It's kind of a disgrace, is what it is,,,
It seems that whenever Our Friends In Government are flogging new legislation, they are fast to play the small business card. Certainly as President Obama was flogging PPACA, he had kind and compassionate words for the many, many small business owners who struggle with skyrocketing health insurance costs in their efforts to keep their employees and their families covered, and equal emphasis to those entrepreneurs who simply can't afford the burden of their employees' health insurance costs. In The Brave New World, Obamacare, and the new health insurance exchanges to be created out of whole cloth as a result of the law, would create easier access to a range of competitive plans, and at better prices, than existed in the marketplace status quo ante.
Well, it's been two years, and Healthcare.gov, state-run exchanges, and even private marketplaces, are straining at the bit to ring up new sales as part of the 2105-16 open enrollment which kicks off November 1st. And how are these exchanges doing at providing small business owners and their employees with access to more affordable health coverage?
Like I said, it's kind of a disgrace...And it shows just about zero signs of improving...
As of this summer, about 9.5 million people have obtained coverage via public exchanges and kept their premium payments up to date. Of those insureds, the Kaiser Family Foundation estimates that about 80,000 small business employees, from about 10,000 small businesses, have purchased plans through the public marketplaces.
You don't need to be an actuary to do the math. That's a small business batting average of .008...eight-tenths of one percent of public exchange enrollees are employees of companies employing fewer than 50 people: the population PPACA's Small Employers Health Options Plans (SHOP) was meant to serve.
Things are scarcely better on the private-sector side: Accenture estimates that about ten million employees have enrolled for health coverage via private exchanges. I'd have to guess that the vast majority of those enrollees are employees and retirees of the large self-insured companies which have signed up (though not in overwhelming numbers) for the exchange applications being sold by the big guys: Towers, Mercer, and Aon, and by companies like Bloom Health and Liazon, who in general are also shooting for larger groups, be they self-insured or fully-insured.
I say I have to guess because, unlike public exchanges, the private entities are not obligated at all to do any public reporting of their enrollment results.
But I know insurance guys well enough to know that, whether public or private, if anybody was doing a stellar job of enrolling small groups, they'd be trumpeting their success from the rooftops in an effort to sell even more.
But...zippo...
Well, I say to myself, it's only been two years. With individual enrollments sort of hitting a wall, this will be the year the public exchanges will recognize that hitting their enrollment numbers depends on their success in marketing to the small business marketplace.
Then HHS Secretary Burwell announces that Healthcare.gov's enrollment goal for the 2015-16 open enrollment is a net increase of...one million sign-ups..
So instead of working hard to cultivate a truly overpriced and under-served segment of the marketplace, HHS has reduced its expectations, I imagine largely because they recognize that their enrollment projections have far exceeded their actual performance over the past two years, so there's some political hay to be made from setting expectations lower, then celebrating their big success in exceeding them.
Which, of course, has everything to do with politics, and almost nothing to do with actually helping people. The fact that HHS has chosen several key local markets on which to concentrate their enrollment efforts (Dallas, Houston, Northern New Jersey, Chicago and Miami) further stokes suspicions that election-year politics might be playing a role in their targeting.
There is, to be straightforward, no way for HHS to reach its long-term enrollment goals, even modified downward, without engaging the small business market in a meaningful way.
Which, if you're an Obamacare fan (or even just a small business fan) makes it maddening that HHS has no apparent plans even to try.
It's not as if there's no demand. There are over 7.5 million businesses in the U.S. which have at least one employee. Only 500,000 of those companies employ more than 100 people. Just over 5 million of them employ fewer than 20 people, and eighty percent of those companies employ fewer than ten people. Yet those small groups, those with fewer than 100 workers, provide jobs to over 40 million Americans. So we're talking about over 40 million customers in the small group market, including an easy ten million who do not have employer-sponsored health coverage.
Despite the presence of an individual mandate requiring employees of small companies which don't offer group health coverage to obtain it on their own. Despite the fact that fewer that half of small businesses with ten or fewer employees are able to offer health coverage to their workers, and that that number is decreasing every year. Despite the fact that PPACA insurance reforms have significantly increased premiums in the small group market, even above the 15-25% annual increases they've grown used to.
Not even an acknowledgment that they could be doing a better job.
Nothing. Not a peep.
But there's more to it than politics. There are plenty of other reasons why small businesses are getting the fuzzy end of the lollipop. Here are just a few:
In the technical triage process, small businesses got the shaft...Everyone remembers the chaos which surrounded the initial PPACA open enrollment period. In the rush to fix the many difficult problems which plagued the public exchange platforms at kick-off, some ballast had to get tossed overboard. The (largely) political decision was to place initial emphasis on individual coverage, since that's where the most obvious "pain" was, and since insurers had a little more experience at quoting individual plans on-line. The idea, I'm sure, was to get the SHOP platform up "later"...and as is the case with many organizations which run on annual cycles, "later" never comes.
Initial small business response to the roll-out was pretty good: a reported 50,000 small businesses visited the public exchange sites soon after launch. But the technology was so bad, they got scared off...and told their friends...
"No Mandate" doesn't mean "no need in the marketplace"...Companies with fewer than 50 employees are exempt from PPACA's employer mandate. Exchange operators, public and largely private, have put their resources behind supporting those larger groups which face a federal requirement to fund their employees' health coverage at least partially.
What this overlooks is the difficulty which the smallest of small companies face in just trying to find coverage for their workers. The small group market is highly concentrated at the local market level, which means limited competition. Prices are high, largely the result of higher administrative costs. There's a lot of churn in the small group market. And despite the fact that fewer than half of companies with fewer than ten employees offer employer-sponsored coverage to their workers, literally millions of small business owners are still struggling with rising costs and fewer choices (the effect of concentration on the insurer side) in their efforts to cover their workers...and themselves.
A whopping "Congratulations! You don't HAVE to do anything!" completely overlooks the fact that millions of smaller employers are getting killed in the voluntary (as opposed to the "mandatory") marketplace.
In general, non-group products (to use a technical term) suck...In comparison with group plans, non-group products, even those which are "qualified" under PPACA, cost more, cover less, and mean higher deductibles and co-pays. Few small business owners (who purchase coverage not just for their workers, but also for themselves and their families) find much which is attractive about the "metal" plans which are available via the public exchanges, compared with the group plans they're struggling to keep in place. And most public exchanges have very little to offer to small groups; the public marketplaces' initial emphasis was on recruiting insurers for the non-group market. So again, small business owners are stuck with limited choices, limited employee choices (since the ability of employees to shop among various group insurance plans is constrained by limited options and substandard technical functionality), and lots of headaches.
