How did it go? Unavoidably, that will be the big question come Tuesday.
But there will be much more to it than that.
A 180-Day Open Enrollment––Not a One-Day Open Enrollment
What happens on the first day, for good or bad, will constitute only a tiny percentage of the open enrollment period. Consumers will likely visit the new websites many times before they make any decisions, and that is exactly as it should be.
Many of the health plans touted as being low-cost plans are going to be very limited access plans. It won’t be easy for consumers to compare one plan’s provider network to the other. In the best of circumstances, consumers will be confused by what is being offered for some time and will have to make a major effort to make sense of it for themselves.
Let’s not forget, they will be buying something that will cost thousands of dollars––their money or the government’s––and that kind of purchase will never be as simple as going to Amazon and buying a book.
I will suggest that if the local press wants to be helpful they will waste less time asking how things went the first day and more time doing stories on the quality of the various health plans in their local communities––particularly over provider access, which will be the only major product differentiator between health insurance companies.
Will There Be Administrative Problems With the Exchanges?
There already are. And, there will be lots more.
During the last 24-hours I have been told that the information technology testing between insurance companies and the federal government, particularly around the government telling insurance companies who they will be covering, continues to be a real mess.
But whatever obvious problems there are at launch, there will likely be more problems and more serious problems behind the scenes in the lead-up to January 1, the initial problems will be worked out in a few days or a few weeks. Operational expectations are now so low for Obamacare’s health insurance exchanges a small disaster will be considered a political victory.
Will we have rate shock?
It looks to me like consumers will have a choice when they get to look at the health plans available on the new “Obamacare” health insurance exchanges––rate shock or benefit shock. While there has been lots of focus on the issue of rate shock, I will suggest that just as big an issue may well be benefit shock—that consumers will look at what they will be getting for their premium payments and that they will be surprised at what their out-of-pocket costs will be and before they get anything.
The chart above was prepared by Covered California, the state-run California exchange. This chart does not include specific California plan premiums. What it does show is the net of subsidy cost a single person would pay at the various income points for the second lowest cost Silver plan, as well as the deductibles and co-pays they can expect to see from the standard Silver plan.
While the benefit plan structures may vary a bit from state to state, this gives us a pretty good idea of what consumers can expect in all of the states (click on chart to enlarge). A single person making $22,980 per year would face a premium, net of subsidies, of $121 per month. That’s pretty good.
Come October millions of people will be applying for tens of billions of dollars in federal health insurance premium subsidies on the honor system.
On the Friday after the Fourth of July––when the administration apparently hoped no one would be paying attention––the Obama administration dropped 606 pages of regulations. Buried inside was the news that that insurance exchanges can ignore any personal income information they get from the Federal Data Hub during 2014 if it conflicts with “attestations” made by individuals.
That came three days after the administration announced it was putting the employer mandate on hold––and therefore not requiring detailed information from employers regarding the health plans they offer to their workers. The administration said the delay was because of the burden the reporting put on employers. But, was the administration ready to handle the data?
Because there will be no employer reporting in 2014, the administration also said in the Friday regs that the new health insurance exchanges “may accept the applicants attestation regarding enrollment in eligible employer-sponsored plan…without verification.” Given the incredibly complex “ObamaCare” 60%/9.5% employer benefit eligibility rule, that will be a challenge for most citizens.
But here’s the biggest deal in the new “ObamaCare” regulation: The exchanges are to rely upon the applicant’s statement regarding their income the vast majority of the time. Instead of requiring proof of their income, as had been expected when the Federal Data Hub couldn’t verify someone’s representation, the exchanges will only do a formal check on a “statistically valid sample” of applications.”
For those not part of this “statistically valid sample,” “the Exchange may accept the attestation of projected annual household income without any further verification.”
Apparently, millions of people will receive tens of billions of federal premium subsidy dollars “without any further verification.”
It would appear that the administration is going to rely upon subsequent 2014 tax filings, made in early 2015, to reconcile what it paid people compared to what they were actually eligible for.
