Health and Human Services Secretary Kathleen Sebelius should have known what was coming. (Image... [+]
Back in March, at an insurance industry conference in Washington, the problems were apparent. Henry Chao, chief information officer at the Centers for Medicare and Medicaid Services, openly fretted that the exchanges wouldn’t be ready by October. “I’m pretty nervous—I don’t know about you,” he told the crowd. “Let’s just make sure it’s not a third-world experience.” At the time, Chao’s comment seemed like an attempt at dark humor. One week into the launch of Obamacare, however, it’s not a joke: it’s literally easier to blog from the Kenyan border than to sign up for insurance on Obamacare’s federal exchange. Why is this happening? Politics. The Obama administration was more afraid of delaying the launch of Obamacare, than they were of botching it.
All you need to know about the rollout of Obamacare’s subsidized insurance exchanges is that, so far, the toughest questions posed to the Obama administration have come from Comedy Central. “We’re going to do a challenge,” Jon Stewart told Kathleen Sebelius on the Daily Show. “I’m going to try and download every movie ever made, and you are going to try and sign up for Obamacare, and we’ll see which happens first.”
IT problems have been evident for at least 8 months
We’ve known since at least February that the exchanges were looking shaky. There were Chao’s comments at the insurer conference. There was a survey by Edifecs, a health-care IT consulting firm, that found that 70 percent of insurers were “skeptical that the [exchanges] will be ready to launch by the October 1, 2013 deadline.” 93 percent said that exchanges were not seeking enough feedback from insurers; 75 percent were “very concerned with being able to reconcile premium, enrollment, and payment records” from exchanges; and 88 percent were “concerned about potential disruption to existing IT enrollment infrastructure and processes.”
The White House, and its progressive allies, have repeated the talking point that it’s recalcitrant Republicans who have sabotaged the law, by refusing to set up state-based exchanges in red states. But Kevin Counihan, chairman of the insurance exchange in blue-state Connecticut, has repeatedly expressed frustration at the contradictory instructions from Washington.
“Sometimes it feels like we’re driving a car and then changing the tire at the same time,” he told the Associated Press in March. “We’re going to have a challenging enough time providing the quality of service that our residents deserve in Connecticut with the deadline that we have. If they keep adding new regulations, I’m sorry. We have to suddenly say, ‘enough is enough.’” Counihan is one of the many people trying in good faith to implement the law who says, “I wish we had one more year.”
Widespread privacy violations
Michael Astrue, who stepped down as Commissioner of the Social Security Administration earlier this year, has expressed grave concerns about government reports stating that the exchanges cannot secure sensitive personal information from hackers and identity thieves.
“A functional and legally compliant federal exchange almost certainly will not be ready on October 1,” says Astrue. “The reasons for failure are not short timelines (Congress gave HHS more than three years), political interference (Congress has not focused on ACA systems), or complexity (states have built well-designed exchanges). The reason is plain old incompetence and arrogance.”
According to Astrue, CMS “threw together an overly simplistic system without adequate privacy safeguards,” leaving exchange enrollees “open to identity theft, lost periods of health insurance coverage, and exposure of address for victims of domestic abuse and others…the beta version [of the exchanges] jammed through a few months ago will, unless delayed and fixed, inflict on the public the most widespread violation of the Privacy Act [of 1974] in our history.”
What have we learned since October 1? That these experts raised valid concerns, concerns that were largely ignored by the White House.
‘At lower volumes, it would work fine’
The Obama administration has pointedly refused to release enrollment figures for the exchanges, presumably out of concern that the numbers are too small. Health and Human Services Secretary Kathleen Sebelius even went so far as to say that the login snafus were “a great problem to have,” because they’re “based on the fact that the volume has been so high and the interest is so high.”
Todd Park, the White House’s Chief Technology Officer, said that “at lower volumes, it would work fine,” an excuse that has already become the butt of software-industry jokes. We’re constantly told that there are 50 million uninsured Americans who are desperate for subsidized health coverage. But the U.S. Department of Health and Human Services, with its $1 trillion-a-year budget, can’t anticipate the need to build a system that can handle the average daily traffic of the Drudge Report?
