Feds Face Challenges In Launching U.S. Health Exchange

With many states unwilling or unable to get insurance exchanges operational by the health law deadline of Jan. 1, 2014, pressure is growing on the federal government to do the job for them.

But health care experts are starting to ask whether the fallback federal exchange called for in the 2010 health law will be operational by the deadline in states that will not have their own exchanges ready.

“It will be an enormous uphill battle to get this thing launched on time,” says Robert Laszewski, a consultant and former insurance executive who is watching the effort closely.  “They have a Herculean task, even if everyone was cooperating.”

The federal exchange – like the state models – would be a one-stop website where individuals and small businesses could compare insurance policy offerings on price, coverage and quality.

The exchanges also will help applicants determine whether they are eligible for Medicaid or for federal subsidies or tax credits to help offset premium costs.  Thus, the exchanges will need to incorporate a host of state and federal data on income, employment and residency. Enrollment through the state and federal exchanges is scheduled to begin in the fall of 2013.

So how far along are the feds? 

It’s hard to assess, because the Obama administration has “been very reluctant to provide any updates on progress,” says Daniel Schuyler, a director at consulting firm Leavitt Partners in Salt Lake City, which is advising states on the establishment of exchanges.

The federal Department of Health and Human Services did not respond to requests for comment.

All but a few states accepted initial federal planning money for exchanges, and 28 of them plus the District of Columbia have received additional grants.

About a dozen have authorized establishment of exchanges, but even those may not be able to meet the deadlines for enrollment. Alaska, Florida and Louisiana have said flat out that they won’t establish exchanges of their own. 

That guarantees that a federal exchange will be needed. But those crafting it face enormous technical, political and financial challenges.

Technically, federal data from a host of agencies needs to be collected in one system, which then must be linked with differing computer systems in 50 states plus the District of Columbia.

Matt Salo, executive director of the National Association of Medicaid Directors, notes that computer systems in some states are quite old and may need substantial upgrading. While the federal government is putting up 90 percent of the money for the upgrades, Salo says there is some question about whether there is enough “physical capacity in the IT systems world” to get it all done in time.

 “Our members have been having conversations with the vendors since the law was passed, and they are coming to the gradual conclusions that no, they don’t have the capacity to do this everywhere in the time frame,” says Salo.

Political threats also abound. No one knows whether the Supreme Court will invalidate part or all of the law next year. It is also not clear how much funding will be available to launch and operate the federal exchange, and the 2012 presidential and congressional elections could delay or derail the entire process if Republicans are victorious.

Still, at this point Schuyler says he is confident that the Obama administration “will be able to provide a federally facilitated exchange” in time to meet the law’s requirements.

Although federal officials are saying very little about their progress, they have signed contracts worth more than $150 million with several private contractors who are working on creating the federal exchange. Late last month, Oregon’s top insurance regulator, Teresa Miller, was hired by the Department of Health and Human Services to oversee development of health insurance exchanges.

The administration is taking a three-pronged approach, says Schuyler, who formerly was director of technology at the Utah Health Exchange.

First, a Federal Data Services Hub is being built to pull together needed information across agencies, such as the IRS and Social Security. States will be able to “plug in” to that data hub if they run their own exchanges.  The Department of Health and Human Services has signed a five-year contract worth roughly $69 million with Columbia, Md.-based Quality Software Services to set up the hub.

The second prong is to beef up the healthcare.gov site to include more information on health insurers and the health law.  While the site already has some information on private insurers by zip code, more is coming.

And finally, the federal government has signed a $94 million contract with Fairfax, Va.-based  CGI Federal Inc. to build the federal exchange. The firm is also helping with the healthcare.gov site. A company spokeswoman referred questions to the government.

Despite the contracts, some state officials, Medicaid directors and health-care experts are nervous. 

Many significant questions remain unsettled about the operation of exchanges, they say, whether the marketplaces are managed by the states or by the federal government. 

They still don’t know, for example, the final rules on “essential benefits” the federal government will require insurers to offer in all policies sold on the exchanges. Details on what the federal exchange will look like are still lacking.  Also not clear are the standards – and the work required – for the states to upgrade their computer systems so they will link with the federal data hub. States will be assessed in January 2013 as to whether they will be ready by the fall of that year.

“There’s an enormous amount to be decided and put together and built before these key milestones can happen,” says Laura Minzer, executive director of the Illinois Chamber of Commerce’s Healthcare Council. “The fact that so little has happened [at the state and federal level] is good cause for alarm.”

What’s happening in Illinois shows that even when a state has authorized an exchange, political disagreements can stymie efforts to move forward. 

“A study group met over the summer, but didn’t come up with any clear recommendations,” says Minzer.  A big part is politics, she adds.  Some lawmakers – both Democrats and Republicans — fear that any movement to implement the law threatens their re-election chances. Others want to wait to see how the Supreme Court rules.

“Even though we are a blue state – the Democrats have a majority in the House and Senate – there’s a nervousness going into the [2012] elections,” she says. “There’s speculation that nothing will happen on the exchange until after the elections.”

It is possible to set up exchanges fairly fast, says John McDonough, one of the principal authors of the Massachusetts law that created a similar site, called the Connector.  In that state, the exchange was up and running within about six months of the law’s enactment, he says.

“Massachusetts had a head start because it had already done a modernization of its data system, so it’s not completely analogous, “ says McDonough, now director of the Center for Public Health Leadership at Harvard School of Public Health, “but it doesn’t take as much time to get an exchange up as a lot imagine.”

McDonough says in his conversations with Obama administration officials, he has found them “hell-bent on meeting the Jan. 1, 2014, deadline by hook or crook.”