $40 million a year to operate — but most of that is now generated by a 3.5 percent fee on carriers offering plans sold in the market, which is what is charged by the federal government’s exchange as well.
There is real value in having a state-based marketplace that makes it easy for Coloradans who can’t get insurance through an employer to compare plans and prices. That value remains even if Republicans do away with the Affordable Care Act at the federal level.
It is conceivable that Coloradans could still want a place to easily compare and contrast plans even if the requirement they have insurance and the federal subsidies for lower income buyers go away. Patterson likes to point to a 2008 commission on improving Colorado’s health care system that called for just such a marketplace.
We’ve not been shy about , which has suffered from mismanagement in its formative years and negative audits, including one last month suggesting it . It has also been expensive. In 2013, lawmakers approved spending $15 million in taxpayer dollars from the Unclaimed Property Tax fund to the exchange. (An earlier, and minuscule, tax on all insurance plans in the state meant to shore up Connect’s budget has expired.)
Smallwood says he fears a bigger bailout if we don’t scrap the plan now. But we’d argue a bailout of the nonprofit would require lawmaker approval, and Republicans in the Senate would be unlikely to approve that anytime soon.
No, let’s let Connect for Health Colorado remain.
But yes, let’s do away with its $5 million subsidy. The time for Colorado’s health exchange to be self-sufficient has long passed.
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