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Why some state-run health exchanges worked

WASHINGTON – Two months after they launched, most of the online health insurance exchanges run by states have vastly outperformed their federal counterpart,

WASHINGTON – Two months after they launched, most of the online health insurance exchanges run by states have vastly outperformed their federal counterpart,

Four of the states with their own exchanges – Connecticut, Kentucky, Rhode Island and Washington – have sites that have run especially smoothly, becoming models for states such as Arkansas, Idaho, Illinois and New Mexico that are planning to launch their own sites in 2014. Because of ongoing problems with the federal site, other states that are using it might also decide to build their own next year.

Not every state-run exchange has performed well – Hawaii, Oregon, Maryland and Vermont all have had significant problems. However, even though the 14 exchanges run by states and the District of Columbia serve less than a third of the U.S. population, they accounted for more than half of all Medicaid enrollments and 75 percent of private insurance sign-ups in October, according to the federal government's most recent enrollment report.

It's too early to pinpoint exactly why some state-run exchanges did better than others, but two common characteristics stand out: simplicity and an abundance of testing.

Instead of creating the ultimate health insurance exchange with lots of features – such as multiple ways to search for an insurance policy – the successful states created a simpler "version 1.0" with a plan to add more functionality in the future.

Take Kentucky, which runs one of the most trouble free sites. It has registered consumers for private insurance at a steady clip of nearly 1,400 a week, and enrolled 29,000 people in Medicaid during the first month. Per capita, Kentucky has registered more people for private insurance and Medicaid than any other state.

"Our system doesn't have a lot of bells and whistles," said Carrie Banahan, executive director of the Kentucky exchange, which is known as Kynect. "There aren't a lot of graphics that would take a lot of bandwidth."

Kentucky and other top-performing states enable consumers to browse the various plans available on the exchange without first having to set up a password-protected account. That step alone spared those exchanges a lot of error messages and screen freezes experienced by people using the federal site.

Successful states also devoted months, not weeks, to exhaustive, round-the-clock testing. Kentucky tested for three months, while the U.S. Department of Health and Human Services reportedly devoted only the last two weeks of September to testing before its Oct. 1 launch.

Idaho and New Mexico are building their own sites now and will launch them next year.

Dan Schuyler, a director at health care consultants Leavitt Partners and former technology director for the Utah Health Exchange, also pointed out that state exchanges fared better if they screened for Medicaid eligibility and linked to the state's existing Medicaid enrollment site, rather than attempting to enroll consumers directly from the exchange. Utah's exchange was the second of its kind in the United States when created in 2009. Massachusetts built the first in 2006.

Schuyler said the states' relative success was largely the result of three strategic decisions.

Instead of managing the massive IT projects alone, states used federal money to hire outside management teams to oversee the development and testing of their health insurance exchanges. They also hired so-called "systems integrators" to ensure their new websites communicated with their Medicaid enrollment systems and other state and federal databases. HHS used its own staff to perform both those roles.

In addition, states used existing platforms and off-the-shelf components, while the federal government ordered up a customized system.

Money was also an issue. The Affordable Care Act offered states open-ended federal funding to design and build their insurance marketplaces. States took full advantage of the offer, spending an average of $30 per resident to build their exchanges – a total of $3.2 billion in federal funding.

Meanwhile HHS – which had expected most states to build their own exchanges – had to scrape together existing departmental funding for what became one of the biggest government IT projects in history.

Two poorly performing states, Hawaii and Vermont, used Canadian firm CGI Group, the same contractor that built the now infamous federal exchange. The top four performing states, Connecticut, Kentucky, Rhode Island and Washington, all contracted with consulting firm Deloitte to manage and develop their sites.

"In every state there was a unique confluence of factors, including politics, policy, designers and contractors," said Elizabeth Carpenter, senior manager at health care consultant Avalere Health.

Oregon and Maryland started working on their exchanges ahead of most other states. Nevertheless, Oregon's exchange is still virtually non-functional and Maryland, which experienced substantial technical problems in the first month, continues to lag in the number of residents enrolled.

California and New York also got early starts and both experienced technical failures during the first month. Even Massachusetts, which arguably should have had an easy time creating an ACA-compliant exchange since it had already run a successful health insurance marketplace for years, is faltering. Its website, another one built by CGI, is still plagued by glitches.

Last week Politico reported that even some of the better-performing states, such as Kentucky and New York, are experiencing problems with what are called "back-end" operations, the transfer of information from the exchanges to the insurance carriers. Many of the carriers are receiving faulty information, according to Politico.



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