That presents some big issues.
The administration suddenly announced last night that the requirement that all employers with 50 or more workers offer health insurance has been delayed until 2015.
If an employer with 50 or more workers did not provide health insurance to their full time workers in 2014, they would have been subject to a fine of $2,000 per worker. The employer would have also been subject to a $3,000 fine for each worker that went to the insurance exchanges if the employer package was not affordable.
Why did the administration delay the large employer mandate?
Because many employers have been in the early stages of planning to cut back the hours of workers in order to avoid having to offer insurance to those customarily considered part time, those who work at least the 30 hours per week the law established for defining a full time worker––and they haven’t been bashful in telling their employees why. In addition, there has been growing evidence that some employers were holding back on hiring in order to avoid more of the mandate costs at a time of high unemployment.
While the administration cited employer administration issues with mandate reporting as the reason for the delay, the bottom line is that the Affordable Care Act (“Obamacare”) was looking like it was about to be successfully labeled a job killer and the administration wanted to avoid that.
You also have to wonder if all of the reporting challenges were just with employers or was the administration also having trouble with the complex employer mandate information systems they will ultimately have to build?
After months of speculation on just where the Obama administration is toward the development of the new health insurance exchanges, the Government Accountability Office (GAO) has issued a 48-page report complete with timelines and a detailed report on just where the Obama administration is––or at least was last month.
The key summary:
“Much progress has been made, but much remains to be accomplished within a relatively short amount of time. CMS’s timelines provide a roadmap to completion; however, factors such as the still-evolving scope of CMS’s required activities in each state and the many activities yet to be performed—some close to the start of enrollment—suggest a potential for challenges going forward. And while the missed interim deadlines may not affect implementation, additional missed deadlines closer to the start of enrollment could do so. CMS recently completed risk assessments and plans for mitigating risks associated with the data hub, and is also working on strategies to address state preparedness contingencies. Whether these efforts will assure the timely and smooth implementation of the exchanges by October 2013 cannot yet be determined. ”
Regarding the Data Hub:
“FFEs [the federal exchanges] along with the data services hub services are central to the goal under PPACA of having health insurance exchanges operating in each state by 2014, and of providing a single point of access to the health insurance market for individuals. Their development has been a complex undertaking, involving the coordinated actions of multiple federal, state, and private stakeholders, and the creation of an information system to support connectivity and near real-time data sharing between health insurance exchanges and multiple federal and state agencies. Much progress has been made in establishing the regulatory framework and guidance required for this undertaking, and CMS is currently taking steps to implement key activities of the FFEs, and developing, testing, and implementing the data hub. Nevertheless, much remains to be accomplished within a relatively short amount of time. CMS’s timelines and targeted completion dates provide a roadmap to completion of the required activities by the start of enrollment on October 1, 2013.
Last week, I received my weekly email update from the Maryland health insurance exchange:
Maryland Health Connection completed its Final Detailed Design Review (FDDR) live system demo on Thursday, May 30. The FDDR is a federal stage-gate required of all state-based exchanges. Maryland Health Connection successfully demonstrated end-to-end enrollment of a split family scenario including user log in, eligibility determination, real-time data verification through the Federal Data Services Hub, enrollment into plans, payment and file generation to be sent to an insurance carrier. This major information technology milestone received high marks by federal partners. We will continue with development of Maryland Health Connection over the next several weeks and begin user acceptance testing in July.
This report tells us a few things.
First, the Maryland health insurance exchange is on track to launch on time and ready to serve all comers. I continue to be impressed by how well this state-run health insurance exchange is working toward implementing the Affordable Care Act (“ObamaCare”) on October 1, 2013.
Second, apparently the Federal Data Hub is up and running. While that is what the Obama administration has been telling us, it has been hard to find anyone who has actually seen it or used it.
Third, Maryland has its system ready to exchange eligibility and premium information with the health insurance plans––perhaps the biggest challenge the new exchanges, state or federal, face.
