Feds Spent $4.8 Billion on Obamacare Exchanges So Far

Law provided ‘indefinite’ funding

June 25, 2014

The federal government has spent nearly $5 billion to establish federal and state exchanges for Obamacare, according to a report by the Congressional Research Service (CRS).

The funding was provided by a section of the Affordable Care Act that allowed for "indefinite" funding at the discretion of the Secretary of Health and Human Services (HHS).

"The Centers for Medicare & Medicaid Services (CMS) is incurring significant administrative costs to support [federally-facilitated exchanges] FFE operations," the report, which was released earlier this month, said.

According to CMS, the government spent $456 million to support "exchange operations" between fiscal years 2010 and 2012, before the law went into effect. In 2013 the government spent $1.545 billion for administrative costs associated with the exchanges, and expects to spend an additional $1.390 million this year. The agency has requested another $1.788 billion for 2015.

The law enabled HHS to distribute multiple grants to states to plan and establish exchanges. Initial planning grants were valued at $1 million, though multiple rounds of "exchange establishment grants" cost much more, totaling $4.6 billion.

Every state and D.C. received planning grants except Alaska, which did not apply.

The government also provided $249 million for "early innovator" grants for states creating their own exchanges. The grants were designed to help create the IT infrastructure of their exchanges that would then be used as models for other states.

Oregon was one of only eight states deemed an "early innovator," and received $59.9 million, the highest amount awarded. The state received $305 million in federal funding overall, for its failed exchange. The state decided to nix Cover Oregon earlier this year, and will join the federal exchange.

The states that received the most federal funding were California ($1.066 billion), New York ($511 million), Oregon ($305 million), Washington ($266 million), Kentucky ($254 million), and Hawaii ($205 million).

A handful of states only received the $1 million for initial planning grants, including: Texas, Oklahoma, Kansas, Wyoming, Montana, North Dakota, Wisconsin, Ohio, Georgia, and South Carolina. All except Montana have Republican governors.

Alaska never accepted any federal funding, and Florida and Louisiana returned all funds they received from the federal government.

"To date, HHS has awarded a total of more than $4.8 billion to states and D.C. in planning, establishment, and early innovator grants," the report said. Ultimately only 14 states and D.C. set up their own exchanges, while 36 states joined

The funding was provided by Section 1311 of the ACA, which "appropriated indefinite (i.e., unspecified) amounts for planning and establishment grants for health insurance exchanges."

In addition to establishing the federal marketplace and state exchanges, the government spent roughly $700 million on marketing that went towards creating doge memes, cat GIFs, and cartoon ads to promote enrollment.

Every exchange is expected to be self-sustaining by next year, and the government is planning to fund the exchanges through user fees paid by insurance companies, which were first collected this year.

"HHS has described how it intends to generate funding for the 36 FFEs it administers," the report said.  "Beginning in 2014, HHS will charge a monthly user fee to all issuers that sell plans through an FFE. The fee for an issuer is equal to the product of the billable members enrolled in the plan through an FFE and a monthly user fee rate. For benefit years 2014 and 2015, the monthly user fee rate is 3.5 percent of the plan’s monthly premium."

President Barack Obama’s budget for FY 2015 calls for $1.8 billion to operate the health care exchanges, $1.159 billion of which is planned to be paid for through user fees.

However, the report noted that CMS is only expected to collect approximately $200 million in user fees this year.

"The FY2015 budget does not identify any other sources of funding to support exchange operations," the report said.