Marketing vs. transaction processing...Much of the technical horsepower behind both public and private exchanges comes from the large group world. Those who run exchanges tend to come from one of three places: broker utilities, insurance company back-office operations, and third-party administrators. In general, they are transaction processors. They don't sell products; they provide "functionality." That's why the public marketplaces look for all the world like neutral facilitators rather than sales organizations...because they are, and are meant to be. They're set up so customers must find them, and then mostly during specific time frames such as during annual open enrollment periods. There's virtually zero marketing outreach to the small group market, despite the fact that marketing to small groups can go on year-round, and is not constrained by open enrollments.
Distribution is a pain in the a**...Insurers generally do a crummy job of selling their own products, especially in the group market. They are almost completely reliant on third parties like brokers and agents to sell their products for them.
This creates a few big problems: First, most public exchanges were set up intentionally to "disintermediate" agents. This is a decision which has created some political tension between the public exchanges and the agent community. And it's true that in states like California, Colorado and Massachusetts, which have found ways to work with agents, exchanges have had a little more success in recruiting small groups than other states. But just a little more; there's scant evidence that the involvement of agents alone will move the needle on small group sales, because;
Secondly, reductions in administrative costs, specifically mandated as part of PPACA's "medical loss ratio" requirements, have put a lot of pressure on small group third-party distribution. Small group sales are inefficient and expensive. It takes almost as much effort to sell a ten-life group as a hundred-life group, so with compensation being squeezed, agents are going where the money is, and will sell small groups when they're forced to, if at all. And insurers will often not consider underwriting groups with fewer than 25 employees.
Third, there's a lot of conflicting pressure regarding small groups even within insurance companies. Operations people will tend to embrace exchange-type marketing, because they can see the potential for efficiencies and cost reductions. Sales managers hate the exchange environment, since they tend to see technology-based solutions both as threats to "their guys"...the agents they work so hard to keep happy...and as competitive threats from other insurers. In the old sales paradigm, if you control distribution (on which insurers spend millions and millions of dollars), you control the market. In the 21st century, technology and transparency can be great equalizers. So sales managers with market-dominant insurers see no benefit to them in transparency, or in the "level playing field" the exchanges can imply. They are in no hurry to disrupt their market positions by (Heaven forbid!) encouraging competition and transparency.
Who's your ideal customer? Not small groups...Think again about where health exchange expertise comes from. Companies which have developed broker utilities see brokers and agents as their customers. Agents and brokers are using these utilities primarily as defensive tools; they can be very useful in protecting existing business, but aren't so hot at creating new businesses.
The insurance company back-office support companies are primarily post-sale transaction processors. Their customers are (obviously) insurance carriers seeking to outsource administrative headaches on the back end of their transactions.
Third-party administrators serve primarily large, self-insured companies with enrollment, renewal, and claims-processing support.
None of these groups have any great experience at selling small group coverage. And because the bureaucrats running our public exchanges also have no small group sales experience, they are tragically dependent on the expertise out there to help them succeed. So if there's no expertise out there in the industry, they don't even know how to find it, or even what to ask for.
So:
The technology stinks.
The existing public exchange processes are geared to individuals, not groups, and group functionality is not a priority.
Because there's no mandate to drive small groups into the exchange marketplace, and very little incentive to enter it voluntarily, private and public exchanges are overlooking the small group market in search of lower-hanging fruit.
Small group products are scarce, and non-group products are substandard.
Exchanges are generally set up as transaction processors, not marketers.
Insurers and agents generally view small group exchanges as threats.
And nobody...nobody...sees small groups as a marketing priority.
Quite the value proposition, huh?...
There are solutions to all these problems, assuming there's anybody out there interested in a solution that could open the exchange market up to about 40 million customers.
Want to know what they are?
That's next week...
Monday, October 19, 2015
Tuesday, April 29, 2014
Health Exchange 1.0: Winners And Losers, So Far...
OK, so it's over...
I've been hunkered down in my little foxhole for the past several weeks as the first Obamacare open enrollment period wound down. The propaganda flack was flying so thick and heavy between partisans on both sides of the debate that A Humble Seeker After Truth like yours truly was at significant risk of getting fragged.
But finally, we've had our first face-full of Health Exchange 1.0. And now that we've lived through it and The World As We Know It has not ended, it's time to look at some results, see what we might learn from them, and look ahead to Health Exchange 2.0, which (I hope) will build on those learnings and improve the process.
Robert Pear wrote in The New York Times wrote that, with the end of open enrollment, Obamacare looks less like a monolithic national program and more like a patchwork of experiments in the policy laboratories which are the states. Some have succeeded. Some have not, and for a great many people, the future remains quite uncertain.
Let's take a look at the box scores thus far:
Winners
Millions and Millions Of Americans: The numbers are still squishy, but we've come a long way, very quickly, from insurers' initial belief that nobody would ever shop for health insurance on-line. By White House accounts, about eight million Americans withstood the rolling disaster of the Healthcare.gov roll-out, and persisted through a wonky process on the still-glitchy public exchange platform, to enroll in health coverage through the federal exchange.
An additional three million Americans benefited from Medicaid expansion in states which adopted the Obama Administration's Medicaid expansion program.
And a bonus: research by The Rand Corporation suggested that almost as many Americans (somewhere between six and eight million) signed up for private health coverage directly with insurers or through their employers..
So...Do the numbers suggest a pent-up demand for health coverage? Maybe. About a third of the folks signing up for coverage via Healthcare.gov were apparently uninsured previously. But the majority had coverage elsewhere before they went shopping.
Certainly, enrollment suggested the effectiveness of subsidies as an incentive to enroll. Medicaid expansion enabled millions of poor people to obtain coverage. And about three-quarters of Healthcare.gov enrollees received at least some level of federal subsidy. We don't yet know the total cost of those subsidies, but there's no doubt that many folks came to the state and federal marketplaces in search of a better deal. The number of "off-exchange" individuals with non-group coverage dropped from 9.4 million to 7.8 million people, the majority of whom found coverage elsewhere.
But the number of individuals who enrolled in private, employer-sponsored plans off the exchanges is a pleasant surprise. In general, these folks did not receive subsidies. And during the open enrollment period, more than three times as many people went from zero coverage to employer-sponsored coverage than those who may have lost their coverage, either because their employers discontinued their plans or because the plans didn't meet Obamacare standards for plan design.
