Sunday, September 29, 2013

The Affordable Health Care Act's Launch On October 1st––So 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.

But It Does Matter How Efficiently the New Exchanges Launch
Some people are spinning that the administrative problems are not all that significant. After all, the real target date is January 1; the first date people can be covered.

But it does matter.

The country is so cynical about Obamacare that any more screw-ups will only add to that cynicism. The administration has been saying that the prices for the insurance plans are a lot lower than expected and that there will be plenty of good access to a wide variety of providers for these prices.

The administration hasn't managed expectations––it is has spun them.

When people begin to see the prices they will pay and the benefits they get for those prices, many will become even more cynical (See: Benefit Shock).

If there are serious launch problems that goes to the heart of the administration's credibility. After all, they have been telling us this would all work on time––albeit with a few "bumps."

If people have lots of trouble and frustration trying to gain access to sites or call centers or provider lists, word will get around. If they are sick, people will run the gauntlet to get covered. If they are healthy, they won't bother.

If only sick people show up, Obamacare is on a long walk off a short pier.

Seven Million People Signing Up Aren't Close to the Number of People We Will Eventually Need to Make Obamacare Sustainable
We often hear that the administration's first-year objective is to sign-up 7 million people––of which 2.4 million need to be aged 18-34, in order to get a sustainable mix.

It is estimated that about half those who could buy on the exchange, about 26 million, will be eligible for subsidies. Then there are the rest of the people who do not qualify for a subsidy but could still buy on the exchange.

Getting 7 million people out of those millions is only getting a small fraction of the people who are today uninsured or already in the individual market. That is hardly a good cross section of the available pool likely to get us enough healthy people.

There Isn't Rate Shock?
Tell that to the 16 million people in the current individual health insurance market whose plans are not "grandfathered," (85% of the 19 million in the market who will not be able to qualify under the stringent grandfathering rules) and therefore must comply on January 1 with the new Obamacare benefit and rating rules.

Everyone of them will be getting a letter before their renewal date (most renew in January) telling them their old plan no longer complies with the new rules and they will have to move to an Obamacare compliant plan for a different premium.

For the vast majority of these people there will be shock. A reporter recently called me with a letter in hand from the health plan currently insuring a 60-year-old couple. Their rates are doubling.

Many insurers are now approaching their current customers––individual and small group––advising them to change their policy anniversary date in order to avoid, for one last year, the rate shock that isn't supposed to be happening.

No, there hasn't yet been rate shock when states and the Obama administration have focused on promoting the second-lowest cost Silver plan. But in almost all cases, those plans are not the plans people are buying today. These are plans specially crafted for a low-income market––made up of providers willing to take the lowest reimbursements.

But a plan like you have today? The federal subsidy is tied to that second lowest plan. If you want the kind of provider network you're accustomed to you can to expect prepare to pay a lot more, whether you are subsidized or not.

In fact, many insurance companies are only offering these cheaper network plans on the exchange and saving their traditional broad access network plans for sale outside the exchanges.

This is a legitimate strategy on the part of insurers focused on what they think will largely be a low-income population more used to a Medicaid network and worried about saving every dime they can.

But, buyer beware. Consumers need to be very thorough here. A Silver plan is not a Silver plan is not a Silver plan.

Watch-Out for January, February, and March
The real indication of just how well Obamacare was administratively launched won't be known until after January 1. That is when patients will be showing up in doctors' offices expecting their provider to have them in the computer system. That is when the first premium deductions will come out of peoples' bank accounts.

Maybe more importantly, that is when the insurance companies will have to deal with an arcane thing called "adds and deletes." That is when thousands of people's administrative status will have to be changed every month for any number of reasons out of perhaps tens or hundreds of thousands of Obamacare names the insurance company has in their records. If there is a potential for a nasty breakdown in the connections between the exchanges and the insurance companies, it is here.

Then there are all of the people who signed up and paid a month's premium and didn't pay for the next month. Many very low-income people don't have bank accounts making their ability to continue to pay their premiums a challenge. Heck, most low-income people don't have money making it a major challenge for them to keep the insurance.

We Won't Know if Obamacare Managed To Attract a Good Balance of Enrollees For Two Years
So, don't call me on Tuesday and ask me if enough healthy people are signing up.

The 2015 exchange rates and health plans will have to be developed by the participating insurance companies in mid-2014 so they can go through the approval process and be put on the exchange in time for the next year's October 1 open enrollment.

That means health insurance companies will be looking at only a few months of claims experience when 2015 rates are developed. They will know more than they know today but not enough to have a high confidence in their 2015 actuarial projections.

It won't be until we see the 2016 exchange plans and rates that we will have a solid idea of just how Obamacare is doing toward being a vibrant and sustainable program––whether the rates will remain stable or skyrocket because we didn't get enough healthy people signing-up.

Just How Well Obamacare Does Will Likely Vary a Great Deal From State to State
Massachusetts implemented something very close to Obamacare relatively smoothly.

But, they had more ramp-up time to get the job done and had fewer uninsured to start with.

But maybe more importantly, there was wide support for their new law not just from Democrats but also from the provider community, business, and a Republican governor.

In particular, among the "red" Republican states, there has been a steady drumbeat of criticism from political leaders. In many "red" states an overwhelming majority of the electorate just plain hates this new law. That attitude, plus a much lower level sign-up effort, because these "red" states got far less implementation and marketing money from the feds than states building their own exchange, will only hurt the effort.

That takes us back to the challenge of getting the healthy to buy in order to provide the money to pay for the sick. My outlook for these "red" states is far more pessimistic than in the "blue" states that have enthusiastically embraced Obamacare.

Will Obamacare Survive?
I don't think it can survive without a number of major fixes.

I think these fixes are technically doable and should be politically possible. Democrats are right when they say Obamacare was built on Republican principles––at least at the chassis level. Insurance exchanges and advanceable tax credits to buy insurance, after all, have long been Republican ideas.

But to get this thing fixed, Republicans are going to have to be willing to work with Democrats to make "Obamacare" sustainable. For now, Republicans really do have a hate reaction when they hear or say that word.

Let's hope these attitudes become more constructive. After all, this is about solving an important national problem by getting people covered.

And, if Obamacare fails the Democrats' willingness to ever do another market-based health insurance reform bill will go down with it.

Watching them for 20 years, I have little confidence that Republicans in Congress will ever come up with a fundamental health insurance reform bill the country could take seriously as an alternative.

That means that after it became clear Obamacare had failed, it would be the Democrats who would most likely come back with another health insurance reform effort.

I doubt they would even bother to have a public option in that one.
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