FRANKFORT (AP) — It will cost $236,000 to dismantle the state’s popular health insurance exchange, according to Kentucky’s newly elected Republican governor, who repudiated his Democratic predecessor’s estimate that it could cost as much as $23 million.
Republican Gov. Matt Bevin said the new cost estimates validate his decision to cut ties with a key part of President Barack Obama’s signature health care law, calling it unsustainable and an unnecessary drain on the state’s finances since the state could easily be using the federal system.
“It’s time to set the record straight on kynect,” Bevin said in a news release, adding that closing kynect will save taxpayers $20 million.
In a news release, former Democratic Gov. Steve Beshear said Bevin’s math “doesn’t add up.” He said Bevin’s claim that dismantling kynect will save taxpayers $20 million “is simply untrue.” The money for kynect comes from a 1 percent assessment on all private health insurance plans. The state has not used money from state income and sales taxes to pay for the system.
“Zero dollars have been taken from the Kentucky General Fund to pay for this exchange,” Beshear said. “There are no savings to use elsewhere.”
But when kynect is gone, state lawmakers could use the $27 million generated by the 1 percent assessment on private health insurance plans to pay for something else. That assessment existed before kynect. Beshear just redirected it to pay for the exchange.
The Bevin administration has said it will use the assessment to pay for dismantling kynect. After that, lawmakers can decide what to do with it. Democratic state Rep. Joni Jenkins, who supports kynect and leads the budget subcommittee overseeing kynect’s budget, said the money “can go to pay for something else.”
The federal Affordable Care Act requires everyone to have insurance. To help with that, the law required states to set up health insurance exchanges where low-income people could purchase private health plans with the help of federal subsidies. But a U.S. Supreme Court ruling said states could choose not to create an exchange. The federal government built a system to accommodate those states.
Beshear created the exchange via executive order, making Kentucky one of 13 states that operate their own health insurance exchanges. The federal government gave the state a $290 million grant to build the exchange, where nearly 100,000 people have purchased private plans. But Bevin said the system was too expensive to operate. He has pledged to eliminate it and transition the state to the federal system.
Before leaving office, Beshear’s administration warned it would cost at least $23 million to dismantle the technical infrastructure for kynect. But Wednesday, Health and Family Services Cabinet Secretary Vickie Yates Brown Glisson said it would cost $5.3 million.
Of that, $4.1 million would build a computer system so state and federal officials could share eligibility and enrollment information, Glisson said. The secretary told House budget writers Wednesday that she has “the understanding” that the federal government will pay for 90 percent of that cost, meaning Kentucky taxpayers will have to pay $413,000.
Glisson said it would cost $1.2 million to dismantle kynect’s technical infrastructure. But she said the state would save $1.3 million in maintenance and operations costs. Glisson said she also expects other savings from no longer having to run a call center and consumer outreach programs. Kynect has a $35 million budget this year, mostly paid for from the assessment on private health insurance plans.
“So in essence, for less than $250,000 to decommission kynect, the commonwealth will be able to save at least $20 million,” Glisson said.
Glisson said Kentucky would share the costs with the federal government for the new system, but noted the federal government would pay for most of it. The federal government would collect a 1.5 percent assessment on all plans sold on the exchange, while the state would place a 0.5 percent assessment on the plans to pay for administrative costs.
“Those insurance policies are going to cost more,” Jenkins said. “I think we’re going to lose people.”