Across the country, I am not so worried that consumers will have a website to go to on October 1 in order to shop for the new health plans as I am concerned with how things will go on January 1, 2014 when patients show up in a doctors office. If we don’t have a clean exchange of eligibility and payment information there are going to be lots of people who will have their doctor or hospital telling them they don’t know anything about their coverage.
I have to say I was surprised with the press reports last week that there wasn’t “rate shock” in California when the California exchange offered preliminary information about their new plans and rates.
At least one prominent health actuarial group had predicted a 30% baseline increase in costs for California’s new health insurance exchange plans under the Affordable Care Act (ObamaCare”).
As the director of the California exchange put it, “These rates are way below the worst-case gloom-and-doom scenarios we have heard.”
But a few days later there is lots more information coming out and it would appear we have a case of apples to oranges to grapefruit. And, we have a pretty good case of rate shock.
First, the exchange officials pointed out that we have to be careful to compare apples to apples when looking at 2013 rates and comparing them to the 2014 exchange rates because the 2014 exchange plans have far more generous benefits.
Yes we do, particularly when the California exchange forces us to give up our apple and buy a more expensive orange.
One of the reasons health insurance in the exchange will cost a lot more in most states is because the new health law outlaws many of the existing plans now being offered and requires only those much richer plans to be sold.
Are people going to get more coverage for their money? Yes. Do they want more coverage if the premium costs for those plans is a lot higher? Likely yes if taxpayers are paying for most of it. If not, clearly they didn’t want to pay for it before. Come January, lots of California consumers in the small group and individual market are going to get a letter from their existing insurer telling them their current plan is no longer available and the cost of the new required plans will be a lot more.
Simply, the new law is taking plan design choices away instead of letting the consumer decide what is good for them. Does that matter in California?
Every week, I get an email from the Maryland Health Connection––the state run health insurance exchange.
Maryland is one of a minority of states that are building their own Affordable Care Act (“ObamaCare”) exchange.
You can go to their site and sign up for these weekly updates.
Let me suggest that Maryland is an example of what an on-track and well organized effort looks like for any exchange hoping to be ready to enroll people on October 1––and ensure that they will be covered should they walk into a doctor’s office on January 1, 2014.
Maryland is simply ticking through all of the key milestones they must meet. The latest release reviewed its efforts to launch the connector program (those who will assist people in signing up), the status of the carrier filings (Maryland Blue Cross has filed for an average increase of 25% for individual coverage warning young people could pay as much as 150% more), the timelines for carrier submissions of coverage packages, and they outlined their third party administration program to be able to launch the small business choice (SHOP) option––unlike the federal exchange Maryland will have the SHOP option.
As the Obama administration continues its top secret effort to build federal insurance exchanges in about 34 states while 16 states are doing it on their own, that continues to be the big question.
HHS is using IT consulting firm CGI for much of the work on the exchanges and the federal data hub. CGI has their plate full since they are not only working on the federal exchange but also doing work for the state exchanges in at least Colorado, Vermont, and Hawaii.
Earlier this month, the Senate Finance Committee held an oversight hearing. The Obama guy in charge of exchange development testified before them. I thought it was notable that it was the Democrats who expressed the greatest concern, and frustration, over senators not getting a clear idea for just where the administration is toward the goal of launching the new health insurance exchanges on October 1.
So far California has received $910 million in federal grants to launch its new health insurance exchange under the Affordable Care Act (“Obamacare”).
The California exchange, “Covered California,” has so far awarded a $183 million contract to Accenture to build the website, enrollment, and eligibility system and another $174 million to operate the exchange for four years.
The state will also spend $250 million on a two-year marketing campaign. By comparison California Senator Barbara Boxer spent $28 million on her 2010 statewide reelection campaign while her challenger spent another $22 million.
The most recent installment of the $910 million in federal money was a $674 million grant. The exchange’s executive director noted that was less than the $706 million he had asked for. “The feds reduced the 2014 potential payment for outreach and enrollment by about $30 million,” he said. “But we think we have enough resources on hand to do the biggest outreach that I have ever seen.”