Jon Kingsdale, who oversaw the Massachusetts health insurance exchange from 2006 to 2010, is a managing director of the Wakely Consulting Group. Wakely has provided actuarial and other technical assistance for the Obama administration’s Affordable Care Act.
“The Affordable Care Act is not just a Web site. It’s much more,” President Obama said last month. This focus beyond short-term technical problems is meant to bolster the faith of those, like me, who support the Affordable Care Act. However, it will succeed only if the administration does much more than fix the Web site.
As HealthCare.gov — the main door to insurance shopping for 13 million of the 17 million uninsured who are eligible for subsidies — gets patched up in the coming weeks, the government must also prepare the world’s largest insurance store to meet two equally daunting challenges.
The first is to get enrollment, billing and premium collections working smoothly. In 2006, when we launched the Massachusetts Health Connector, which became the prototype for insurance exchanges under the ACA, my team encountered start-up problems. Tracking billing and collections was a much bigger challenge than getting our Web site to work.
Here’s why: Enrollees are not covered until their first month’s premium is received. In the individual insurance market, premium billing and collection is difficult to track. Folks frequently pay late or in weekly installments, or send too little or even too much. And when they stop paying, they often do not notify the insurer; the company must determine whether it is an intentional termination, an oversight, or a lost or late payment. Unlike most of today’s 15 million direct enrollees, who pay premiums on their own, an estimated 27 percent of those who will be eligible for tax credits under the ACA do not have checking accounts. So they must use cash, money orders or prepaid debit cards to pay their share of monthly premiums.
Under the health-care law, premium billing and tracking will be even tougher. There are hundreds of prices across each of the thousands of plans in the federal marketplace. Having enrollees pay partial premiums, and the IRS issue tax credits for the rest, means twice as much billing. Calculating subsidies based on personal income tax filings also creates security issues: In addition to the problems with verifying consumers’ identities online, which have created delays on HealthCare.gov, tens of thousands of unlicensed “navigators” are fanning out across the country to help folks enroll. Many of these people don’t have to submit to thorough background checks, although they will gain access to personal financial information. And consumer protections for low-income enrollees who miss payments require complex notifications over 90 days before an insurer can end coverage.
Even when the Web site is fixed, these challenges will remain.
In Massachusetts, we received about 100 visits to the site for every one enrollment. If the tens of millions of hits for the federal exchange in October eventually translate into millions of customers, the accuracy of the enrollment data — and insurers’ ability to correctly split premium billing between millions of enrollees and the IRS; track premium remittances; and chase, reconcile and report on accounts receivable — will be tested under the pressure of high volume. If insurers cannot track and collect premium dollars each month, the extra work of doubling back with customers and insurers will frustrate consumers and delay coverage. And a mounting backlog could eventually compromise the fiscal integrity of the exchange.
What Obama points to with justifiable pride are good prices for good coverage. But there lies the second potential pitfall, with even greater political peril for the ACA. Comparing prices in 2014 to those in 2013 is an “apples to oranges” exercise because the health plans on the exchange are new, and many of them differ considerably from older ones. The president is correct in pointing to the substandard quality of much of the individual coverage that is being phased out. We did that in Massachusetts as well, replacing an estimated 150,000 individual and group insurance policies that lacked prescription drug coverage and other basic elements.
Because the exchange makes it easy for consumers to compare premiums and other features of one health plan against those of another, by next autumn they will be able to see premium increases, state by state and congressional district by district. The insurance shopping season is scheduled to open on Oct. 15, 2014 — 20 days before the midterm elections.
Why is this an immediate challenge? Because the hundreds of insurers offering plans on the federal exchange will begin pricing for 2015 in just a few months. Their chief financial officers should be sweating bullets about the obstacles that HealthCare.gov’s glitches have put in the path of enrollees. Fortunately, October was an early shopping month, mainly for browsing and for those who are sick and highly motivated to get coverage. It wasn’t an important month for enrolling the “young invincibles” — uninsured young people who don’t think they need health care — who will subsidize older, sicker enrollees. But the longer HealthCare.gov remains clogged, the more young invincibles will be discouraged from joining. If that happens, enrollment in the 36 states using the federal exchange will resemble small, high-risk insurance pools composed mainly of the sick — potentially causing premiums to soar in 2015.
Insurers must set rates for 2015 in some states by the end of February, and in most states before June. They can’t raise their rates on plans in the federal exchange now; their prices are locked in for next year. Nor can most carriers recoup any 2014 losses by raising premiums for 2015: Unless most competitors do the same, hiking premiums will chase away any healthy customers they have. But that is the imminent danger — a general rise in rates among health plans on the federal exchange.
The administration can try to head off the problem, or it can blame insurers after the fact. To convince skeptical CFOs that October 2014 will be very different from today, first the Web site and the information systems behind it must work. Additionally, the administration has to prove that it can effectively manage the world’s largest commercial health insurance store. And the president has only a few months to do so.
Health reform is a marathon, not a sprint. The Congressional Budget Office projects that public exchanges will build enrollment gradually — to 7 million in 2014, 13 million in 2015 and 22 million in 2016. A shortfall in 2014 can be made up in 2015.
Except that 2015 is essentially here already. In Massachusetts, we begin planning for open enrollment nine months ahead — and that’s just one state. Even while it struggles with its start-up, Covered California is already planning for 2015.
A health insurance exchange is more than a Web site. It is an insurance store, and to manage it well requires insurance experience, technical know-how, and savvy marketing and sales tactics. The administration has a few months to put together a management team with these skills, dedicated exclusively to running the world’s largest store for private insurance. The Centers for Medicare and Medicaid Services have talented staff, and Jeffrey Zients, a former budget official who’s been called up to help fix the federal exchange’s online enrollment, may be just the guy to corral wayward technology vendors. But selling insurance is not what policy analysts and turnaround specialists do. I had 45 employees dedicated to operating the Massachusetts Health Connector; California has budgeted more than 300. Who’s minding the federal store?
If the administration fails to convince hundreds of insurers that the federal exchange will do a superb job marketing their products next fall, what then?
Premiums will jump, Democrats will blame “greedy” insurers, regulators will review rates and push for price controls. And Republicans can credibly crow: “We told you so.”