There is certainly reason to take these numbers with a grain of salt. It's estimated that as many as a third of Healthcare.gov enrollees had not yet paid their premiums by enrollment deadline. The Rand research was based on a wide-ranging survey of a representative sample of Americans. And many skeptics believe that many of the folks who withstood The Trials Of The Wonky Website did so because their health conditions were so serious that the prospect of subsidized coverage would enable them to exploit the health care system at taxpayer expense.
But that final thought discounts the notion that, prior to enactment of the insurance reforms enacted in PPACA, insurers' medical underwriting standards were so restrictive that a little hypertension or a little high cholesterol could result either in "rate-ups" which made the cost of obtaining coverage prohibitive, or even in denial of coverage.
Inescapable conclusion: The rate of uninsured Americans has reportedly dropped from 20.5 percent of the population to 15.8 percent. So, at least for now, close to twenty million Americans have demonstrated that significant demand exists out there, and both public and private health plans have seen a significant increase in enrollment. For those folks and those families, this is a big win. And it happened in six months; that is an amazing achievement.
Wellpoint/Anthem: This company is one of a very small number of insurers which decided that the exchange business represented a significant business opportunity, and enthusiastically participated in Healthcare.gov and state exchanges in every state in which the company has a presence. They were rewarded with over a million new customers. It's very unusual for an insurer to take that sort of risk as a leader; in most cases, as in this one, the race is usually to be second, once the leader has taken the initial hits. I suspect that Anthem's early success in building enrollment via the exchanges will encourage other insurers which have been hanging back to increase their commitment to this potentially powerful marketing channel.
Losers
Hawaii, Maryland, Massachusetts, Minnesota, and Oregon: Actually, in addition to this five-way tie, throw in American taxpayers as losers, as well. These five states, having pocketed over a billion dollars in development grants, built state exchange platforms which didn't work. In Hawaii, recipient of $205 million to build their state exchange, managed to sign up a whopping 7600 people. Now, math is not my strong suit, but I think that boils down to about $27,000 per enrollment. The remainder of the states continued to be so dysfunctional that the vast majority of their enrollments were on paper...the old fashioned way.
Maryland has already agreed to scrap its own exchange platform and adopt the technology platform developed by The State Of Connecticut. And last week the Oregon legislature, having determined that fixing their monstrosity would cost at least an additional $30-40 million, opted to shut down their exchange and join Healthcare.gov.
This is just the first round of shake-out from the chaos of development which ran parallel to the government's rush to create the regulations outlining how exchanges should operate. States like California, Colorado, Connecticut, Kentucky and California, which have had far greater success with their exchange platforms, could become licensors of their technology.
CGI: Hey!...Anybody thinking of building or re-modeling their exchange platforms and processes, DO NOT HIRE THIS COMPANY!...At least in America, CGI has a reputation for being far more highly-skilled at navigating the government procurement process than at actually doing the work, either on time or on-budget. That attribute became all too clear as the exchange open enrollment date loomed, and everybody watching (except, apparently, then HHS Secretary Kathleen Sibelius and the entire White House staff) could see that Healthcare.gov was not going to be ready for prime time.
Under normal circumstances, the combination of CGI's "expertise" and the lax and highly-politicized oversight of their government "clients" passes unnoticed by the public...But in those cases, there's rarely a deadline, and the technology they develop doesn't touch the lives of millions of people directly. But in this case, CGI Federal could not, no matter how they spun, avoid the fall-out from their botched attempt to build the Healthcare.gov website and supporting processes. Between what it cost taxpayers to let CGI Federal do...whatever it was they were doing...and the cost of bringing Accenture in to fix it, and the cost of building out the "back end" applications required to manage the exchange (still nowhere near ready), the project will easily exceed another billion dollars. So I guess, as in the previous category, the taxpayers are also losers...and Accenture is a winner by default.
(Oh, and in case you think the CGI choke-a-thon was restricted to wild and wacky D.C., consider that CGI also built the non-performing platform in Massachusetts).
Red State Residents; Just as whether one sees Obamacare as a success or a disaster largely depends on one's party affiliation and where you get your news, exchange enrollment by state currently seems to be highly dependent on the political leadership in each state. In general, exchange enrollment has been highest in states with Democrat leaders, and lower in states with Republican leaders. Much of the disparity comes from those states' refusal to co-operate with the federal government's Medicaid expansion. But political leadership (or lack of it) also contributes to how vigorously the public exchange is promoted.
Next time around, I'll talk a little about some of the big remaining exchange questions, about the upcoming 2014 open enrollment (which is hard upon us), and what's in all this for small businesses (Hint: not much).
I've been hunkered down in my little foxhole for the past several weeks as the first Obamacare open enrollment period wound down. The propaganda flack was flying so thick and heavy between partisans on both sides of the debate that A Humble Seeker After Truth like yours truly was at significant risk of getting fragged.
But finally, we've had our first face-full of Health Exchange 1.0. And now that we've lived through it and The World As We Know It has not ended, it's time to look at some results, see what we might learn from them, and look ahead to Health Exchange 2.0, which (I hope) will build on those learnings and improve the process.
Robert Pear wrote in The New York Times wrote that, with the end of open enrollment, Obamacare looks less like a monolithic national program and more like a patchwork of experiments in the policy laboratories which are the states. Some have succeeded. Some have not, and for a great many people, the future remains quite uncertain.
Let's take a look at the box scores thus far:
Winners
Millions and Millions Of Americans: The numbers are still squishy, but we've come a long way, very quickly, from insurers' initial belief that nobody would ever shop for health insurance on-line. By White House accounts, about eight million Americans withstood the rolling disaster of the Healthcare.gov roll-out, and persisted through a wonky process on the still-glitchy public exchange platform, to enroll in health coverage through the federal exchange.
An additional three million Americans benefited from Medicaid expansion in states which adopted the Obama Administration's Medicaid expansion program.
And a bonus: research by The Rand Corporation suggested that almost as many Americans (somewhere between six and eight million) signed up for private health coverage directly with insurers or through their employers..
So...Do the numbers suggest a pent-up demand for health coverage? Maybe. About a third of the folks signing up for coverage via Healthcare.gov were apparently uninsured previously. But the majority had coverage elsewhere before they went shopping.
Certainly, enrollment suggested the effectiveness of subsidies as an incentive to enroll. Medicaid expansion enabled millions of poor people to obtain coverage. And about three-quarters of Healthcare.gov enrollees received at least some level of federal subsidy. We don't yet know the total cost of those subsidies, but there's no doubt that many folks came to the state and federal marketplaces in search of a better deal. The number of "off-exchange" individuals with non-group coverage dropped from 9.4 million to 7.8 million people, the majority of whom found coverage elsewhere.
