20 States Opting Out of Health Insurance Exchanges. What Now?

Posted by on Jan 15, 2013 in Employee Benefit Program, Health, Human Resources | 0 comments

20 States Opting Out of Health Insurance Exchanges. What Now?


Any small business owner who’s landed a big sale knows the feeling: The good news is, we got the contract! The bad news is, we got the contract!

That’s what the Obama Administration is confronting now that we are deep into the implementation phase of the Affordable Care Act. For a while, there was some wiggle room: Mitt Romney promised to repeal the Act if he could get the votes in the Senate. And for a while it looked like he might win.

But the election went to Obama, and so there was no avoiding the issue: The Affordable Care Act requires that health insurance “exchanges” (think “Travelocity.com” for health insurance policies) get set up in all fifty states.

But that doesn’t mean the states have to do it.

In fact, some 20 states have refused.

Why? A combination of factors, including fundamental opposition to an unfunded mandate, and worries that the exchange operators would have to rat out state citizens and small businesses to the feds for not complying with the federal regulations.

“When job creators and Wisconsin families are facing difficult times it doesn’t make sense to commit to a federal health care mandate that will result in hidden taxes for Wisconsin families, increased health care costs and insurance premiums, and more uncertainty in the private sector,” said Scott Walker, the Republican governor of Wisconsin, earlier this year, flatly rejecting the premise of using state money to build an online health insurance exchange.”

Kansas – where the Secretary of Health and Human Services Secretary Kathleen Sebelius once served as insurance commissioner and governor – received a $31 million dollar “early innovator grant” from the Federal government that would require them to set up an exchange. They sent it back.

So that leaves the Obama Administration and his Department of Health and Human Services to do it – and some people are wondering if they can pull it off. Indeed it is looking increasingly as if the Administration has painted itself into a corner.

Selling an airline ticket online is one thing; Implementing an entire outreach, eligibility, and quoting system when different family members are eligible for different plans and ineligible for others, with each state’s policies subject to different regulations by the individual state insurance commissioners, is quite another. From a technological perspective, it is nearly unprecedented for a single government bureaucracy to take on.

Case in point: Army Knowledge Online, the online Web portal for U.S. Army personnel, which has been fraught with problems, bugs, and failed security measures – multi-billion dollar boondoggle that Army officials are now planning to defund over the next five years.

The federal government had a hard time with that program, with just 1.4 million accounts. The same government that gave us the model of health care efficiency known as the Department of Veterans Affairs is now taking on responsibility for a series of vastly more complex programs, servicing hundreds of millions of citizens in at least 20 states, with 20 different Medicaid eligibility requirements, all from a standing start, with no infrastructure in place to support the effort.

Meanwhile, the clock is ticking. All these exchanges must be up and operational by 1 January, 2014. Actually, they don’t even have that long: Enrollment begins October 1.

Systems like this typically take two years or more to develop in the private sector – and the federal government – not exactly known for execution or meeting time and cost schedules – must now do it in just 13 months – and do it 20 times over.

Further, they have to do it with $1 billion. Experts are predicting substantial cost overruns – forcing the DHHS to cut services elsewhere, or perhaps force them to tack a surcharge onto exchange transactions.

A Huge IT Project

The race is on. But the Department of Health and Human Services is tripping over its own shoelaces, right out of the starting gate. The original legislation left the Department with the huge burden of developing the regulatory apparatus that will actually have to operate the “ObamaCare” system. And they are still trying to work through that process. But software developers have to synchronize their products with the federal regulations, and until the Department finalizes its regulations, the software designers can’t do their jobs. As a result, state insurance commissioners have recently learned that they won’t even have the basic software solution they need to work with for another three months beyond the already tight timeline originally planned.

Meanwhile, the Administration must review every plan offered by every insurance carrier in every one of the 20 states that have thus far opted to leave the exchanges up to the Feds – a process that cannot even begin until the Department finalizes the regulations.

The implementation phase of the Affordable Care Act, predictably, is looking like another instance of “ready, fire, aim” policymaking, of a piece with Obama’s January 2009 executive order to close down the Guantanamo Bay detention facility and move the inmates to federal prisons. The president gave the order without assessing the practical difficulties in carrying it out. Gitmo remains open to this day, four years after the order.