Ezra Klein: We last talked about 10 days ago. So in the interim, what are your insurance industry sources saying has changed on HealthCare.gov?
Bob Laszewski: Really nothing. There are two sides to this coin. The numbers of people enrolling and then the problems in processing enrollment information between federal government and insurance companies. If I were spinning for the White House I would say enrollment is up 50 percent! But that’s because it’s up from like 10 a day to 15 a day. I haven’t talked to large insurers seeing more than 100 enrollments a day.
On the backdoor, the 834 connections, I had one client tell me they saw some improvement in the error rate, so I checked with three other clients, and they said they hadn’t seen any improvement.
EK: So most people can’t actually buy insurance through the Web site yet, and those who can may not be sending the right data to insurers?
BL: I almost have the sense that HealthCare.gov is in de facto shutdown. Here’s why: Government has to fix the back end before the front end. The demand here is real. I don’t think anyone can dispute that millions of people want to sign up. So if they fix the front end for consumers and thousands of people or hundreds of thousands of people being enrolled before they fix the back end, we’ll have a catastrophic mess.
When insurers are getting 10 or 20 or 50 enrollments a day they can clean the errors up manually. But they can’t do that for thousands of enrollments a day. They have to automate at some point. So I think the Obama administration doesn’t want to cross the red line to shut the system down, but I think this is effectively a shutdown in which they don’t say they’ve shut it down but it basically is shut down.
EK: What about using the phone number?
BL: Telling people to call the 1-800 number isn’t any good either. The government has to transmit the enrollment information over the computer system to the insurer anyway.
The other problem with signing up over the phone is that in most states consumers will have five or six or seven or eight insurance companies each offering at least five or six plans. The typical person will be faced with 30 to 50 plan options. I don’t know how a consumer can have a conversation about which plan is best for them over the phone. In Medicare, seniors receive this big, thick catalog on Oct. 15. They can study it and pick their plans. Or they can use the Web site. But a consumer has to be able to study the plans.
EK: Let’s go back to the 834s for a minute. This sounds like it should be an easy problem to solve. The 834 standard is widely used. It’s not particularly complicated. What’s going wrong?
BL: I don’t know. This process is decades old. Every union and every self-insured employer who contracts with an insurance company uses it. It’s like a 74 Ford pick-up truck. There’s nothing complicated about it. People in the industry are shaking their heads over the errors they’re getting. They’ve been using this process for many years. No one has ever seen these kinds of errors before. No one has any idea where they’re coming from.
EK: The White House says it’s working very closely with insurers to resolve this issue. Are you hearing from insurers working closely with the White House?
BL: No, I can’t confirm or deny that other than to say I talk to a lot of people in the industry, and no one knows of anybody doing that. I’m not saying the White House is lying. If they say they’re doing this, they probably are. It’s possible they have found three or four key people in big insurance companies, and that’s who they’re talking to. But I’ve got a pretty good net, and I don’t know of anybody.
EK: How about the tech surge? Do you know of anyone from the outside working on it?
BL: No. That’s not my bailiwick, but I have not heard of anybody there. So here we go again with the top secret stuff. These people are coming in to volunteer in the spirit of public service. I don’t know why they wouldn’t want their names listed. I think the administration needs to ask three questions here. Can they fix it on the run? Do they need to shut it down for a short period of time? Do they need to shut it down for a long period of time? That’s what the new czar is going to be asking.
EK: You mean Jeff Zients?
EK: The release there made his role sound much smaller than “czar.” I think it said he was there to offer advice and counsel.
BL: I think that was in deference to Secretary [Kathleen] Sebelius. I think it’s quite clear he’s moving in to clean this up without it looking like Sebelius is being demoted or pushed aside. There’s no way someone with those credentials is going in to consult. His job is to get this fixed. When you have a task as gargantuan as this is you can’t have a committee straightening it out. You need a czar. Someone needs to be in charge. My experience of turnaround management is it will take him a few days at least to get his hands around the issues before he begins working on them.
EK: We’ve talked about the problems getting into the site and the problems transmitting information to insurers, but what about the middle step, where it figures out if you’re actually eligible for subsidies or Medicaid?
BL: I work on the insurance company side and that happens before you get there. But it’s also clear they do not have a system to determine eligibility. This business that they aren’t shuttling people over to Medicaid is a huge issue. About seven and a half million people are eligible for this expansion., If they don’t have an efficient way of getting them there that’s a huge deal. The subsidy calculator is also a huge deal. A lot of the insurance companies are using a portal to the exchange to tell their customers their subsidies. That hasn’t worked from day one. So an enormously helpful backstop here, which is the insurance companies and brokers like ehealthinsurance.com, aren’t able to provide that workaround.
It’s easy to be a Monday morning quarterback but if I had been sitting there a month before launch trying to come up with a worst-case scenario for a world in which the system crashed, it would’ve been making sure these subsidy calculators work so that private insurers could help them buy plans. And insurers were begging for this. The eHealth CEO was begging for it. And the administration only gave it reluctantly. So it went to the low priority list. And it doesn’t work. Nobody knows what the problem is, or if it’s close or far to getting fixed. If I was the czar, I’d make that one of my top priorities.
EK: So this is a pretty grim assessment for where the law is.
BL: I’m not even giving you an assessment. I’m reporting to you that between yesterday afternoon and this morning, I went back through my senior executive contacts in the insurance industry. I asked two questions: Are you seeing an increase in enrollment after the weekend? They said a tiny bit. And then, are you seeing an improvement in 834 transmissions, and one insurer said they thought they saw improvement, and the others said there wasn’t. And all of them said the error rate remained way higher than could be tolerated. So from an operational perspective there’s no change. Has the needle moved a bit? A tiny bit. But not enough that it matters.
But fixing an IT system isn’t linear. You don’t fix 5 percent of the problem one day and 5 percent the next. You can make progress on the small, easy stuff quickly, but the big problems take a long time.
EK: Which is to say that if and when these problems get fixed, it won’t be slow improvements, but that they’ll figure out the issue, send out the software patch, and then big chunks of the problem will clear at once?
BL: Yes, that’s right. There are big logjams here. And it could just be one tiny little line of code that’s screwed up.
But they have to get the backroom fixed before they open the front door. If they open the front door before that back room is fixed, you’ll have a catastrophe. People are going to be signing up and seeing their banks accounts debited multiple times, or their insurance won’t come through. The White House is meeting with insurance industry executives today, and I can tell you what they’re talking about. They say you need to get this fixed, because you’re setting us up for a real fall with our customers. They’re not going to blame Kathleen Sebelius if they walk into their doctor’s office and the doctor doesn’t know who they are. They’ll blame the insurance company. And I’m sure what the insurers are telling the White House today is we will not let you put us in that position.