But the number of individuals who enrolled in private, employer-sponsored plans off the exchanges is a pleasant surprise. In general, these folks did not receive subsidies. And during the open enrollment period, more than three times as many people went from zero coverage to employer-sponsored coverage than those who may have lost their coverage, either because their employers discontinued their plans or because the plans didn't meet Obamacare standards for plan design.
There is certainly reason to take these numbers with a grain of salt. It's estimated that as many as a third of Healthcare.gov enrollees had not yet paid their premiums by enrollment deadline. The Rand research was based on a wide-ranging survey of a representative sample of Americans. And many skeptics believe that many of the folks who withstood The Trials Of The Wonky Website did so because their health conditions were so serious that the prospect of subsidized coverage would enable them to exploit the health care system at taxpayer expense.
But that final thought discounts the notion that, prior to enactment of the insurance reforms enacted in PPACA, insurers' medical underwriting standards were so restrictive that a little hypertension or a little high cholesterol could result either in "rate-ups" which made the cost of obtaining coverage prohibitive, or even in denial of coverage.
Inescapable conclusion: The rate of uninsured Americans has reportedly dropped from 20.5 percent of the population to 15.8 percent. So, at least for now, close to twenty million Americans have demonstrated that significant demand exists out there, and both public and private health plans have seen a significant increase in enrollment. For those folks and those families, this is a big win. And it happened in six months; that is an amazing achievement.
Wellpoint/Anthem: This company is one of a very small number of insurers which decided that the exchange business represented a significant business opportunity, and enthusiastically participated in Healthcare.gov and state exchanges in every state in which the company has a presence. They were rewarded with over a million new customers. It's very unusual for an insurer to take that sort of risk as a leader; in most cases, as in this one, the race is usually to be second, once the leader has taken the initial hits. I suspect that Anthem's early success in building enrollment via the exchanges will encourage other insurers which have been hanging back to increase their commitment to this potentially powerful marketing channel.
Losers
Hawaii, Maryland, Massachusetts, Minnesota, and Oregon: Actually, in addition to this five-way tie, throw in American taxpayers as losers, as well. These five states, having pocketed over a billion dollars in development grants, built state exchange platforms which didn't work. In Hawaii, recipient of $205 million to build their state exchange, managed to sign up a whopping 7600 people. Now, math is not my strong suit, but I think that boils down to about $27,000 per enrollment. The remainder of the states continued to be so dysfunctional that the vast majority of their enrollments were on paper...the old fashioned way.
Maryland has already agreed to scrap its own exchange platform and adopt the technology platform developed by The State Of Connecticut. And last week the Oregon legislature, having determined that fixing their monstrosity would cost at least an additional $30-40 million, opted to shut down their exchange and join Healthcare.gov.
This is just the first round of shake-out from the chaos of development which ran parallel to the government's rush to create the regulations outlining how exchanges should operate. States like California, Colorado, Connecticut, Kentucky and California, which have had far greater success with their exchange platforms, could become licensors of their technology.
CGI: Hey!...Anybody thinking of building or re-modeling their exchange platforms and processes, DO NOT HIRE THIS COMPANY!...At least in America, CGI has a reputation for being far more highly-skilled at navigating the government procurement process than at actually doing the work, either on time or on-budget. That attribute became all too clear as the exchange open enrollment date loomed, and everybody watching (except, apparently, then HHS Secretary Kathleen Sibelius and the entire White House staff) could see that Healthcare.gov was not going to be ready for prime time.
Under normal circumstances, the combination of CGI's "expertise" and the lax and highly-politicized oversight of their government "clients" passes unnoticed by the public...But in those cases, there's rarely a deadline, and the technology they develop doesn't touch the lives of millions of people directly. But in this case, CGI Federal could not, no matter how they spun, avoid the fall-out from their botched attempt to build the Healthcare.gov website and supporting processes. Between what it cost taxpayers to let CGI Federal do...whatever it was they were doing...and the cost of bringing Accenture in to fix it, and the cost of building out the "back end" applications required to manage the exchange (still nowhere near ready), the project will easily exceed another billion dollars. So I guess, as in the previous category, the taxpayers are also losers...and Accenture is a winner by default.
(Oh, and in case you think the CGI choke-a-thon was restricted to wild and wacky D.C., consider that CGI also built the non-performing platform in Massachusetts).
Red State Residents; Just as whether one sees Obamacare as a success or a disaster largely depends on one's party affiliation and where you get your news, exchange enrollment by state currently seems to be highly dependent on the political leadership in each state. In general, exchange enrollment has been highest in states with Democrat leaders, and lower in states with Republican leaders. Much of the disparity comes from those states' refusal to co-operate with the federal government's Medicaid expansion. But political leadership (or lack of it) also contributes to how vigorously the public exchange is promoted.
Next time around, I'll talk a little about some of the big remaining exchange questions, about the upcoming 2014 open enrollment (which is hard upon us), and what's in all this for small businesses (Hint: not much).
Thursday, February 13, 2014
The Coming Small Business S**tstorm...That NOBODY'S Ready For...Least Of All, Small Businesses
As PPACA was being concocted, one of my greatest concerns was that I saw very little in the legislation itself which would provide much of a benefit for a segment of the market most in need of constructive reform: the small group market, especially companies with fewer than 25 employees, and especially groups with 10 or fewer workers. This has traditionally been a market segment which is both overpriced and under-served.
And with pressure on insurers to reduce administrative costs, it seemed that small businesses, which are relatively expensive to sell to and service, would readily be abandoned by insurers and brokers in search of bigger fish. My fear was that small businesses would take it in the proverbial teeth, saddled with additional costs due to the broad-based insurance reforms, but with few benefits to offset the aggravation. And it seemed to me that insurers would readily abandon the small group marketplace, making their "big bets" that small business owners would be quick to dump their plans and push their employees onto the public exchanges, with the subsidies they would provide.
It struck me then that the "reformers" had very little knowledge of the issues besetting small business owners in the "micro-group" niche, about half of whom are struggling to provide some sort of health coverage for their workers and their families. The prevailing wisdom in political circles is that small businesses are either greedy, denying their employees access to health coverage, or ignorant, and needing to be "encouraged" by government to "do the right thing."
So I asked very early on...who is speaking for small business?
With the announcement yesterday that the Obama Administration had decided to push the employer mandate for companies in the 50-99 market out past the 2014 elections, it's clear that small business owners must not have very good lobbyists; since they're sort of out in the cold...The Little Cheese That Stands Alone.
