Independent IT consultants in Ohio were tasked with calculating the cost of an insurance exchange in the state earlier this year. The state is required by federal law to establish an exchange by 2014 in an effort to streamline health insurance. The undertaking is in no way small, as a great deal of digital infrastructure must first be made, the price of which may be daunting. According to the state’s consultants, the technology alone will cost $63 million.
The sum is quite high when compounded by the additional expensive associated with the exchange, such as staffing and the drafting of new regulations. While the ultimate total is yet unknown, it is unlikely that Ohio, as well as other states, will be able to afford an exchange without government support. Fortunately, the federal government has been issuing grants to help states shoulder the financial burden. The down side to this, however, is that the grants do not cover the cost for the exchanges. So, Ohio is now faced with two options: Pay for the exchange in full, or partner with the federal government and have the price of the exchange cut by 30%.
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Accounting firm KPMG LLP released a report this week directed at the Ohio Department of Insurance warning legislators about the possible problems in partnering with the federal government. The report notes that while the price tag for the exchange will be reduced by 30%, the exchange itself will only have 12% of the functionality it would have if the state took charge of the bill. This could translate into higher costs in the future as the exchange would no longer be flexible as it would be subject to the sweeping, general rule of the federal government.
How legislators will respond to the predicament is yet to be seen.