Commercial risk will be a critical catalyst of progress – it’s complicated, but is it possible? We think so.

Blog Post

T-minus-12 days, and the federal exchange is still 'glitchy.'

September 19, 2013

    Dan Diamond, Managing Editor

    The Wall Street Journal broke the news Thursday night that a "pricing glitch" is plaguing the federal health insurance exchange software ... with less than two weeks to go before the exchanges are supposed to launch.

    Basically, the exchange's calculator can't do a pretty important piece of math: How much each consumer will need to pay for his or her specific coverage.

    Glitches had been somewhat expected—there had been rumblings of technical problems, despite officials' public vows of confidence—but it doesn't make the Journal's scoop less of a story. Opponents of Obamacare will use any delay to raise fresh concerns about the law's implementation, and even the most ardent supporters of the ACA acknowledge that having working software is crucial to a working rollout on Oct. 1.

    And what happens to enrollment targets if the glitches aren't quickly resolved and would-be customers get frustrated and turn away?

    There are several potential interpretations and implications here, given that this story is bound up in both politics and policy. From my perch at the Daily Briefing, I'd offer these five quick reactions to the Journal's scoop.

    1. This news is not a surprise.

    When reporting on the ACA's rollout, especially since the Supreme Court's ruling last June, officials and analysts kept raising the same question with me: Will the exchanges be ready in time?

    • Keep in mind, the exchanges are intended to combine an unprecedented mix of eligibility verification systems, subsidy calculations, and thousands of insurance products.
    • Add an additional factor—the pace of ACA implementation lagged between 2010 and 2012 because of the ongoing uncertainty over whether the law was even constitutional—and the level of complexity involved in getting the exchanges off the ground really is astounding.

    There have been hints that these systems might not be ready. Federal officials announced over the summer that they would scale back the exchanges' verification requirements until 2015. And the contractors charged with designing the systems might as well be working on the Siberian insurance exchange, given how they've ignored media requests.

    2. The federal exchange isn't the only one with glitchy software. State exchanges are having problems, too.

    Oregon has already announced that it plans to delay the formal roll-out of Cover Oregon to continue beta-testing, and California (a state that has moved exceptionally quickly to implement health reform) was weighing contingency plans for Covered California, too.

    As Caroline Pearson of Avalere Health told me a few weeks ago, "if California's talking about contingency planning, then we need to acknowledge that any number of state-run exchanges may not be fully operational by Oct. 1."

    However, the federal exchange software takes on extra importance given the sheer number of states (36) and potential customers (32 million uninsured) that will be shopping through its exchange.

    3. But the fear that disaster is looming may outpace the reality.

    In interviews, dozens of experts have told me that the exchange software needs to be working as soon as possible, lest would-be consumers get scared away by negative news and ACA implementation suffer a major blow.

    (In response, I always ask for a historical example of bad press killing a law like the ACA; outside of the MCCA, I still haven't heard a great answer.)

    Overwhelmingly, the Americans who will be shopping through the exchanges this fall are the ones who have pined for this moment for months, if not years: The chronically ill who wanted coverage but couldn't get it, or the low-income Americans who couldn't afford it. They likely won't be deterred by a few software glitches.

    And I'm also struck by how another major reform, Medicare Part D, was treated in the press and by critics when it launched versus how we view it today. As the Washington Post's Sarah Kliff notes, while Part D's 2005 rollout was hardly smooth, now it's a much-beloved program by beneficaries and industry experts alike.

    4. If the software's not ready to go, there will be workarounds.

    There already were a mix of offline ways to purchase coverage through the exchanges, whether through call centers or in person; the AP notes that 30% of applicants were expected to use paper.

    But software delays may spur additional solutions, too. Oregon, for example, will rely on insurance brokers to help state residents obtain coverage until the state's exchange website is ready to go.

    And an enormous number of stakeholders want the exchanges to be successful, from insurers that are hoping to see new business to hospitals that want to lower their uncompensated care costs. Basically, CMS can raise a virtual volunteer army if necessary.

    Meanwhile, the enrollment period runs through March 31. There's no "early bird special" as Dave Morgan, a California employee benefits adviser, pointed out on Twitter; premium prices for 2014 will be the same whether you're purchasing coverage on Oct. 1 or Dec. 15.

    5. The most important variable isn't whether the software's perfectly functional. It's who's buying into the exchanges.

    Drawing on CBO estimates, the White House has set a target of getting 7 million people enrolled through the exchanges for 2014. Given that 25 million-plus Americans are eligible for exchange subsidies, that seems like a very achievable figure, experts like Avalere's Pearson have told me. (Wall Street is significantly more pessimistic, Lewis Krauskopf notes at Reuters.)

    And unless the press is really, really bad—or the software glitches turn out to be really, really hard to solve*—history won't much remember that the exchange websites weren't working on day one if they're working by day 10.

    Instead, the success of the exchanges rests heavily on factors like keeping premiums low, even as participating health plans begin to cover millions of Americans with pre-existing and chronic conditions. Which means:

    • Those expensive patients will need to be cross-subsidized by other new patients who won't utilize as much health care: young Americans. 
    • And understanding that the people most motivated to shop for coverage on the exchanges are likely older and sick, will the young and healthy buy into the exchanges, too? Especially if broken software gets in the way?

    That bears watching in the coming weeks and months—especially because the software problem probably won't.

    * Necessary disclaimer: All bets are off if the software problem isn't fixed in a few days or weeks. The exchanges were touted with the promise that they'd be like Orbitz or Amazon, just for buying health coverage.

    Imagine the effect on the publishing industry if Amazon stopped working and the nation had to go back to buying books through mail-order catalogs. And purchasing health insurance is a significantly more complicated process than purchasing a copy of "Harry Potter."

    Three ways to prepare for the exchange tsunami

    For hospital leaders, being ready for health insurance exchanges will be the difference between 24 million challenges and 24 million opportunities.

    Watch the video now to learn more.

    Have a Question?


    Ask our experts a question on any topic in health care by visiting our member portal, AskAdvisory.