Because, while companies with fewer than 25 employees will not be required to purchase and pay for coverage for their employees, those that wish to are going to face an administrative nightmare in about six short months...and nobody...insurers, brokers, and especially small business owners...is prepared to deal with the shitstorm which will engulf the small business market beginning in October.
And it's not clear to me that either our political "leaders," nor those in the industry, are terribly concerned.
What's gonna happen?...
Thousands upon thousands of small businesses have had their plans "grandfathered" by their insurers, even though the plans didn't adhere to PPACA requirements.
Thousands upon thousands more have accepted two-year rate renewals, with an eye toward postponing "rate shock" till 2015.
Starting in the fourth quarter of 2014, all these groups will need to be re-sold.
If these small businesses wish to continue to provide health coverage to their workers, the plans they offer will have to comply with ACA regulations. That means new plan designs, which will be expensive.
They'll probably be looking at their workforces in light of the requirement that "full-time employment" be re-defined at 30 hours per week. (This may not be as catastrophic as some critics have suggested. In the past, when managing a very large small business health plan, our groups audits found that the most commonly-broken rule was enrolling less-than-full-time employees on the company's health plan. We tried to accommodate this by modifying our carrier contracts to provide some flexibility in defining "full-time employment" down to 30 hours per week. As long as companies provided coverage to all their qualified employees working 30 hours per more per week, they were okay with us. Same with 35 or 40 hours per week. All we asked was that the companies be consistent in their treatment of workers).
And thousands upon thousands of small businesses, whose rates had been set based on health underwriting, will have to be re-rated using community-rating criteria. In general this will make coverage more expensive for younger, healthier workers and slightly less expensive for older workers, and those with health conditions.
Unless the White House gets smart very quickly, this is going to mean a huge amount of chaos in the small group market.
Want to be whether Healthcare.gov will be ready? Because it's not right now. Even with the "front end" vastly improved over launch, the "back end" functions...billing, enrollment, defined contribution or other premium-sharing functionality...are very likely just a glimmer (maybe a glaze) in some programmers' eyes.
Insurers certainly aren't ready. Having snapped out of their Obamacare-denial reverie in early 2013, their first effort involved getting (sort of) ready for the onrush of individuals hitting the exchange market. The widely-decried outrage over Healthcare.gov's launch provided a lot of cover for private insurers whose "exchange" technology was not ready for prime time, either. Most of them are still processing applications on paper and/or over the phone.
Where are the "private exchanges?" In general, most of the "big name" exchange operators...Mercer, Towers Watson, Aon Hewitt...are chasing low-hanging fruit...Their "exchanges" are largely amped-up third party administration platforms with a new label. And they're chasing large, self-insured groups with a lot of retirees first. They won't be in the 50-99-employee group space for at least another year, if ever, and they've never really had an interest in the fewer-than-25-employee small group market.
The biggest exchange e-brokers, like eHealth and GoHealth, started their lives as brokers in the individual market. That's where their expertise is, and where they've made their money. They might be thinking about the small group market, but they're very busy sticking to their knitting. Hard to see them ready to jump in six months from now.
The limited number of players with small group functionality are mostly broker utilities, developed to assist brokers in managing their own books of business. Will they have the ability, or the willpower, to leap over the hordes of middlemen and go directly to the small business owner/operator in an exchange-type direct-to-consumer environment?
Again, wanna bet?...
It'd be a real shame if PPACA, which, at least rhetorically, was supposed to make health coverage easier to access and more affordable for small businesses and their workers, instead undermined and destroyed the small group health insurance market.
But unless I'm very wrong, the coming shitstorm is gathering which could do just that.
So, if I'm wrong, for Gawd's sake, enlighten me...
And with pressure on insurers to reduce administrative costs, it seemed that small businesses, which are relatively expensive to sell to and service, would readily be abandoned by insurers and brokers in search of bigger fish. My fear was that small businesses would take it in the proverbial teeth, saddled with additional costs due to the broad-based insurance reforms, but with few benefits to offset the aggravation. And it seemed to me that insurers would readily abandon the small group marketplace, making their "big bets" that small business owners would be quick to dump their plans and push their employees onto the public exchanges, with the subsidies they would provide.
It struck me then that the "reformers" had very little knowledge of the issues besetting small business owners in the "micro-group" niche, about half of whom are struggling to provide some sort of health coverage for their workers and their families. The prevailing wisdom in political circles is that small businesses are either greedy, denying their employees access to health coverage, or ignorant, and needing to be "encouraged" by government to "do the right thing."
So I asked very early on...who is speaking for small business?
With the announcement yesterday that the Obama Administration had decided to push the employer mandate for companies in the 50-99 market out past the 2014 elections, it's clear that small business owners must not have very good lobbyists; since they're sort of out in the cold...The Little Cheese That Stands Alone.
Because, while companies with fewer than 25 employees will not be required to purchase and pay for coverage for their employees, those that wish to are going to face an administrative nightmare in about six short months...and nobody...insurers, brokers, and especially small business owners...is prepared to deal with the shitstorm which will engulf the small business market beginning in October.
And it's not clear to me that either our political "leaders," nor those in the industry, are terribly concerned.
What's gonna happen?...
Thousands upon thousands of small businesses have had their plans "grandfathered" by their insurers, even though the plans didn't adhere to PPACA requirements.
Thousands upon thousands more have accepted two-year rate renewals, with an eye toward postponing "rate shock" till 2015.
Starting in the fourth quarter of 2014, all these groups will need to be re-sold.
If these small businesses wish to continue to provide health coverage to their workers, the plans they offer will have to comply with ACA regulations. That means new plan designs, which will be expensive.
They'll probably be looking at their workforces in light of the requirement that "full-time employment" be re-defined at 30 hours per week. (This may not be as catastrophic as some critics have suggested. In the past, when managing a very large small business health plan, our groups audits found that the most commonly-broken rule was enrolling less-than-full-time employees on the company's health plan. We tried to accommodate this by modifying our carrier contracts to provide some flexibility in defining "full-time employment" down to 30 hours per week. As long as companies provided coverage to all their qualified employees working 30 hours per more per week, they were okay with us. Same with 35 or 40 hours per week. All we asked was that the companies be consistent in their treatment of workers).
And thousands upon thousands of small businesses, whose rates had been set based on health underwriting, will have to be re-rated using community-rating criteria. In general this will make coverage more expensive for younger, healthier workers and slightly less expensive for older workers, and those with health conditions.
Unless the White House gets smart very quickly, this is going to mean a huge amount of chaos in the small group market.
