- Associated Press - Thursday, May 22, 2014

PROVIDENCE, R.I. (AP) - The head of Rhode Island’s health insurance marketplace said Thursday the state needs to come up with an unexpected $4.6 million for the coming fiscal year, a change from the governor’s proposed budget, which included no state money.

Director Christine Ferguson said HealthSource RI has gotten permission to use tens of millions of dollars in federal funding beyond the original deadline of year’s end, but recently learned doing so will require ponying up $4.6 million.

Ferguson said the General Assembly could appropriate the money or it could be raised through fees of various types.

Gov. Lincoln Chafee’s budget blueprint for the fiscal year that starts in July includes $23.4 million for the so-called exchange, all federal money.

Ferguson said HealthSource’s new anticipated 2015 budget is about $55 million, including the requested state funds and additional new federal grants.

Lawmakers did not expect to make an appropriation for fiscal 2015. The House Finance Committee, which writes the budget, was told by fiscal staff this week that the state is facing a projected budget hole of some $67 million.

“I am aware that HealthSource has been working with the federal government to get additional support and the director recently conveyed this estimated figure to me,” committee Chairman Raymond Gallison, D-Bristol, said in a statement. “The viability, functionality and long-term sustainability of the state’s exchange remains under careful review by the House Finance Committee.”

Concerned about cost, some in the General Assembly have suggested turning HealthSource RI, considered a model among state-based marketplaces, back to the federal government, which operates healthcare.gov. But at a briefing for reporters Thursday, Ferguson said that would be a mistake.

She said she did not know if Rhode Island would be assessed a penalty for pulling the plug on the exchange. But the federal government would get an estimated 1.9 percent fee on premiums from individuals and small employers whose insurers offer coverage on healthcare.gov, she said. The fee would be assessed on all those using that carrier, even if they bought a policy outside of the federal marketplace.

Ferguson estimated the fees would amount to about $17.3 million overall. She said the state likely could operate the marketplace at that spending level, which is less than earlier estimates.

The state-run marketplaces are supposed to be self-sustaining beginning next year, though Rhode Island has gotten more time. While some states have come up with a funding source, Rhode Island hasn’t decided on one.

She said federal officials are aware of the state-level discussion about handing the marketplace back, and described them as displeased.

“They view us as one of the best success stories,” she said. “They want to see how it turns out. They are not happy about the idea of making investments and us turning around and saying, ‘Sorry, we didn’t mean it.’”

She said HealthSource RI has helped increase competition and choice and is already having a “profound” effect on health care, with at least a few plans expected to cost less next year.

“The issue is: Do we want to have control over our insurance markets?” she said.

About 29,000 signed up for individual coverage through HealthSource during the first open enrollment, which ended March 31. That’s much higher than the unofficial federal target.

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