The White House claims that 8.6 million consumers visited the federal exchange over its first four days of public operation. On the other hand, insurance industry sources suggest that day one enrollment figures in the federal exchange were “in the single digits.” The one person who reporters found to have enrolled on the exchange, it turns out, was fibbing.
It appears that a major reason why the federal exchange has borne the brunt of the problems is that the website asks you to set up an account, inclusive of your Social Security number, before shopping for prices on the exchange. This is in sharp contrast to the site sponsored by eHealthInsurance.com, that allows anonymous users to look at plans and prices. Verifying these accounts has bogged down the login process. Matthew Hancock, an independent web design expert, told Reuters that “they set up the website in such a way that too many requests to the server arrived at the same time.”
Less than 1% of applicants contain sufficient information
It gets worse. Even if you managed to create an account on healthcare.gov—a painstaking and time-consuming task to say the least—you’re not assured of actually being able to buy the plan you like. One insurer told Dan Mangan of CNBC that “about half” of the applications they’ve received are “corrupted” due to “incomplete data.”
According to Sumit Nijhawan, CEO of health IT company Infogix, “‘1 in 100’ enrollment applicants being sent from the federal marketplace have provided sufficient, verified, information.” Continued Nijhawan, “It is extraordinary that these systems weren’t ready…it could be a public relations nightmare.” Added Dan Mendelson of Avalere Health, “This is not a traffic issue. Right now, the systems aren’t working.”
IT developer Luke Chung, who supports the health law, blogged scathingly about his experience logging into healthcare.gov. “To deliver such low quality results requires multiple process breakdowns. It just proves you can create bad solutions independent of the choice of technology…it wouldn’t pass a basic code review. It appears the people who built the site don’t know what they’re doing, never used it, and didn’t test it.” (One Reddit user describes healthcare.gov as a case study in “how not to optimize a web site.”)
If delays continue, what happens to the individual mandate?
Remember that the exchanges sell a product that, thanks to Obamacare, nearly every American is now required to buy, on pain of a “tax penalty.” If the problems can get fixed within a month or two, it’s probably not a big deal. But if the delays go longer than that, we have a quandary: How do we force people to buy a product that Obamacare’s exchanges aren’t competent to sell?
A one-year delay in the implementation of the individual mandate has been one of the requests made by Republicans in the government shutdown and debt ceiling negotiations. I don’t believe that the Obama administration has the legal authority to unilaterally delay the mandate without an act of Congress. But that hasn’t stopped them before.
HHS has unquestioned legal authority to lengthen the open enrollment period, past the end of March, if it feels that not enough people—or not enough young people—are signing up. But if the individual mandate is still in effect, Americans will still have to pay a fine if they go without health insurance.
Obamacare’s permanence is not a foregone conclusion
This brings us back, full circle, to the politics of Obamacare. Both the White House, and its most intense opponents, agree on one thing: that once Obamacare’s subsidies start flowing, the law will be impossible to repeal. That’s likely true, and that’s why the administration was willing to endure all of these near-term glitches.
But as more and more people have negative experiences under Obamacare—whether it’s long wait times on the web site, or drastically higher insurance rates at home—it’s far from clear that Republicans won’t eventually have the opportunity to make major changes to the law. Shutting down the government over Obamacare was the latest of a long line of stupid ideas promulgated by certain congressional Republicans.
But Democrats have done something of questionable merit as well. They’ve plunged headlong into Obamacare on the hope that the law, warts and all, would take hold and gain the affection of the public. There’s a good chance that they’ll be wrong.
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INVESTORS’ NOTE: Aetna (NYSE:AET), UnitedHealth (NYSE:UNH), WellPoint (NYSE:WLP), Molina (NYSE:MOH), and Cigna (NYSE:CI) are leading players in the exchange market nationwide.