Want to be whether Healthcare.gov will be ready? Because it's not right now. Even with the "front end" vastly improved over launch, the "back end" functions...billing, enrollment, defined contribution or other premium-sharing functionality...are very likely just a glimmer (maybe a glaze) in some programmers' eyes.
Insurers certainly aren't ready. Having snapped out of their Obamacare-denial reverie in early 2013, their first effort involved getting (sort of) ready for the onrush of individuals hitting the exchange market. The widely-decried outrage over Healthcare.gov's launch provided a lot of cover for private insurers whose "exchange" technology was not ready for prime time, either. Most of them are still processing applications on paper and/or over the phone.
Where are the "private exchanges?" In general, most of the "big name" exchange operators...Mercer, Towers Watson, Aon Hewitt...are chasing low-hanging fruit...Their "exchanges" are largely amped-up third party administration platforms with a new label. And they're chasing large, self-insured groups with a lot of retirees first. They won't be in the 50-99-employee group space for at least another year, if ever, and they've never really had an interest in the fewer-than-25-employee small group market.
The biggest exchange e-brokers, like eHealth and GoHealth, started their lives as brokers in the individual market. That's where their expertise is, and where they've made their money. They might be thinking about the small group market, but they're very busy sticking to their knitting. Hard to see them ready to jump in six months from now.
The limited number of players with small group functionality are mostly broker utilities, developed to assist brokers in managing their own books of business. Will they have the ability, or the willpower, to leap over the hordes of middlemen and go directly to the small business owner/operator in an exchange-type direct-to-consumer environment?
Again, wanna bet?...
It'd be a real shame if PPACA, which, at least rhetorically, was supposed to make health coverage easier to access and more affordable for small businesses and their workers, instead undermined and destroyed the small group health insurance market.
But unless I'm very wrong, the coming shitstorm is gathering which could do just that.
So, if I'm wrong, for Gawd's sake, enlighten me...
Tuesday, October 29, 2013
When Is A Mandate NOT A Mandate?...When It Was Designed Never To Be Enforced...
I wrote to President Obama a couple weeks ago, advising him to consider trading a budget resolution and a debt-ceiling increase for a one-year delay in the individual mandate. I suggested there were both solid political reasons and substantive reasons for doing so.
He never got back to me. I mean, I understand; he's been a little busy...
Then last week, without acknowledging that the roll-out of new federal health exchange has been a multi-dimensional disaster, The White House released the news that there will be a six-week delay in the enforcement of the individual mandate. People will have until March 31, 2014, to apply for qualified health coverage before facing a potential penalty.
What penalty?...
I have to say, it has been three years since I read (parts of...well, the personally-relevant parts of) the legislation itself. So I was rather surprised to catch a rant by Lawrence O'Donnell, former Senate staffer, TV consultant (he helped make The West Wing seem like it could really happen), and now host of The Last Word on MSNBC, in which he shattered all the silliness surrounding the "delay Obamacare" shenanigans of the Tea Party and the feckless, follow-any-shiny-object fixation of the media on the roll-out, by pointing out that there really isn't a mandate in the law, except on paper...because the mandate was designed never to be enforced.
First, O'Donnell showed a portion of a White House press conference, in which an intrepid correspondent asked Press Secretary Jay Carney if the recent roll-out snafu would be severe enough to warrant a one-year delay in PPACA's individual mandate, which requires that all individuals either sign up for a health plan or pay a penalty.
Carney gave an answer that would make a Jesuit proud . In short words and simple sentences, Carney said essentially this: "The law is very clear. Individuals will not be subject to a penalty if they live in a state which has refused to participate in Medicaid expansion, as many states with republican governors have done, or if they live in an area which does not provide them with access to affordable health coverage."
The reporter asked for clarification: Might this be taken to mean that someone who can't buy health coverage because the marketplace website doesn't work be considered to live in a place which doesn't have access to affordable health coverage?
Carney repeated his answer.
In other words, yes: if the exchange website isn't working, nobody will be penalized.
But here is the real gem. The law takes great pains to enumerate the fines that might be levied over time upon individuals or employer groups who do not take the steps required by law. Much has been written and reported on that subject.
But the agency tasked with collecting those fines is the Internal Revenue Service. And here's the guidance the law gives to the IRS, from page 131 of PPACA:
"Section 5000 A Title 26- IRS Code Chapter 48- Maintenance of minimum essential coverage:
(A) Waiver of criminal penalties-
In the case of any failure by a taxpayer to timely pay any penalty imposed by this section, such taxpayer shall not be subject to any criminal prosecution or penalty with respect to such failure.
B) Limitation on liens and levies-
The Secretary shall not-
( i) file notice of lien with respect to any property of a taxpayer by reason of any failure to pay the penalty imposed by this section , or (ii) levy on any such property with respect to such failure."
Okay, so, I'm not a lawyer, but I know how to read, and it sure seems to me that, written into the law, there is a "get out of jail free" card for anybody who might, for whatever reason, fail to comply with PPACA's mandate. And given that "taxpayer" is a term which can apply equally to an individual or a corporation (which, as I understand it, is now a person, too), it seems to me that the law pretty explicitly says that no one will ever be required to pay a fine for non-compliance with the PPACA mandate...ever.
So, when is a mandate not a mandate? When the law it's written into clearly and explicitly forbids the enforcement agency from ever collecting any fine, ot taking any other adverse action, against anyone who doesn't comply with the mandate. Ever.
I'm not sure how aware of this provision Our Friends In Government might want people to be of this little magic trick. I'm sure supporters of the law would rather not know that people can freely avoid signing up for a health plan, since there's no penalty for not doing so: that might affect enrollment.
And chances are opponents of the law won't want people to know about it. either. That would mean that some Republican lawmaker would have to take to the ramparts and insist that the law be changed to require the IRS to levy and collect those fines, liens and judgments...which, of course, would be tantamount to a Republican insisting that the government raise taxes.
But for now, I know. And if you've read this, you know. And we have friends. Let's educate them, shall we?...
He never got back to me. I mean, I understand; he's been a little busy...
Then last week, without acknowledging that the roll-out of new federal health exchange has been a multi-dimensional disaster, The White House released the news that there will be a six-week delay in the enforcement of the individual mandate. People will have until March 31, 2014, to apply for qualified health coverage before facing a potential penalty.
What penalty?...
I have to say, it has been three years since I read (parts of...well, the personally-relevant parts of) the legislation itself. So I was rather surprised to catch a rant by Lawrence O'Donnell, former Senate staffer, TV consultant (he helped make The West Wing seem like it could really happen), and now host of The Last Word on MSNBC, in which he shattered all the silliness surrounding the "delay Obamacare" shenanigans of the Tea Party and the feckless, follow-any-shiny-object fixation of the media on the roll-out, by pointing out that there really isn't a mandate in the law, except on paper...because the mandate was designed never to be enforced.
