Can Washington's Exchange use federal grants going forward?

According to the Seattle Times, the Washington Health Benefit Exchange (HBE) may have more financial troubles than we already knew about:

Financial challenges are threatening the survival of Washington’s Healthplanfinder insurance exchange.

First, the marketplace is facing a state budget proposal that would provide roughly two-thirds of the money that exchange officials say they need.

Then this week, U.S. officials warned that exchange spending plans include what could be the illegal use of federal grant dollars.

Worth reading the whole thing. I've written previously about the HBE budget and enrollment.

Here is the U.S. Department of Health and Human Services inspector general's memo that the article references. It notes that some state exchanges "might have used, and might continue to use, establishment grant funds for operating expenses after January 1, 2015, contrary to law."

CMS has provided guidance stating that after January 1, 2015, these Federal funds may not be used to cover maintenance and operating costs, which include rent, software maintenance, telecommunications, utilities, and base operational personnel and contractors.

CMS allows establishment grant funds to be used for activities that do not relate to the operational costs of the marketplaces after January 1, 2015.

The only states mentioned by name in the memo are Rhode Island and Washington. The memo ultimately encourages the Centers for Medicare and Medicaid Services (CMS) to develop and publish "clear guidance" on the difference between "operational costs" and "design, development and implementation costs."

Both the Senate- and House-passed 2015-17 operating budget proposals assume that the HBE can make use of $11.9 million of federal funds, described as follows:

The federal government has allowed the Exchange to use a portion of the grant dollars that expired at the end of 2014 to support operational and design, development, and implementation activities in 2016.

The inspector general's memo suggests that that assumption may not pan out; but, from the Seattle Times article:

Michael Marchand, spokesman for Healthplanfinder, said CMS approved the grant and the exchange can use the money as planned.

“It doesn’t change anything. CMS believes the expenditures are allowable and appropriate,” Marchand said. The exchange, he said, is stuck in a disagreement between the federal offices. “We’re the monkey in the middle.”

No matter how this disagreement shakes out, it's unclear how the HBE will make ends meet.

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