Ky. moves to dismantle health insurance exchange

Kentucky's new Republican administration is moving forward with plans to shut down the state's health insurance exchange, becoming the first state to cut ties with one of the key pieces of President Barack Obama's signature health care law because of a political promise.

Gov. Matt Bevin notified federal officials in a letter dated Dec. 30 that the state exchange will cease operations "as soon as is practicable." That will be at least a year from now, according to federal law. It will not affect health plans sold for 2016.

Kentucky is one of 14 states that run their own state health insurance exchanges. More than 100,000 people have used Kentucky's exchange, dubbed Kynect, to purchase private health insurance plans with the help of a federal subsidy since it was implemented in 2013. The drop in the number of uninsured across the state since the institution of the Affordable Care Act, often called "Obamacare" has been termed unparalleled by some observers.

Bevin has also said he intends to overhaul the state's expanded Medicaid program, which provided health care to 400,000 people and slashed the percentage of uninsured in the state by half.

But Bevin, Kentucky's second Republican governor in more than four decades, campaigned on eliminating Kynect. The system is paid for with a 1 percent tax on all individual health plans sold in the state, both on and off the exchange.

Right now, Bevin says about 85,000 people have purchased a private health insurance plan through Kynect, or about 2 percent of the population.

Bevin spokeswoman Jessica Ditto said the fees from the sale of plans on Kynect generate between $2.5 million and $4 million of the approximately $27 million it takes to operate the exchange each year.

"A majority of Kentuckians are paying a 1 percent assessment on their own premiums to support Kynect operations which they do not use," Ditto said.

Once Kentucky moves to the federal exchange, that tax goes up to 3.5 percent. But the tax is only applied to plans sold on the exchange, Ditto said.

Former Democratic Gov. Steve Beshear, who created Kynect, has estimated it will take at least nine months and cost $23 million to dismantle the system.

Jason Bailey, executive director of the Kentucky Center for Economic Policy, called Bevin's decision "a big step backward on access to health care in Kentucky." Susan Zepeda, president of the Foundation for a Healthy Kentucky, said it "raises a lot of questions," noting state officials had special programs targeting hard-to-reach groups, including veterans and rural residents.

Al Jazeera and The Associated Press