First, O'Donnell showed a portion of a White House press conference, in which an intrepid correspondent asked Press Secretary Jay Carney if the recent roll-out snafu would be severe enough to warrant a one-year delay in PPACA's individual mandate, which requires that all individuals either sign up for a health plan or pay a penalty.
Carney gave an answer that would make a Jesuit proud . In short words and simple sentences, Carney said essentially this: "The law is very clear. Individuals will not be subject to a penalty if they live in a state which has refused to participate in Medicaid expansion, as many states with republican governors have done, or if they live in an area which does not provide them with access to affordable health coverage."
The reporter asked for clarification: Might this be taken to mean that someone who can't buy health coverage because the marketplace website doesn't work be considered to live in a place which doesn't have access to affordable health coverage?
Carney repeated his answer.
In other words, yes: if the exchange website isn't working, nobody will be penalized.
But here is the real gem. The law takes great pains to enumerate the fines that might be levied over time upon individuals or employer groups who do not take the steps required by law. Much has been written and reported on that subject.
But the agency tasked with collecting those fines is the Internal Revenue Service. And here's the guidance the law gives to the IRS, from page 131 of PPACA:
"Section 5000 A Title 26- IRS Code Chapter 48- Maintenance of minimum essential coverage:
(A) Waiver of criminal penalties-
In the case of any failure by a taxpayer to timely pay any penalty imposed by this section, such taxpayer shall not be subject to any criminal prosecution or penalty with respect to such failure.
B) Limitation on liens and levies-
The Secretary shall not-
( i) file notice of lien with respect to any property of a taxpayer by reason of any failure to pay the penalty imposed by this section , or (ii) levy on any such property with respect to such failure."
Okay, so, I'm not a lawyer, but I know how to read, and it sure seems to me that, written into the law, there is a "get out of jail free" card for anybody who might, for whatever reason, fail to comply with PPACA's mandate. And given that "taxpayer" is a term which can apply equally to an individual or a corporation (which, as I understand it, is now a person, too), it seems to me that the law pretty explicitly says that no one will ever be required to pay a fine for non-compliance with the PPACA mandate...ever.
So, when is a mandate not a mandate? When the law it's written into clearly and explicitly forbids the enforcement agency from ever collecting any fine, ot taking any other adverse action, against anyone who doesn't comply with the mandate. Ever.
I'm not sure how aware of this provision Our Friends In Government might want people to be of this little magic trick. I'm sure supporters of the law would rather not know that people can freely avoid signing up for a health plan, since there's no penalty for not doing so: that might affect enrollment.
And chances are opponents of the law won't want people to know about it. either. That would mean that some Republican lawmaker would have to take to the ramparts and insist that the law be changed to require the IRS to levy and collect those fines, liens and judgments...which, of course, would be tantamount to a Republican insisting that the government raise taxes.
But for now, I know. And if you've read this, you know. And we have friends. Let's educate them, shall we?...
Monday, October 14, 2013
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...
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...
Thursday, October 3, 2013
Dear President Obama...Give Your Opponents A Delay Of The Individual Mandate...And Watch 'Em Choke On it...
Dear President Obama:
We haven't met. For several years, as your PPACA was being formulated, I tried to share some advice with you about elements having to do with small business, health exchanges, and how to handle the issue of a mandate. You didn't take me up on any of it, but that's okay; I'm a consultant, so I'm used to giving folks advice that they're free to ignore.
I'm not a big fan of the law. I think it's an object lesson in political overreach, and too much of it depends for its effectiveness on organizations, advisory panels, and technical capabilities which don't exist yet.
But I will give you credit: the insurance reforms you put in place are generally helpful to real people. And the exchanges, though you're having some problems, are going to change forever (hopefully for the better) the way health coverage is bought and sold; I'm a big fan of that.
But now you're sorta stuck. The "Loyal Opposition" has closed down the Government, and we're nearing a debt ceiling crisis, and the parties are pretty dug in on their respective positions. Not cool...
I'm not in your shoes, but I HAVE had some experience in political negotiations with recalcitrant adversaries. And I've found that, in some circumstances, a good tactic is to give my opponents what they want, and watch them choke on it.. This might be one of those times.
If I WERE in your shoes, here's what I'd consider: I'd trade away a one-year suspension of the individual mandate in exchange for a clean Budget Resolution AND a long-term fix of the debt-ceiling. It would either break the impasse, or show your opponents up as complete dopes (as if more evidence were necessary).
And it would be a good deal for you. Here's why:
1) The big reason, of course, is that it would enable you and yours to get the country on a better long-term financial footing. That, I think, is the desired result. I hope you have the long-term interests of the country at stake, and this isn't just a penis-measuring contest. I'll take your word that it's not;
2) You've already pretty much unilaterally granted temporary exemptions to certain key constituencies...and big ones. Big Labor. Big Business. Even employers with more than 50 employees. So you've set a precedent; you WILL compromise PPACA when you deem it to be in your interests to do so. Right now, it's the little guys, individuals and small businesses...who are set up to take it in the teeth because of the mandate. These are the folks who most need the help that PPACA purports to provide. Why not give the little guys that same break you've already given most of the Big Guys?;
3) You already know that the Government is not currently in a position to administer the effects of the mandate effectively. You're relying on "self-reporting" income to the IRS as it relates to calculating taxpayer subsidies. And the means you wish to use to enforce the mandate...specifically, fines on those who don't purchase coverage...are hard to understand and currently impossible to administer. Seems to me a good time to give in on a point...when you don't know how you're going to follow through on it anyway;
4) Granting an exemption from the mandate will not keep anybody who WANTS to buy health care coverage from shopping for and obtaining coverage via the exchanges, be they public or private. I have argued (unsuccessfully, so far) that the vast majority of Americans WANT to have health coverage, and will buy it (especially with the help of subsidies) if it's available. My advice years ago was that, before you drop the hammer of a mandate, it would be wise to make sure the voluntary marketplace is working as well as it can, THEN drop the hammer on the relatively small number of folks who could buy coverage, and have it available, but choose not to purchase it. Judging by the early volume of folks rushing to check out the exchanges, there are PLENTY of folks who are looking to purchase coverage, and are willing to pay for it;
5) Your experts keep telling you that the mandate is necessary to get everyone "into the pool," that the young and healthy MUST buy into the system in great numbers in order to subsidize those who are not so young and not so healthy. The demographics of the "young invincibles" suggest that, even if they all signed up tomorrow, you'd still be short of break-even by about fifty percent, if your goal is six healthy people for every one of the one percent of big utilizers, and three healthy people for the top five percent of utilizers. The numbers never HAVE worked. And if you buy Item #4, and you let everybody who wants to buy coverage in the voluntary marketplace to do so, the sting of the mandate might not hurt so much, and;
6) A year from now, the exchanges will be operating a lot better, you'll have at least a few million folks signed up, we'll know better who they are, what rates they're paying, and have a few insights into their utilization of services. You'll simply have a much better story to tell...and maybe you'll have figured out how actually to administer the mandate.
