Obamacare

California's $910 Million ObamaCare Exchange

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Photo credit: Scott Smith (SRisonS) / Foter.com / CC BY-NC-ND

How much does it cost to open one of ObamaCare's state-run health exchanges? In California, the answer is nearly $910 million and counting.

Health policy consultant Robert Laszewski notes that California has already received a little more than $909 million in federal grants—an amount that's actually $32 million less than the state's exchange director asked for. Does that sound like a fair price? It's not really possible to make a direct comparison to any private sector initiative, but Laszewski provides some useful context:

For some additional perspective I took a look at what it cost to launch the private insurance marketing site, Esurance. That company sells not only health insurance but also things like homeowners and auto insurance across the country. When I put my zip code into their system along with my age, they offered me 87 different health plans from all the big players in my area. Now granted, the new health insurance exchanges are more complex because they have to interface with Medicaid and the IRS as well as calculate subsidies. But the order of magnitude difference in what it cost to launch esurance compared to the California exchange is pretty big.

Privately funded Esurance began its multi-product national web business in 1998 with an initial $5.5 million round of venture fund investment in 1999 and a second round of $34 million a few months later.

The start-up experience of other major web companies is also instructive. Facebook received $13.7 million to launch in 2005. eBay was founded in 1995 and received its first venture money in 1997––$6.7 million in 1997.

Even doubling these investments for inflation still leaves quite a gap.

So where's all the money going? A big chunk is going to the infrastructure and information technology components—building out the website and database technology necessary to manage the law's subsidies and facilitate enrollment in the exchange-based health plans. But a lot of it is just going to marketing and enrollment. As Laszewski notes, the state is launching a two-year, $250 million marketing campaign intended to get people to sign up for the exchange. The state is also paying 20,000 part-time "enrollers" $58 an application for each person they sign up. In contrast, California Blue Shield serves 3.5 million members with just 5,000 employees. 

Despite the expense there's one thing the state likely won't be getting: a nice, stable insurance market. Few states are more supportive of ObamaCare than California, but the states insurance regulators have warned the Obama administration to expect "rate shock" and "market disruption" as part of the transition to ObamaCare. There are some things money can't buy. 

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  1. And you right-wing libertards thought it would cost a billion dollars. Pshaw!

    1. Bitter Clingers =/= “Math Majors”, indeed.

  2. Wait, what happened to free healthcare?

    1. Wait, what happened to free healthcare?

      What happened to cheaper than free healthcare?

  3. Yeah, well at least the money isn’t wasted giving profits to rich people.

    1. Looks like it wasn’t wasted giving anybody healthcare either.

    2. Oh I guarantee you there are a TON of rich people making huge profits off of this by charging $200 per hour for an IT consultant and then hiring a barely qualified Indian programmer and paying him $40 per hour (if he’s onsite, just $15 an hour if he’s still in India)

      1. *ding* and you win a ceegar.

  4. the state is launching a two-year, $250 million marketing campaign intended to get people to sign up for the exchange.

    How dare the people act against their own economic interests? The gall!

    The state is also paying 20,000 part-time “enrollers” $58 an application for each person they sign up.

    Scalp money. Assuming for 7 million uninsured Californians, this will cost $406 million just to get people to apply. So that’s $656 million gone in 2 years.

    Which leaves $253 million for…what?

    1. The state is also paying 20,000 part-time “enrollers” $58 an application for each person they sign up.

      Some how they will discover that they have payed to enroll more uninsured Californians than there are actual California residents.

      1. Unpossible! The state of California will meticulously manage and track every penny spent to carry out Obama’s….BWAHAHAHAHAHAHAHAHA!

        Sorry, I lost it about halfway through.

  5. $910 million for all the good this will do the citizenry of CA? Peanuts

    “Alameda County supervisors have really taken to heart the adage that government should run like a business ? rewarding County Administrator Susan Muranishi with the Wall Street-like wage of $423,664 a year.

    For the rest of her life.”

    http://blog.sfgate.com/matiera…..ps-in-pay/

    1. I will do it for half that.

      1. Really?, you’ll sit on your ass and do nothing for 200K? I’d do it for $150K

  6. So where’s all the money going?

    I’m guessing, mostly to cronies.

  7. It’s funny, I’m a developer in MA, and I’ve had two header hunters call me with positions that sound suspiciously like what would be required to develop this states “Insurance Exchange.” If they have to go “live” in October and they’re just staffing up now, they’re doomed.

    1. I’ve been getting bombarded by calls from recruiters hiring for positions related to Healthcare, either Obamacare itself, or the ICD 9 to ICD 10 transition for the last year and a half.

      1. Tell ’em you’ll do it for “the Wall Street-like wage of $423,664 a year.

        For the rest of my life.”

  8. Lefties told me that medicine is so expensive because of marketing costs…now we see the state-run system as has marketing costs. Lefties told me that medicine is so expensive because of high overheads of staff that state-run systems did not have…and now they are adding those.

    1. They got what they wanted. It doesn’t matter now, there’s no undoing it.

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