Issue Brief | Sep 21, 2015

Financing Shared Administrative Functions Between State-Based Marketplaces and State Medicaid Programs: Cost Allocation Methodologies

Tricia Leddy, Mark Larson, and Christian Heiss, Center for Health Care Strategies

The Affordable Care Act (ACA) provides opportunities for expanded access to health coverage through both the expansion of Medicaid and the establishment of health insurance marketplaces.  State-based marketplaces (SBMs), as pathways to both public and private health coverage, are required to perform cross-program functions that support access to both qualified health plans (QHPs) available through the marketplace, as well as coverage through Medicaid.  While these shared functions create an opportunity for savings through enhanced efficiency, they also require states to properly attribute funding to both through a process known as cost allocation.  This issue brief, prepared by the Center for Health Care Strategies, builds on a previously released analysis of cost allocation methodologies, by providing an in-depth view of the mechanics of implementing cost allocation between Medicaid and marketplace programs.