State healthcare exchanges show flaws of Obamacare

Obamacare‘s most loyal proponents are dropping like flies.

Of the 14 states and the District of Columbia that established their own health insurance exchanges, no less than seven remain completely broken or dysfunctional. One has already been taken over by the federal government.

The others may soon be.

Obamacare envisioned that states would share in the cost of the law by building and administering their own insurance exchanges — with a little federal seed money to get them started. Half a billion dollars later, the federal government is on the cusp of running exchanges in more than 40 states. Taxpayers will pay the price for these boondoggles for years to come.

Some of these exchange failures are so bad that they’ve spawned federal investigations. After flushing $248 million in federal grants down the drain, Oregon’s exchange — Cover Oregon, which was built primarily by Oracle — has yet to enroll a single person through its website. In early May, the FBI announced that state officials were being investigated for fraud. The federal Government Accountability Office has launched an investigation of its own in Oregon, too.

The GAO is also looking into how Hawaii spent $204 million in federal grant money to enroll just 8,000 people. CGI — the same company that led the glitch-plagued rollout of the federal exchange — was the chief contractor in Hawaii. The state spent $920 in “consumer assistance” for every person it enrolled, according to the Robert Wood Johnson Foundation.

On the other side of the country, the Inspector General of the federal Department of Health and Human Services is investigating the failure of Maryland’s exchange, built by Noridian Healthcare Solutions. State officials have already spent $118 million in federal funds on their bungled exchange.

The Old Line State has asked if it can repurpose the software used in Connecticut’s exchange to run its own. But if that doesn’t work, it’ll default to the federal portal.

The director of Minnesota’s exchange — built largely by Virginia-based Maximus — resigned after news surfaced that state officials had taken vacations and received bonuses, despite numerous technical glitches and significant delays at the exchange’s call center.

Massachusetts may need another $120 million to supplement the $170 million it’s already received to rescue its exchange, also initially built by CGI.

Just over 31,000 people have signed up for coverage. The Bay State is now trying to plug new software into its exchange — and preparing for the possibility that it will have to dump its enrollees into

State legislators in neighboring Vermont are calling for an investigation after evidence emerged that the contractor hired to build the state’s exchange — the notorious CGI — may have deceived public officials.

Overall costs in the District of Columbia are so out of control that the city is implementing a tax on insurers to pay for its exchange. D.C. has spent $645 for every enrollee.

All told, the federal government has spent over $1.2 billion to subsidize exchanges in 14 states and the District of Columbia. That’s almost double what was spent building, which serves 36 states.

Even the state exchanges that appear stable may eventually collapse. The Congressional Budget Office initially estimated that 40 percent of the exchange population would need to be between the ages of 18 and 34 in order to offset the cost of expanding coverage to older and sicker Americans.

Every state-based exchange save one failed to meet that enrollment target.

When Obamacare’s exchanges opened for business last fall, the federal government effectively ran the individual insurance markets in nearly three-quarters of the states. As the few states that opted to launch their own exchanges fail, an expensive federal takeover of health insurance is looking ever likelier.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

Scroll to Top