(Cliff Owen/AP)

$2.8 million grant allowed the state to hire nine employees to staff a toll-free hotline. More than 6,000 Texans called in during the past year, seeking advice on how to find affordable coverage, or help filling out an insurance application, or fighting a denied claim. The new employees traversed the state, hosting more than 160 events aimed at making Texans — a quarter of whom lack insurance — more aware of coverage options.

“The grant provided us with the opportunity to ... actually take the 20 or 30 minutes, or however long, to help someone complete an application,” said Audrey Seldin, senior associate commissioner for consumer protection at the Texas Department of Insurance, which oversees the program.

But less than a year after it opened, the Texas Consumer Health Assistance Program is preparing to shut down, a victim of Congress’s inability to agree on a federal budget for next year. The nine employees are likely to be dismissed in April. The events will stop and the toll-free hotline will redirect to a general consumer assistance number at the Texas Department of Insurance, which deals with all kinds of insurance and has less expertise in health coverage.

Texas is among the 35 states that received health reform grants to build consumer assistance programs more than a year ago. The Affordable Care Act of 2010 set aside nearly $30 million to fund the program in 2010, which states have used to handle questions about how to obtain affordable health coverage or appeal denied insurance claims.

The health reform law also authorized future funding for the consumer assistance program, but left it to Congress to appropriate that money — in contrast to most other provisions in the law, which were automatically funded into the future. When the House and Senate failed to pass a budget last year, operating instead on a short-term fix that continued all existing appropriated programs, the consumer assistance program was shut out.

“I don’t know that, while health reform was being debated, any of us understood how hard it would be to get additional funding going forward,” said Christine Barber, a senior policy analyst with Community Catalyst, a Boston-based community advocacy group that has worked with many of the new programs.

Timing questioned

Barber and other consumer advocates say the funding could not have run out at a worse time. The federal health reform law has left more Americans with questions about how health insurance is changing. Those are likely to increase as the law is expected to expand coverage to 32 million more Americans by 2019.

“I have a little bit of a nightmare about what will happen” when the funding runs out, said Victoria Veltri, who oversees Connecticut’s grant and is currently looking to the state or private foundations to continue her program. “I won’t stop searching for funding.”

Connecticut has run ads on television and the sides of buses letting residents know about its services, while Maine has begun representing those denied claims by insurance companies in appeals courts. Since the grant started, Maine Consumers for Affordable Care has netted consumers $23,000 in insurance appeals, with an additional $53,000 on the line in pending cases.

“We haven’t lost one yet,” Mia Poliquin Pross, associate director of the Maine consumer assistance program, said of the claim denials her two attorneys have appealed. “We would really like to ramp up that portion of the work.”

The consumer assistance programs have also served as an informal monitor of health insurance materials and policies, often tipped off by consumers’ questions. Multiple states, including Massachusetts and New York, have reported back to the federal government certain insurers that are out of compliance with a given health reform provision or are incorrectly advertising their services.

As many states expect to exhaust their funds in the spring, they are preparing in different ways. A few, like Texas, have already decided to shut down their programs. The Arkansas Department of Insurance also plans to shut down its program, reassigning two employees funded by the grant to new positions.

Others are exploring how they might be able to move forward without federal funding. But the uncertainty of whether that will happen is already taking its toll: Massachusetts’s new outreach coordinator left when the state could not guarantee she would have a job next year.

“We expected these grants would be funded continually,” said Brian Rosman of Health Care for Massachusetts, which has run the state’s consumer assistance program. “To walk away now from the investment, that seems really counterproductive, given that we’re now getting closer to 2014. I would think these programs would be needed more than ever.”

Many running the grants expressed a similar frustration, not only over investing in a program that would be dismantled so quickly but also at increasing consumers’ awareness of the new departments, only to lose the capacity to handle increased call volumes.

Carla Obiol, a deputy commissioner at the North Carolina Department of Insurance, is managing a $1.2 million grant that allowed the state to create an ombudsman office devoted to handling health insurance issues that she describes as “consumer assistance on steroids.”

“It’s not just about handling complaints,” Obiol said. “We’re adding an educational element, so folks understand they have a right to appeal [an insurance claim denial] and take advantage of that option.”

She’s frustrated at spending so much time building a department only to face the prospect of shutting down. “While we do think this service is so important,” she said, “Why would we build a great data system and recruit professional folks thinking this is going to fold?”

Looking to other sources

Obiol and many others are looking to other federal grant opportunities to continue parts of their programs. Funds to build new health insurance marketplaces, which will launch in 2014, do include some money for consumer assistance, although more limited in scope.

The Department of Health and Human Services is working with states to explore other sources of funding to keep their programs running.

Some states have managed to move forward with their programs, even after funding has run out. New York’s federal funding ran out at the end of October, but it has continued to run a consumer assistance hotline that serves all 62 counties across the state by using funds from the federal health exchange grant. In the past year, it has handled calls from more than 33,000 New Yorkers.

Not all states have applied for health exchange grants, and those that have may use the funds solely to set up the new insurance marketplace.

For many programs, the future remains less certain.

“We’re exploring all options,” said Kimberly Cammarata, an assistant attorney general in the Maryland Consumer Protection Division. “The reality is we need these people. I’m cautiously optimistic that things will work out.”