Future of Nevada’s Insurance Exchange Uncertain after Exchange Board Votes to Cut Ties with Xerox

by Snell & Wilmer

In response to the Affordable Care Act’s establishing Affordable Insurance Exchanges to provide individuals and small business employees with access to health insurance coverage, Nevada chose to create its exchange, the Silver State Health Insurance Exchange (the Exchange), as a state-run entity, independent from the federal government’s exchange. Nevada was one of 14 states initially to opt for the creation of a state-run exchange for the 2014 enrollment period.[1]

In 2012, Nevada contracted with Xerox to design and ultimately build the Exchange website. On May 20, 2014, at a board meeting in Carson City, Nevada, the Exchange’s board voted to end its two-year relationship with Xerox, citing the myriad issues plaguing the Exchange and fears that Xerox would be unable to fix those problems in time for the next open enrollment period beginning November 15, 2014. 

The board indicated the Exchange would become a “state supported” exchange through the end of 2015. This move will allow Nevada to retain its status as a state-based Exchange but will result in using the federal infrastructure for eligibility and enrollment functions. State officials further indicated that the proposed changes would allow the Exchange to keep its autonomy and member-based funding without compromising its ability to switch to another state’s already-operational system, such as Connecticut’s system, for the 2016 enrollment period. Nevada officials acknowledged that moving to a new system for 2016 could cost in excess of $72 million, though the state hopes that federal grants (already applied for) will cover the cost. The same officials expressed optimism that the cost of buying an existing system might drop considerably by the time the Exchange is ready to go forward at the end of 2015. 

The move to abandon the existing Xerox-designed Exchange framework comes after a series of delays, enrollment issue, and allegedly botched insurance purchases, culminating in a class action lawsuit currently pending against the Exchange and Xerox (among others) in the Eighth Judicial District Court for Clark County. Due to the excessive technical challenges that plagued the Exchange from its inception, a special enrollment period was extended from April 1, 2014 to May 30, 2014. 

There is a great deal of uncertainty in the immediate wake of the Exchange board’s decision. Though the expectation is that enrollment will continue under the existing system for the remainder of the April 1 - May 30 “special enrollment” window, there was no explicit confirmation from the board regarding the window. Additionally, there is uncertainty as to how the transition to the federal system—a system plagued with its own issues, technical and otherwise—will impact sign-ups and the ability for the average consumer to secure health insurance in Nevada under the Affordable Care Act. Finally, with no definite indicator which other state’s system Nevada might adopt and no definite funds in-hand to pay for another state’s system, employers state-wide have a murky view of their options.  Employers may be unable to make long-term decisions concerning employee benefits programs if the full universe of healthcare options is unknown to them. 

The full ramifications of the Exchange board’s decision to scrap the existing Exchange framework and pin its hopes to a patchwork solution—made of temporary reliance on the federal system and the hopes that it can secure grant money and buy (and make effective use of) another state’s insurance exchange system—won’t be fully known for months, if not years. 

[1] By April 2014, Oregon, Massachusetts, and Vermont had all abandoned their state-based exchanges in favor of the federal government’s exchange.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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