KY Policy Blog

Unanswered Questions about the Cost and Feasibility of Shutting Down Kynect

By Jason Bailey
February 23, 2016

The governor has notified the federal government that he intends to shut down Kynect and shift Kentucky to the federal health insurance exchange for the next open enrollment period that starts this November. In addition to potential harm to Kentuckians, including higher premiums and fewer people covered, big questions persist about the cost and feasibility of making this transition.

Kynect is widely viewed as a national model for its effectiveness in getting people signed up for the health insurance they are eligible to receive. And it’s shown in the results — Kentucky led the nation in its increase in health coverage in 2014. That’s because Kentucky built a simple and user-friendly system and created an in-state call center, carefully tailored marketing efforts and a network of community-based outreach partners.

State officials say the cost for an information technology (IT) vendor to shut down Kynect will be less than the original quote of $23 million reported by the Kynect executive director in August. Although the administration has not said how much it will cost, they say that Deloitte, the IT vendor, has lowered the estimate based on its experience doing transitions in other states.

But there will still be substantial IT costs and those costs aren’t the only ones Kentucky will incur in making this transition. The state will have to return much of $57.5 million in grant funds already awarded because it is shutting Kynect down. Kentucky will also face ongoing operational costs including the cost of shuttling applications between Medicaid and the federal exchange, implementing and staffing the new intake and processing system for Medicaid (which the state says will be through a new program called Benefind), and conducting outreach and marketing to make sure people know what they are eligible to receive and how to enroll.

Also, it’s unclear what share of the costs of shutting down Kynect would be picked up by the federal government. While 90 percent of the IT costs of transitioning some state exchanges to the federal exchange have been paid by the federal government in the past, the situation in those states was much different than Kentucky’s. In those states, the transition was necessary, because the state exchanges had failed. In Kentucky’s case, the state is abandoning a highly successful exchange that is now well-integrated with Medicaid for an inferior approach.

In fact, federal law says that to be eligible for a 90 percent match the federal government must “determine the system is likely to provide more efficient, economical, and effective administration” of the state plan to provide coverage. Given the many problems states have faced and still face in coordinating Medicaid and exchange coverage, breaking up Kynect would not provide more efficient and economical administration of Kentucky’s Medicaid program.

The answer of what costs the federal government will pick up may not be known in time for the legislature to take into account when enacting the budget, because the state must submit a plan to the federal government first.

In addition to uncertainty about costs, there are serious questions about the feasibility of pulling the transition off in time for the 2017 coverage year. To make the transition, the state must be ready for insurers to submit applications to participate in the federal exchange by April 11, and it must be ready to user test its new system by fall at the latest.

Making a quick transition will require resources and a high degree of technical skill and competency. And there’s the potential for big new snags for consumers, including long wait times, lost applications and other challenges. New Health and Family Services Secretary Glisson opened the door to the possibility it will take more than one year to make the transition in testimony to the Senate Appropriations and Revenue Committee last week.

Now that the budget is in the General Assembly, legislators should ask hard questions about the costs and impact of breaking up Kynect. Lawmakers need more information so that they can make sound and prudent decisions about how Kentucky can best sustain our nation-leading health coverage gains and avoid unnecessary new costs and problems that could result from abandoning a system that has worked so well.

One Response to “Unanswered Questions about the Cost and Feasibility of Shutting Down Kynect”

  1. K says:

    The Bevinator does not care about feasibility only doctrine and unilateral actions that he decides.