Kentucky Gov.-elect Matt Bevin, who takes office Dec. 8, plans to dismantle the state's successful health insurance exchange and shift consumers to the federal one. It's a campaign promise that has sparked controversy in the state.

Supporters of Kentucky's exchange, called Kynect, have asked Bevin to reconsider. They say the exchange created under Obamacare and an expansion of Medicaid have improved public health by dramatically increasing the number of Kentuckians with health coverage.

But health analysts say Bevin's plan to move Kentucky to HealthCare.gov would have little immediate effect on consumers. "The federal exchange is a perfectly viable alternative," says Jon Kingsdale, a health care consultant who formerly led the Massachusetts agency that started the state's exchange in 2006, providing the model for the federal health law. On a federal exchange, consumers would still be able to shop and enroll in private plans and apply for federal subsidies to lower their costs.

And even if Kynect goes away, other states with exchanges will likely decide individually what's best for them rather than rush to follow Kentucky's example.

State-run exchanges do have some advantages, Kingsdale says. For instance, they make it easier for people to enroll in Medicaid because the exchanges connect directly to the state-federal program health insurance program for the poor in each state. State exchanges also generally have lower premium taxes than the federal exchange, fees that insurers pass on to consumers. And states that run their own exchanges have more say about insurance options for consumers than those states that use the federal marketplace.

Bevin's plan to end Kynect has brought a strong rebuke from Obamacare advocates and outgoing Kentucky Gov. Steve Beshear, but it's also revived questions about whether the states or the federal government are best positioned to run the marketplaces. Bevin is a Republican and Beshear is a Democrat.

The exchanges are a linchpin in the federal law that has brought health coverage to 16 million people since 2010. The law's drafters initially thought all but the smallest states would run their own exchanges. Most Republican governors blocked them in their states, citing opposition to the Affordable Care Act.

Thirteen states run their own insurance exchanges. The rest are run fully or in part by the federal government. If Bevin follows through on his plan, Kentucky would be the first state to close its exchange and push most responsibilities to the federal government.

Nevada, Oregon and Hawaii ran into technological problems with their enrollment systems and have shifted in the past year to using the federal HealthCare.gov site. But the states still handle other marketplace functions, including marketing and offering consumer assistance. Nevada and Oregon both posted solid enrollment gains in the second annual enrollment period ended in March 2015 after switching to HealthCare.gov.

Overall, state-run exchanges have enrolled higher percentages of their uninsured citizens than states using the federal exchange. That's partly because all but one state with its own exchange also has expanded Medicaid, making millions more people eligible. Idaho is the only state that has its own exchange and has not broadened Medicaid. Twenty states have not expanded Medicaid.

Kentucky's exchange is considered one of the best-run state exchanges because of its innovative, extensive marketing to uninsured consumers and its ease of use. About 500,000 Kentucky consumers have enrolled on Kynect since 2013, most of them for Medicaid. The state's uninsured rate has dropped from 20 percent to 9 percent over the past two years, according to the latest Gallup poll.

Bevin says he is concerned that the state could end up being on the hook financially if its revenues from premium taxes don't keep up with Kynect's operating expenses. That wasn't a problem in the exchange's startup years when the federal government paid all the costs for state exchanges. But the federal money has run out, and Kynect, like other state exchanges, must rely mainly on premium taxes to fund operations.

Several states including Vermont and Minnesota are struggling to raise enough revenue through premium taxes. With less money, some state exchanges including Rhode Island have greatly curtailed marketing to attract more enrollees.

States that run their own exchanges retain more control over their individual insurance markets and the consumer sign-up experience, says Dan Schuyler, at health care consulting firm Leavitt Partners. California's exchange, for instance, limits which insurers can participate to help it negotiate better rates. Connecticut's exchange requires all insurers to offer standardized plans so it's easier to compare rates and benefits.

Even so, a shift by Kentucky to the federal exchange wouldn't change their insurance choices right away. "If you take consumers out of Kynect and put them into the federal marketplace from a product perspective nothing changes as consumers have access to same plans," Schuyler says.

But the move would cost Kentucky control over which nonprofit groups provide consumer assistance and the state's call center would likely move out. State exchanges could lower their costs by using HealthCare.gov for enrollment while retaining other functions such as consumer assistance and marketing. Starting next year, the federal government will charge state exchanges to use its enrollment system.

Kynect has an annual budget of about $28 million, funded by its 1 percent assessment on health premiums. The assessment would increase to 3.5 percent in a federal exchange, and dismantling Kynect would cost the state an estimated $23 million in one-time expenses, said Audrey Tayse Haynes, head of Kentucky's Cabinet for Health and Family Services.

The earliest that Bevin could shut down Kynect would be in 2017, because the health law requires a 12-month notice to the federal government.

Copyright 2015 Kaiser Health News. To see more, visit http://www.kaiserhealthnews.org/.

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