This June, the Supreme Court will decide whether health insurance subsidies issued under the Affordable Care Act shall only be distributed to state exchanges. In the meantime, there is mounting political pressure for federal exchange states like North Carolina to make the switch to a state-run exchange so individual marketplace customers will not lose their taxpayer funded health plans.

Yet transitioning to a state exchange will not only further endorse Obamacare, but could very well turn into a financial nightmare. The seed money needed to establish a state exchange is no longer available. North Carolina was once set on establishing its own exchange under Governor Beverly Perdue, but more than $70 million in start-up grants were returned to the feds once Republicans took the legislature in 2013. State lawmakers also passed SB 4 into law – an act that negates the decision to opt for a state exchange along with expanding Medicaid.

In addition, surrounding state exchanges such as Massachusetts, Oregon, Minnesota, Vermont, Hawaii, and Rhode Island are failing or have already failed to be self-sustaining since planning and establishment grants awarded by the federal government expired at the beginning of the year.

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Screen Shot 2015-05-15 at 8.49.25 AM The Washington Post has the scoop as to why operating budgets are collapsing:

Most exchanges are independent or quasi-independent entities. For most, the main source of income is fees imposed on insurers, which typically are passed on to consumers. Because those fees are based on how many people have signed up (a larger enrollee pool means lower individual costs), strong enrollment is critical to an exchange’s fiscal success.

Most exchanges have operating budgets of $28 million to $32 million.One of the biggest cost drivers is call centers, where operators answer questions and can sign people up. Enrollment can be a lengthy process — and in several states, contractors are paid by the minute. An even bigger cost involves IT work to correct defective software that might, for example, make mistakes in calculating subsidies. 

Read the full article here.