Republican senator suggests expanding Kynect to other states to help pay state's coming share of Medicaid expansion

"I've been encouraged that there has been bipartisan approval of all this so far," Alvarado said. "I haven't had anyone say, that is a bad idea." He said Beshear Chief of Staff Larry Bond had called it a "novel idea."
Banahan said of the idea, "It took lots of planning and discussion for us to create this state-based exchange and to determine whether we should embark on creating a regional exchange is not as simple as it seems. It is not something we could move on quickly." There are no regional exchanges, but the law provides for them.

Rep. David Watkins, D-Henderson, said, "I think that his proposition surely should be looked at, but I think it would be looked at much more favorably in the context of our new governor intending to keep Kynect, rather than dismantling it."

Under the Patient Protection and Affordable Care Act, states were given the choice of joining the federal exchange, creating a state-based exchange or using hybrid options to create an online marketplace to shop for health insurance.

Kentucky chose to create its own exchange on the advice of hospitals, insurance companies and other business interests, Banahan told the panel. "Kynect is an exchange built by Kentuckians, for Kentuckians," she said in a telephone interview. "Kynect was developed with a wide range of stakeholders. Early on we engaged advocates, insurers, agents, health care providers and businesses, and with their input, tailored our exchange to meet their needs."
Banahan's presentation described the federal exchange as generic and inflexible, and Kynect as tailored and flexible. "With a federal exchange, it's a one size fits all approach with no flexibility," she said.

"As a federal exchange, Kentucky would lose its authority and control to make decisions that impact Kentuckians. . . . Once you lose your authority and control you lose the ability to be informed about what is going on. We would also no longer be unable to intervene or assist individuals and insurers with enrollment problems or issues."

Banahan also noted that funding for kynectors, people who help individuals learn about their health-insurance options, would be reduced by 75 percent if Kentucky moved to the federal exchange. Kynectors held more than 3,000 enrollment, education and outreach events in 2014, she said.

"We don't believe they would provide the statewide services that we have today," Banahan said. With the state based exchange, "We have kynectors in all 120 counties."

Banahan said both agents and insurers are happy with Kynect, and the unique "dashboard" that it offers agents has helped them grow their business by 30 percent -- and the eight insurers that have signed up with Kynect in 2016 have said they probably would not follow Kentucky to the federal exchange. (Corrected Oct. 16, 2015)

Show us the money

Federal money helped start Kynect, but the exchange was set up to be self-sustaining, and is now funded entirely through a 1 percent assessment on insurance policies that the companies pass on to customers. The federal exchange charges a 3.5 percent assessment.

Kynect's budget for the current fiscal year is $26.9 million, according to the presentation.

Banahan said no state has dismantled a "working and successful" exchange, but four failed ones were decommissioned at costs ranging from $5 million to $22 million.

While the total cost of dismantling Kynect is unknown, vendors have projected that it will cost $23 million for IT work alone, Banahan said. "Once we started to decommission Kynect, we believe that cost would be significantly higher."

Alvarado said he was disappointed that Banahan's presentation didn't include information about what it would cost Kentucky annually to participate in the federal exchange, because he had requested that information when he called the meeting.

"For the second time, they could not provide me an answer to that," he said, referring to the Joint Health and Welfare Committee meeting in July, when he said he had pushed Beth Jurek, executive director of the Cabinet for Health and Family Services' budget and policy office, for the same information.

Asked if she had this information, Banahan said, "The governor made an early decision to establish the state exchange; therefore, we did not develop any cost for the federal exchange." She added later, "We never contemplated that we would be part of the federal exchange so we never developed any type of cost, so those numbers aren't available."

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