Weighing Maryland's switch to Connecticut vs. federal health exchange

Since Maryland health exchange officials decided to replace their troubled website with technology used in Connecticut, critics have asked whether it would be cheaper and less risky to join the federal website.

Democratic U.S. Rep. John Delaney, among the exchange's most persistent critics, said discussions with "numerous parties inside the government and in the private sector led me to believe that switching to the federal option was a cost-effective option that would help more Marylanders receive health care."


But he added that it was hard to assess because the "whole process has never been transparent."

Exchange officials said the federal option could be a good deal for some states. But Maryland's antiquated Medicaid system couldn't hook up to the federal site, and building a separate system would be costly, they said.


Connecticut's site also can't directly enroll people in Medicaid, but the capability is being included in both states. In Maryland, adapting the technology for both Medicaid and private insurance enrollees would cost $41 million, a recent exchange analysis showed.

Building a new Medicaid system would cost $46 million and ramping into the federal site would cost another $5 million to $6 million. And because the new Medicaid system wouldn't be ready by the next open enrollment in November, an interim paper enrollment system would cost another $5 million to $10 million, the analysis showed.

A separate exchange analysis found maintaining both the federal and Connecticut systems would cost about $6 million annually.

"Medicaid issues make all the difference here," said Dr. Joshua M. Sharfstein, chair of the exchange board and Maryland's health secretary.

He said comparing states is tough because each already has made unique technology investments. At least one other state planning to move to the federal site, Oregon, says it would cost less: $5 million for the transition to the federal site and another $30 million to hook up its Medicaid system.

And while an information technology expert agreed that building a new Medicaid system would be costly, the well-functioning federal site posed fewer risks. And it still might be hard to beat the federal site's long-term costs, said Rick Howard, a research director at Gartner, an IT research and advisory company.

Howard put both the move to the Connecticut technology and the federal site at $35 million to $55 million, with the federal site coming in at the low end and Connecticut's technology at the high end.

Fees on insurers will defray the operating costs of both options, but states with their own technology bear more costs from licensing and upgrades — though Sharfstein said upgrade costs can be shared among states with similar technology, and Maryland won't have a separate Medicaid system to maintain.


Howard added, "In the long term, it will be increasingly difficult for the remaining state-based marketplaces to match the economies of scale and lower operating expense that the federal exchange can provide."

"All states will need to re-evaluate their initial assumptions about the costs of operating a health insurance marketplace and what type of state-federal partnership model best meets their unique state needs at a price they can afford."