In Obamacare health coverage, could — and should — Michigan go it alone?

• Michiganders who need health insurance can turn to the online federal marketplace to buy individual coverage
• More than 400,000 Michiganders are covered that way
• A proposed law would wrest control from Washington, enabling the state to set up its own exchange

Hundreds of thousands of Michiganders could see savings in their health care coverage — at least according to supporters of a bill recently approved in the state Senate that would wrest control of the individual insurance marketplace from the federal government.

The Michigan Health Insurance Exchange Act is a thickly bureaucratic piece of legislation, but the lead Democratic sponsor says it could save the state millions of dollars over time by moving control of exchange operations and outreach to Lansing.

To understand the idea of a state-run exchange — as well as the concerns some Republican lawmakers have over its potential cost — is to first understand its ties to the 2010 Affordable Care Act, or Obamacare.

What exactly is this thing?

First, a paragraph or two of history. (Stick with us; this background is important.)

The Affordable Care Act, or Obamacare, created the “individual marketplace,” a one-stop shop for people to buy insurance if they weren’t receiving workplace coverage or Medicare or Medicaid.

The idea — back in 2010 — was to make insurance more affordable and more comprehensive for everybody. Plans on this online marketplace had to comply with Obamacare requirements, such as offering free wellness exams each year and screenings like mammograms and colonoscopies. Children can stay on their parents’ insurance until they’re 26 years old.

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Most of those who purchase insurance there can get tax credits that reduce their premiums. The size of the premiums depends on household income.

Many states, including Michigan, didn’t want to create their own marketplaces at the time, and they opted to use a federally operated marketplace instead. 

(Still with us?)

That federal site, healthcare.gov, opened for business in 2013. This year, more than 410,000 Michiganders purchased their insurance here.

In return for running the marketplace, the U.S. Department of Health and Human Services tacks a 2.75% fee on premiums to cover costs of operating the technology and for outreach.

And the possible change?

With the Michigan Health Insurance Exchange Act, Michigan would operate its own marketplace.

Moving that sizable slice of the insurance market from Washington to Lansing would allow Lansing to collect those fees and use a “targeted approach instead of a one-size-fits-all approach” by Washington, state Sen. Kevin Hertel, D-St. Clair Shores, sponsor of the legislation, told Bridge Michigan.

For example, Michigan-specific campaigns could target low-income communities in which large numbers of residents lost Medicaid coverage over the past year as the state reassessed eligibility for them. 

Those newly uninsured could buy low-cost plans on the marketplace, but might not know about them, Hertel told Bridge.

That, in turn, would expand the insurance pool, reducing insurance costs for everyone, he said.

Other states that have set up state exchanges have seen increased enrollment, Hertel told fellow lawmakers during hearings in November and April.

In January, Pennsylvania reported adding more than 150,000 people to its marketplace in the four years since taking over its operations, although those numbers also happened as — nationally — the rates of insured people rose to unprecedented levels, driven at least in part by increased federal premium subsidies through the 2022 Inflation Reduction Act and the post-pandemic purge of Americans from Medicaid programs.

Sounds good, but … ?

Right. As Hamlet mused: Aye, there’s the rub.

How much an exchange would save taxpayers and — more immediately important — how much it would cost taxpayers to set up is unclear.

“The exact costs of running a program would be significant but highly dependent on the details of the program,” according to a Senate fiscal analysis.

Federal funds would continue to pay for some of the costs, but the state’s cost likely would range from $30 million to $40 million per year for the first few years, analysts wrote.

Those costs would be covered — at least in part — by the user fees that would be diverted from Washington to Lansing.

But that specter of an unknown “significant appropriation,” as fiscal analysts wrote, worried Republican lawmakers in March, when the Senate’s health policy committee, chaired by Hertel, passed the bill to the larger Senate, which approved the legislation along party lines on Friday, with all Republicans voting no.

Four Republicans voted against the bill while it was in committee, after questions about its cost. 

In both hearings, Sen. Mark Huizenga, R-Walker, questioned what he called “nebulous” costs, savings and implementation details.

“So far, the calculus seems very simplistic versus a detailed plan,” he said, continuing a short time later: “I'm just skeptical of the process and what the net savings would actually be for our state.”

What happens now?

The bill now moves to the House, which has referred it to its Insurance and Financial Services committee.

The legislation would create a 12-member board and require it to establish a nonprofit corporation to provide the exchange. 

Members would represent the state health and insurance departments, as well as insurers, consumers, and experts in health benefits and policy.