By Deena Winter | Nebraska Watchdog
Updated Friday 10 a.m.
LINCOLN – An Omaha senator and Obamacare supporter says part of the reason Nebraskans’ premiums will go up more than other Americans’ who buy their own insurance is the governor’s refusal to expand Medicaid and have the state run its health-care exchange.
Last week, the Obama administration released data on the average premiums in states where the Obamacare marketplaces will be overseen partially or completely by the feds. That data showed Nebraskans who buy their own insurance will see some of the biggest premium increases in the nation, sometimes tripling for young people.
Sen. Jeremy Nordquist laid some of the blame at the feet of the governor, saying a state-run exchange would have allowed the state to push for more competition in the marketplace.
Citing Nebraska Watchdog’s story last week on steep premium hikes Nebraskans will see under this phase of Obamacare, Gov. Dave Heineman said Tuesday on KFAB he’s “very, very concerned” about the situation.
“It’s just ridiculous,” Heineman said. “This Obamacare isn’t ready for prime time.”
The governor opted to let the feds run the health-care exchange in Nebraska because it would cost considerably less than a state-run exchange. Heineman strenuously opposes Obamacare, but, under the law, Nebraska has to participate in the exchanges, where people can shop for insurance online.
Heineman said consultants estimated that running a state exchange through 2020 would cost $646 million, or $81 million per year, while letting the feds handle it would cost $176 million over the first eight years. Those costs are for things such as website development, call center operation, staffing, equipment and offices.
On KFAB, the governor said it would cost more for the state to run the exchange because “there are economies of scale” with the feds handling it for many states. He said the feds would dictate how the exchange would be run anyway.
“It costs more, they’re totally in control — didn’t make sense to have a state exchange,” Heineman said. “Anybody who wants to blame the cost of what is going on with Obamacare on that decision is just engaged in propaganda.”
State Insurance Commissioner Bruce Ramge also disagreed that Nebraska’s decision to go with a federal exchange contributed to high premiums. The amount of competition among insurers is a major factor, and even if the state were running its own exchange it would still only have four insurance companies offering coverage on it. State insurance officials tried recruiting companies, but there was little interest, with no insurers willing to commit to participating in a state exchange one year ago.
Nordquist accused the Heineman administration of inflating the cost to do a state exchange. According to data compiled by the Citizens’ Council for Health Freedom, other states will pay considerably less than the $81 million annually Nebraska projected: Colorado projects $25 million, Connecticut $30 million, Idaho $10 million, Minnesota $54 million, Nevada $15-19 million and Oregon $34 million.
“I cannot think of any logical reason why it would cost $81 million per year to run such an exchange,” Nordquist said. “Clearly, there was fuzzy and intentionally misleading math taking place inside the Department of Insurance and the Department of Health and Human Services when the states of Colorado, Iowa, Kansas and South Dakota could, combined, run their own state exchanges for almost 20 percent less than the estimates out of the Heineman administration.”
Nordquist said either the Heineman administration was intentionally trying to deceive the public to score political points against Obamacare, or “we have much deeper problems of mismanagement inside these departments.”
“It might be time to look for new staff from our neighboring states,” Nordquist said.
State insurance department officials said the same four companies were competing for the contracts to build the exchanges in states. Several consultants helped come up with cost estimates for a state-run exchange, with a request for proposals on the cost to run call centers and information technology, Ramge said. He believes Nebraska’s cost estimates included the cost to determine Medicaid eligibility, while other states separated that.
Nordquist said once those high cost estimates for a state exchange were “thrown around without any detailed itemization,” the debate was over. But he’s convinced the state could have operated a marketplace for much less— surely less than the 3.5 percent tax the feds have imposed on states with a federal exchange.
He also believes expanding Medicaid would have helped keep Nebraska’s rates down, citing a study by the independent, nonprofit RAND Corp. that said premiums for people who buy their own insurance would increase 8 percent to 10 percent in states that don’t expand Medicaid.
The study said that’s because rather than getting on Medicaid, people just above the poverty line will get insurance through the exchanges, and since low-income people generally aren’t as healthy as higher-income people, they will drive up premiums.
Ramge said he’s heard of the RAND study.
“Maybe there is an impact,” he said. “That seems high. Until it actually happens… I think it’s speculative.”
It’s not too late to turn back, Nordquist said: States can move to a state exchange any time, but they can only get startup grants through 2015. But Heineman is highly unlikely to change his position on either issue; he’s long said expanding Medicaid would require the state to slash funding for education and increase taxes.
“We don’t need to have a Medicaid expansion that we can’t afford,” he reiterated during a news conference Wednesday. “It’s not the time to expand when we can’t even get the current system right.”
Others have said another contributor to the big rate hikes is Nebraska has low insurance rates and a lightly regulated insurance marketplace where companies can sell bare-boned plans, whereas some East Coast states already mandate more comprehensive, Obamacare-esque coverage.
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