The Affordable Care Act created health insurance Marketplaces—government-operated entities with websites for purchasing health coverage, often with income-based premium subsidies. During the 2023 legislative session, Texas lawmakers introduced two bills to transition the state’s Marketplace from the federally facilitated Marketplace to a state-based Marketplace (SBM). This study summarizes and analyzes perspectives on a potential Texas transition to an SBM, including risks and benefits, best practices to mitigate risks to coverage if Texas elects to establish an SBM, and other measures to improve coverage.

Why This Matters

In 2024, over 20 million consumers nationwide received health insurance through the Affordable Care Act Marketplaces, including 3.4 million in Texas. Marketplace enrollment in Texas has more than tripled since 2020. Marketplaces are intended to provide a convenient clearinghouse for consumers to compare plans and enroll. Running an SBM allows states to customize Marketplace policies and practices within federal guidelines. Other states have used this autonomy to support health coverage through means like state-funded supplemental premium subsidies and facilitated enrollment. However, there is no guarantee an SBM in Texas would play out the same way.

Key Takeaways

Our key findings include the following:

• Interviewees broadly agreed that Texas would face both potential risks and benefits in transitioning to an SBM. While some interviewees thought an SBM would likely benefit the state overall, those who would be most directly affected uniformly thought that any potential benefits for Texas in adopting an SBM were substantially outweighed by the risk of worse outcomes, especially given the recent strong performance of the FFM. 
• Transitioning to an SBM would have potential benefits, including the flexibility to improve policy and consumer experience, local control, rebranding, cost savings to support coverage, and the ability to address fraud.
• Transitioning to an SBM would also introduce potential risks, including transition risks, operational shortcomings, lack of clear goals, competing priorities, new burdens on the state, risk to the health sector, and jeopardizing FFM gains.
• Interviewees raised several elements that would be important if Texas were to move forward with an SBM, including that there be broad consensus that the Marketplace's primary goal was to expand coverage, as well as considerations around agency structure, stakeholder input, noncompliant coverage, use of funding, standards for consumer support and outreach, Marketplace-Medicaid coordination, call center implementation, and Enhanced Direct Enrollment.

The report also discusses other state actions to support coverage, regardless of Marketplace type, such as raising awareness of currently available subsidized coverage options and affordability protections, improving consumer experiences with Medicaid, improving Medicaid-Marketplace coordination, and expanding eligibility for public coverage.

How We Did It

The study consisted of two main components: (1) a review of research literature, legal and regulatory landscape, and publicly available documents on SBMs and Texas, and (2) 25 interviews with 35 national and Texas-based experts and stakeholders representing the following perspectives: Texas-based consumer and advocacy groups, Texas-based insurer and provider organizations, Texas-based health insurance navigators and brokers, Texas policymakers, national experts on Marketplace coverage and SBMs, vendors that help states establish and run SBMs, and officials in SBM states.