CMS plans to distribute $20 million in grants to state-based marketplaces that will finance technology upgrades to improve performance and the consumer experience.

The grants, part of the American Rescue Plan Act, are meant to assist SBMs in complying with federal marketplace requirements and in providing quicker insurance enrollment and eligibility determinations.

For states with currently approved SBMs, these grants will act as a form of federal maintenance funding, said Adam Block, a New York-based health economist and former CMS regulator.

Typically, states have to pay for pricey SBM infrastructure improvements or use money collected as user fees from health insurers selling policies on the marketplaces, he said. States will welcome the federal help, he said.

CMS will award up to 21 grants to SBMs that meet application requirements, including those that use the federal platform for consumer eligibility determinations and enrollment, rather than a state-run website.

Fifteen states have fully state-based health insurance exchanges, including Nevada, New Jersey and Pennsylvania, the most recent to leave the federal system and establish their own marketplaces. An additional six states run most of their exchange operations but use instead of their own enrollment platforms. Residents and insurance carriers in the remaining states rely on federal infrastructure and

SBMs enrolled 3.8 million customers during the most recent open enrollment period, compared to 8.3 million in states that use the federal marketplace, CMS data show.

Applications for the new grants are due July 20 and CMS will issue grants in early September, according to the agency. The grants’ will span from the date of the award through Sept. 9, 2022.

SBMs can also put the funding toward consumer notifications and education, stakeholder training, state and federal reporting, a call center, staff training, or other program policies or procedures to implement federal requirements, a CMS spokesperson said.

While SBMs are in a strong position with President Joe Biden’s administration in terms of insurer participation and outreach, there is still room for operational improvement, said Joel Ario, a managing director at Manatt Health in Albany, New York. Ario is a former federal exchange regulator and also served as insurance commissioner in Pennsylvania and Oregon.

“The new funding stream, roughly a million dollars per state, is very welcome money,” he said. “In a world in which technology is still changing at lightning speed, all exchanges can use more resources to continue to update their technologies.”

The funding ideally will improve the market environment for marketplaces and encourage more states to establish their own marketplaces, Ario said.

“States that take ownership over their own marketplaces can do a better job … with targeting outreach and enrollment, and also with adopting policy reforms that bolster and improve the marketplaces,” Ario said. “From a public policy perspective, both of those are easier to do with a state-based marketplace than under the federal marketplace.”

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