Five years and $5 billion later, half of the 17 state insurance exchanges are in financial trouble - so much so that many of them are considering folding and forcing their citizens to use the federal exchange healthcare.gov.

Washington Post:

Nearly half of the 17 insurance marketplaces set up by the states and the District under President Obama’s health law are struggling financially, presenting state officials with an unexpected and serious challenge five years after the passage of the landmark Affordable Care Act.

Many of the online exchanges are wrestling with surging costs, especially for balky technology and expensive customer call centers — and tepid enrollment numbers. To ease the fiscal distress, officials are considering raising fees on insurers, sharing costs with other states and pressing state lawmakers for cash infusions. Some are weighing turning over part or all of their troubled marketplaces to the federal exchange, HealthCare.gov, which now works smoothly.

The latest challenges come at a critical time. With two enrollment periods completed, the law has sharply reduced the number of uninsured and is starting to force change in the nation’s sprawling health-care system. But the law remains highly controversial and faces another threat: The Supreme Court will decide by the end of June whether consumers in the 34 states using the federal exchange will be barred from receiving subsidies to buy insurance.

If the court strikes down subsidies in the federal exchange, the states that are struggling financially might be less likely to turn over all operations to the federal marketplace, because they will want to make sure their residents do not lose subsidies to help them buy insurance. If the court upholds subsidies for the federal exchange, some states might step up efforts to transfer operations to HealthCare.gov.

Healthcare.gov may be working "smoothly" in the sense it's not freezing, and crashing, and giving out inaccurate subsidy information. But the back end of the site that allows the IRS to communicate with insurance companies, and insurance companies to bill consumers - among other necessary functions - still hasn't been built. 

Beyond that, the problem with state exchanges has been due to poor design of the website and disinterest. At least 5 exchanges are barely worklng - Hawaii, Minnesota, Maryland, Oregon, and Vermont - and several others are experiencing a severe financial crunch. 

Some state lawmakers express frustration that exchange officials either do not know whether their marketplaces will eventually be self-sufficient or are reluctant to say.

“Basically, the exchange is teetering, and the question is, ‘Can this be shored up?’ ” said Republican Sen. Ellen Roberts, who chairs the committee that oversees Colorado’s exchange board. The cost of running the exchange’s call center is expected to reach $21.3 million for this year. The previous estimate was $13.6 million.

When the ACA was enacted, Democratic governors pressed to create their own exchanges to signal their support for the law and to assert their own authority. Republican governors refused to set up exchanges as “a sort of badge of honor in opposing Obamacare,” said Larry Levitt, a senior vice president at the Henry J. Kaiser Family Foundation. But now, decisions probably will be made on more pragmatic grounds. “It will come down to more of a dollar-and-cents decision,” he said.

This is a feature of the state exchanges - not a bug. Eventually, all state exchanges will fail and the federal government will take over the business of selling insurance to everyone. This is how it was envisioned by the architects - a single payer system with one website, and one arbiter of health care, run by the federal government.