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Monday, October 21st 2013

The Rollout Isn’t Going To Fell Obamacare

The roll out of healthcare.gov has been a poorly mitigated disaster. For the federally run exchanges, which represent the majority, connection problems and webpage load times and login dogles have made signing up for health insurance essentially impossible for perhaps hundreds of thousands of people.

These problems, seen by consumers, underlie even larger issues with the system however,

[E]xperts said the technological problems of the site went far beyond the roadblocks to creating accounts that continue to prevent legions of users from even registering. Indeed, several said, the login problems, though vexing to consumers, may be the easiest to solve. One specialist said that as many as five million lines of software code may need to be rewritten before the Web site runs properly.

“The account creation and registration problems are masking the problems that will happen later,” said one person involved in the repair effort.

Those who have successfully started or completed applications are having, at times, their data transmitted ineffectually to the insurers they’re trying to purchase from.

Insurance executives said in interviews that they were frustrated because they did not know the government’s plan or schedule for repairs. Insurers have found that the system provides them with incorrect information about some enrollees, repeatedly enrolls and cancels the enrollments of others, and simply loses the enrollments of still others.

Correcting those errors, specialists said, could require extensive rewriting of software code. Insurers said it could be weeks before their data and the government’s could be reconciled.

It is a source of major criticism of the entire endeavor. And also some humor.

The task of integrating the expensive and numerous contractors who built the exchange website has been something seemingly hairbrained.

CMS did not hire a general contractor to manage the exchange project but handled that overall technical management task itself. None of the people I spoke with wanted to get into how this decision was made or at what level, but all of them agreed that it was a very bad idea and was at the core of the disaster they have so far experienced.

The work to fix this is going to take months and such long term problems are calling into question how the exhanges’ numbers are going to look after the first year with low volume enrollment of generally sick people.

One key worry is based on the fact that what they’re facing is not a situation where it is impossible to buy coverage but one where it is possible but very difficult to buy coverage. That’s much worse from their point of view, because it means that only highly motivated consumers are getting coverage. People who are highly motivated to get coverage in a community-rated insurance system are very likely to be in bad health. The healthy young man who sees an ad for his state exchange during a baseball game and loads up the site to get coverage—the dream consumer so essential to the design of the exchange system—will not keep trying 25 times over a week if the site is not working. The person with high health costs and no insurance will. The exchange system is designed to enable that sick person to get coverage, of course, but it can only do that if the healthy person does too. The insurers don’t yet have a clear overall sense of the risk profile of the people who are signing up, but the circumstantial evidence they have is very distressing to them. The danger of a rapid adverse selection spiral is much more serious than they believed possible this summer. They would love it if the administration could shut down the exchange system, at least the federal one, until the interface problems can be addressed. But they know this is impossible.

But such pressures are not insurmountable and despite some critics’ contentions a bad year for the insurers is not going to ruin the program or dry up the marketplaces. The subsidies are going to be too large and the pressures from the administration too great. And even if this substantially drives up the costs and delays the program – even delaying the individual mandate – it isn’t going to be a death kneel to Obamacare.

The technical architecture of the federal exchanges and to a lesser extent the state ones has been very badly screwed up. The problem may be so bad as to render Obamacare’s rollout impossible in practice at this point. But it may not be. And right now no one knows if it will or will not. My gut sense after listening to these insiders, for what little it’s worth, is that it’s not likely that the situation will prove to be much worse than it now seems, and it’s more likely that it will prove to be less bad than it now seems.

The time frame for Obamacare may change and the costs may grow but the program is going to keep pressing on and do, eventually, what it was decided to. Nor do I think we can judge the program solely based on this royal screw up. It will fly or fall when the glitches are finally overcome and the marketplaces are truly up and running and then we’ll get a feel for whether this part of the Affordable Care Act can improve access and health and help keep down costs.