What $634 Million (And Counting) Hasn't Taught The Federal Health Exchange: Customer Experience Matters

About a half-dozen years ago, I was asked to develop a small group market entry strategy for a prominent regional broker. That gig led to our design and development of what would now be called a prototype health exchange platform.

The broker client wanted us to be particularly solicitous of the insurer partner which would be involved in the project: a very large national health insurer. Because we were going to try something new, it was particularly important that the insurer see this as a good deal for them. Our task was to help to "heal their pain."

So we started by asking the insurer what their biggest problem was in dealing with smaller groups. Their answer involved the "paper chase" entailed in setting up new business. Their application process was all on paper. A whopping 80% of the new business applications the company received from small groups needed to be returned to the group at least once because something was incorrect or incomplete with either the group or employee application forms. And when the applications were finally completed and sent to small group underwriting, only about three percent of the applications actually resulted in new business.

Those dismal outcomes meant a horrific amount of inefficiency and waste in the sales and underwriting process. Could we find a way to assure that the insurer wouldn't receive any applications until the entire group, including employees, had filled out their forms completely and correctly, so that they'd be "scrubbed" before underwriting received them?

This is not that hard to do, as anybody who's ever bought anything on-line can attest. We broke the application process into stages, and the applicant couldn't proceed to the next stage until the previous stage had been completed. And only when the entire process was completed could the group receive any kind of binding quote.

We launched the site and waited. And waited. And waited, while applications barely trickled in. Business owners were almost  never moving past the first couple pages of the process. We contacted a few to find out why.

Turned out the customer had no interest in doing all the work up-front. They wanted to "window shop" before starting down the application path, and wanted to compare products and receive quotes, even basic ones, on the plans they were shopping for. If they liked what they saw, if the plans' basic quotes seemed reasonable compared to their current coverage, then they'd apply.

We made a quick fix, allowing groups to obtain basic quotes after providing the system with some very basic information. If they liked the product mix, then they could apply.

And we added a couple other features which enabled business owners or their agents to track the application process in real time, identify who within the group had completed their applications and who hadn't yet, and created personalized messages to the employes who hadn't completed the task yet, reminding them that we needed their applications. This reduced a lot of aggravation for agents and group officials.

The result was a flood of group applications...hundreds...in the first couple weeks after re-launch. Which created another problem: the insurer's underwriting department was swamped with more applications than the could handle. They begged us to turn the process off for awhile so they could catch up.

We learned a great lesson. What the insurer wanted from the process..."scrubbed" applications, filled out accurately and completely...was at odds with the customers' desire for transparency and freedom to shop. We fixed the problem...for less than $100,000...to put the customers' interests first...and opened the floodgates.

Customer experience matters.

This "true life adventure" is what came to mind as I read accounts of the missteps which have occurred with the launch of the Federal Health Exchange/Marketplace/Call-It-Whatever-You Want. In the first week or so, fewer than 5,000 people had successfully wound their way through the Exchange's bureaucratic obstacles to buy health coverage. Literally millions more have been frustrated by long waits, error messages, and system crashes.

Experts say these are not "glitches" which can be easily or quickly fixed. The problems are built into the system, the result of two things: 1) the need to fulfill the expectations of the multiple federal agencies which all have a "piece" of the exchange process, all of whom seem to require a bunch of information from applicants before the agencies can do their jobs, which results in; 2) applicants being required to enter a bunch of personal financial data into the system to open an account before they can begin to shop.

Let's pretend for a moment that as many as 20% of "shoppers" are seriously ready to apply for and purchase coverage when they access the exchange system (my estimate is high, I'll bet). That would mean that 80% of those "shoppers" are being required to send a flood of unnecessary data into the pipeline before they even get to begin "window shopping."

So right now, the exchange pipeline is the focus of a "perfect storm:" the pipeline is choked with a lot of unnecessary data, which creates a lot of error messages and system crashes; federal agencies don't really know what 20% of the data they receive will be meaningful to them down the line; and most importantly, those who are seeking health coverage, and who will be paying for it...the customers...are getting frustrated, and will begin staying away by the millions.

The "What? Me worry?" attitude of HHS Secretary Sibelius and the rest of the Administration compounds the problem. They say, "these are little things which can be easily fixed." Customers continue to be frustrated. Word gets out that the federal exchange is a pain to work with. Insurers are frustrated that the flood of new applicants they've been told to expect aren't materializing. Nobody's happy. When an Administration official finally says, a month or three from now, "Everything's fixed; all are welcome," who's going to believe them?

It's a real clown show, which lends additional credibility to my confidence that, contrary to the fears of many insurers and brokers, the federal exchange will not be a particularly formidable "competitor" with the private sector (though the small number of  state exchanges may be a different story). The government doesn't know how to sell nothin'. Bureaucracies are good at following rules, not at serving customers...and especially not at anticipating their needs. These are not new lessons, but the current fiasco is yet another case in point.

What is really quite infuriating is that CGI Federal, the big-systems-consulting firm which won the (sole source) federal contract to build the exchange, and which might have been expected to bring at least some market savvy to the process, could be either so clueless or so cynical that they were unable to see this coming.

CGI is a big firm with a knack for obtaining big government contracts. It is possible that negotiating the procurement bureaucracy is more at the core of the firm's competency than its ability to do the job.

And of course, CGI can hardly be considered solely to blame. The fact that two-thirds of states blew off the implementation of their own exchanges in deference to the federal government, significantly affected the scale of the engagement...though not necessarily the complexity. And with all the political intrigue surrounding the implementation of Obamacare, consultants were reportedly unable to begin writing code until about six months ago. This makes the federal government, and particularly the HHS Department's Center For Consumer Information And Insurance Oversight (CCIIO), which "owns" the federal exchange, a consultant's ideal client: deeply troubled, under a tight deadline, with no particularly definitive idea about how to achieve its goals, but with very deep pockets.

Those deep, deep pockets have clearly been necessary. Because, while the original budget for building the federal exchange was "not to exceed" $94 million, by the time of launch, CGI and its subcontractors had been paid over $634 million for the work they've done to date...on a platform which doesn't work. And they stand to be paid a couple hundred more to correct problems at "the front end" of the exchange and to build out "the back end" administrative functions necessary to the ongoing management of the exchanges.

How many of those hundreds of millions of dollars were actually spent on user testing? Probably none. When development projects come under a time crunch, one of the first casualties is often user testing. And from CGI's perspective, the "user" is their client. The way to keep revenue flowing is to keep the client happy, and to get paid for putting out fires...even if they're fires you set yourself. Anyone who's uncomfortably watched "House Of Lies" on Showtime knows that most big consulting firms' core competency is selling services, not necessarily solving problems.

I'd like to think this is an expensive object lesson for CCIIO: people matter more than bureaucracies. The market matters more than rules.

Probably not though...When politics and greed team up, it's always the regular people who get it in the teeth...