According to reports from the Associated Press (AP), Idaho’s government-run health insurance exchange may already be headed for financial trouble. As a remedy, the exchange’s management has considered raising the fee it assesses on insurance purchases from the current 1.5 percent up to 2.6 percent within the next two years.

In response to this news, one state senator is calling for both the repeal of the exchange and for the implementation of new insurance industry reforms.

“There is no surprise here,” Sen. Russ Fulcher, R-Meridian, said of the financial hardship of the insurance exchange. “The fact that the wheels are coming off, right out of the gate, does not surprise me. It will get it worse if we don't try to make it right.”

According to the AP, internal email messages among the exchange’s leadership dating back to early September—approximately a month before the exchange website had officially gone online—indicated that exchange financial director Pat Kelly was prepared to tell the board of directors that the fee charged on insurance policies would need to be increased because of the operational costs of the exchange and the likely number of exchange customers being lower than originally estimated.

However, Kelly’s calculations were never revealed to the board members, but were brought to light by the AP this week via a public records request.

Fulcher, who voted against the formation of the exchange in the Senate earlier this year, told IdahoReporter.com that “they don't have enough people signing on to this thing (the exchange), and the people who are signing on to this don't have the health profile that would drive the cost downward. The only thing that is surprising here to me is that somebody would be surprised.”

The state legislation that created the health insurance exchange prohibits the use of state tax revenues for funding the operation. In February, Gov. Butch Otter’s chief of staff gave assurances to members of the Legislature that federal funds would be available to handle the exchange’s start-up costs, while the expectation was that the exchange would become fully self-funding by 2016. Federal law requires the health insurance exchanges to be self-funding in that year.

During legislative debate earlier this year some lawmakers, including Sen. Branden Durst, D-Boise, raised concerns that the exchange would not be limited in the amount of fees that it could assess on insurance purchases. Despite the promises of federal start-up funds and the ability to raise fees, the exchange ran into cash flow problems earlier this summer leading the board of directors to accept a transfer of $385,000 from the Idaho Department of Health and Welfare to the exchange’s bank accounts.

“This is exactly what was predicted when we debated this in the Legislature earlier in the year,” Fulcher told IdahoReporter.com. “This is a federal exchange, it is not a state exchange. That was all part of the misleading tactic to try to get Idahoans to swallow this thing. It's the same rules, it's the same parameters, the only difference may be that you've got Idahoans pulling the trigger on it, but it is a federal exchange in the sense that it costs the same as a federal exchange. So it was misleading when those supporting it were telling us that it was going to be cheaper.”

Fulcher says that the legislation creating the exchange should be repealed, and that legislation providing “private sector, free-market alternatives” should be passed. “I don't want to put another dime or another man-hour into this effort from the state of Idaho,” he said.

Listen to Fulcher’s comments in their entirety HERE.