Expensive “Glitches” Plague ObamaCare Exchanges

Oct 21, 2013

It's been nearly three weeks since the launch of ObamaCare’s centerpiece, the health insurance exchanges. Whatever you think of the health care law we can all agree it should function and consumers should be able to view and purchase insurance plans. But people are still having difficult times logging in, seeing what insurance choices are available, and enrolling. The Washington Post’s Ezra Klein called it a “failure.”

These difficulties have resulted in miniscule numbers of people signing up. In Alaska, only seven people have enrolled with the help of the state’s community health centers.  In Delaware, it took 15 days to have its first successful sign-up, and it wasn’t easy for hotel-owner, Janice Baker:

She switched to the phone, dialing the toll-free number that the government set up. But after 1½ hours on the phone, her sign-up attempts were for naught when the representative's computer locked up. If that wasn't enough, the same thing happened the next time she called.

Not until Baker went online after clearing her computer's Internet browsing history, cookies and other temporary data — a suggestion she said she found on the www.healthcare.gov site — did she have success.

Enrollment is better in California (28,699) and New York (more than 40,000). The most generous numbers given to the Associated Press are that about 476,000 people have taken some step in the application process on both the federal and state exchanges. However, no one in the administration is saying how many people actually enrolled in an insurance plan.

The problems with the poorly-functioning federal exchanges go beyond simply a glitchy website. As the Wall Street Journal reports, insurance companies that are selling plans on the exchanges are getting bad data:

Emerging errors include duplicate enrollments, spouses reported as children, missing data fields and suspect eligibility determinations, say executives at more than a dozen health plans. Blue Cross & Blue Shield of Nebraska said it had to hire temporary workers to contact new customers directly to resolve inaccuracies in submissions. Medical Mutual of Ohio said one customer had successfully signed up for three of its plans.

The flaws could do lasting damage to the law if customers are deterred from signing up or mistakenly believe they have obtained coverage.

As more of those users attempted to sign up for plans this week, insurers began noticing problems with enrollment data. For now, they say they are largely able to manually correct the errors. But as enrollment increases—up to 7 million consumers are expected to sign up in the next 5½ months—that may not be possible, they worry.

Yuval Levin spoke to some insurance company officials and government worker managing the project about these difficulties:

Meanwhile, the back-end communication between the exchanges and the insurers has been terrible, as is increasingly being reported. The extent of these problems has also been a surprise to CMS, and here too an increase in volume if the user interface issues are solved could lead to huge problems that would be very difficult to correct. CMS officials and the large insurers thought at first that the garbled data being automatically sent to insurers must be a function of some very simple problems of format incompatibility between the government and insurer systems, but that now seems not to be the case, and the problem appears to be deeper and harder to resolve. It is a very high priority problem, because the system will not be able to function if the insurers cannot have some confidence about the data they receive. At this point, insurers are trying to work through the data manually, because the volume of enrollments is very, very low. But again, if that changes, this could quickly become impossible.

Many who think they successfully purchased an insurance plan could be in for a shock when they visit a doctor’s office only to find out that they don’t have an insurance plan. Customers will be mad at insurers who will be frustrated with the federal government, and don’t be surprised if trial lawyers pounce with lawsuits.

Add this frustration to the premium rate shock consumers are experiencing. Even on The Daily Kos, normally supportive of the law, there’s anger.

For months, Health and Human Services Secretary Kathleen Sebelius said the exchanges would be ready to go by October 1. In September, she compared the launch of the exchanges to Apple rolling out a new product in that there are usually problems at the beginning. “Everybody just assumes, ‘Well, there’s a problem, they’ll fix it, we’ll move on,’” she said.

Ok, let’s compare the launch of the federal government exchanges to a launch of a product by a private sector company. First, it might cost less. Farhad Manjoo at the Wall Street Journal writes that while it has cost “at least $360 million, and possibly as much as $600 million” to build the federal exchanges, developing the iPhone cost Apple about $150 million, and many more got to buy that product upon launch.

Why has it been so expensive to build the exchanges? Tim Worstall at Forbes writes that it’s due to government officials poorly managing a complex software project. The Centers for Medicare and Medicaid Services (CMS), managers of the project even though they have no experience launching something like the exchanges, didn’t clearly state the objectives of the project and (to avoid controversy prior to the election) held back the release of regulations that delayed code writing.

These delays meant there was not enough time for testing the massive project, which Secretary Sebelius admitted to the Wall Street Journal [h/t Doug Powers]:

After two weeks of review, the HHS secretary concluded, “We didn’t have enough testing, specifically for high volumes, for a very complicated project.”

The online insurance marketplace needed five years of construction and a year of testing, she said: “We had two years and almost no testing.”

Second, Secretary Sebelius was correct that new technology has its hiccups. The question is how does an organization respond? Today, President Obama announced a "tech surge" to fix the website's problems, and HHS wrote in a blog post that they were bringing in the calvary:

Our team is bringing in some of the best and brightest from both inside and outside government to scrub in with the team and help improve HealthCare.gov.

Which prompted this quip on Twitter:

While it's good that the administration is getting needed help to fix these problems, this doesn’t ease the frustration of potential enrollees or the insurance companies who are selling policies on the exchanges.

What's more, the New York Times reports that while contractors think they know the problems with the website,

the administration has been slow to issue orders for fixing those flaws, and some contractors worry that the system may be weeks away from operating smoothly, people close to the project say.

In the private sector, Megan McArdle at Bloomberg View writes “this system would already have been rolled back, probably less than 48 hours after it was rolled out.” Instead, the President is telling people who can't access HealthCare.gov to call a 1-800 number.

Along with not reducing health care costs, imposing billions of dollars in taxes, and hurting job creationObamaCare isn’t making a dent in expanding coverage to the uninsured because of these serious technical problems. Nevertheless, the status quo isn’t acceptable. Here are two sets of reforms that would reduce the law’s burdens on consumers and businesses, and these wouldn’t require a massively expensive, highly technical rollout. Also, on October 30, the U.S. Chamber will hold it's 2nd Annual Health Care Summit for a discussion of how the public and private sectors can work to increase value and improve outcomes in our health care system.

UPDATE: The Washington Post reports that Healthcare.gov failed a stress test only a few days before launch [via memeorandum]:

Days before the launch of President Obama’s online health ­insurance marketplace, government officials and contractors tested a key part of the Web site to see whether it could handle tens of thousands of consumers at the same time. It crashed after a simulation in which just a few hundred people tried to log on simultaneously.

Despite the failed test, federal health officials plowed ahead.

After a test one month before launch, insurance companies were telling the federal government to rethink its launch date:

The Centers for Medicare and Medicaid Services (CMS), the federal agency in charge of running the health insurance exchange in 36 states, invited about 10 insurers to give advice and help test the Web site.

About a month before the exchange opened, this testing group urged agency officials not to launch it nationwide because it was still riddled with problems, according to an insurance IT executive who was close to the rollout.

“We discussed . . . is there a way to do a pilot — by state, by geographic region?” the executive said.

BloombergBusinessweek reports that developers were so rushed to meet the launch date that "as recently as last week, the exchange’s computer code contained placeholder language that programmers typically use in preliminary drafts, said Clay Johnson, a former White House presidential innovation fellow during 2012-2013."

A private sector company would've likely rethought the rollout, but not the federal government. Ed Morrissey at Hot Air, calls this mess "entirely self-inflicted, and could be seen coming for months — by the administration itself."

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