To me, this looks like a pretty good deal for you. You right the country. Everybody who wants to buy health coverage can do so. You have time to get systems operating properly. An additional few million people get covered. You "cave" on one matter of "principle" which might be based on faulty assumptions anyway...But it seems to me that principle has sorta flown out the window a ling time ago.
I recognize that this argument might be entirely too sensible to succeed in Washington. But if you think about it for about 60 seconds, I think you'll see the value.
And imagine the looks on your adversaries' faces when they figure out you've gotten everything you wanted in exchange for bargaining away something which is of relatively little value, and might even make your signature legislative achievement better.
Don't thank me, JJP
We haven't met. For several years, as your PPACA was being formulated, I tried to share some advice with you about elements having to do with small business, health exchanges, and how to handle the issue of a mandate. You didn't take me up on any of it, but that's okay; I'm a consultant, so I'm used to giving folks advice that they're free to ignore.
I'm not a big fan of the law. I think it's an object lesson in political overreach, and too much of it depends for its effectiveness on organizations, advisory panels, and technical capabilities which don't exist yet.
But I will give you credit: the insurance reforms you put in place are generally helpful to real people. And the exchanges, though you're having some problems, are going to change forever (hopefully for the better) the way health coverage is bought and sold; I'm a big fan of that.
But now you're sorta stuck. The "Loyal Opposition" has closed down the Government, and we're nearing a debt ceiling crisis, and the parties are pretty dug in on their respective positions. Not cool...
I'm not in your shoes, but I HAVE had some experience in political negotiations with recalcitrant adversaries. And I've found that, in some circumstances, a good tactic is to give my opponents what they want, and watch them choke on it.. This might be one of those times.
If I WERE in your shoes, here's what I'd consider: I'd trade away a one-year suspension of the individual mandate in exchange for a clean Budget Resolution AND a long-term fix of the debt-ceiling. It would either break the impasse, or show your opponents up as complete dopes (as if more evidence were necessary).
And it would be a good deal for you. Here's why:
1) The big reason, of course, is that it would enable you and yours to get the country on a better long-term financial footing. That, I think, is the desired result. I hope you have the long-term interests of the country at stake, and this isn't just a penis-measuring contest. I'll take your word that it's not;
2) You've already pretty much unilaterally granted temporary exemptions to certain key constituencies...and big ones. Big Labor. Big Business. Even employers with more than 50 employees. So you've set a precedent; you WILL compromise PPACA when you deem it to be in your interests to do so. Right now, it's the little guys, individuals and small businesses...who are set up to take it in the teeth because of the mandate. These are the folks who most need the help that PPACA purports to provide. Why not give the little guys that same break you've already given most of the Big Guys?;
3) You already know that the Government is not currently in a position to administer the effects of the mandate effectively. You're relying on "self-reporting" income to the IRS as it relates to calculating taxpayer subsidies. And the means you wish to use to enforce the mandate...specifically, fines on those who don't purchase coverage...are hard to understand and currently impossible to administer. Seems to me a good time to give in on a point...when you don't know how you're going to follow through on it anyway;
4) Granting an exemption from the mandate will not keep anybody who WANTS to buy health care coverage from shopping for and obtaining coverage via the exchanges, be they public or private. I have argued (unsuccessfully, so far) that the vast majority of Americans WANT to have health coverage, and will buy it (especially with the help of subsidies) if it's available. My advice years ago was that, before you drop the hammer of a mandate, it would be wise to make sure the voluntary marketplace is working as well as it can, THEN drop the hammer on the relatively small number of folks who could buy coverage, and have it available, but choose not to purchase it. Judging by the early volume of folks rushing to check out the exchanges, there are PLENTY of folks who are looking to purchase coverage, and are willing to pay for it;
5) Your experts keep telling you that the mandate is necessary to get everyone "into the pool," that the young and healthy MUST buy into the system in great numbers in order to subsidize those who are not so young and not so healthy. The demographics of the "young invincibles" suggest that, even if they all signed up tomorrow, you'd still be short of break-even by about fifty percent, if your goal is six healthy people for every one of the one percent of big utilizers, and three healthy people for the top five percent of utilizers. The numbers never HAVE worked. And if you buy Item #4, and you let everybody who wants to buy coverage in the voluntary marketplace to do so, the sting of the mandate might not hurt so much, and;
6) A year from now, the exchanges will be operating a lot better, you'll have at least a few million folks signed up, we'll know better who they are, what rates they're paying, and have a few insights into their utilization of services. You'll simply have a much better story to tell...and maybe you'll have figured out how actually to administer the mandate.
To me, this looks like a pretty good deal for you. You right the country. Everybody who wants to buy health coverage can do so. You have time to get systems operating properly. An additional few million people get covered. You "cave" on one matter of "principle" which might be based on faulty assumptions anyway...But it seems to me that principle has sorta flown out the window a ling time ago.
I recognize that this argument might be entirely too sensible to succeed in Washington. But if you think about it for about 60 seconds, I think you'll see the value.
And imagine the looks on your adversaries' faces when they figure out you've gotten everything you wanted in exchange for bargaining away something which is of relatively little value, and might even make your signature legislative achievement better.
Don't thank me, JJP
Monday, September 30, 2013
Exchanges "Launch" On Tuesday...Are YOU Ready For The Sh*tshow?...
The Revolution starts tomorrow.
It's been a long time coming.
Waaaaaay back in the mid-90's, some of COSE's leaders (before we were so rudely interrupted) began thinking about how to use good deals on small group health plans as an organizing factor based on which to create a branded, national small business association. Such a plan would have demanded the development of an automated platform and process for buying and selling small group health plans. I even got the opportunity to pitch the idea to a few investors.The consensus of those investors was that it wasn't terribly likely that people would ever buy insurance on-line.
This was about a year before Progressive launched an on-line revolution in car insurance, and more broadly, on the p&c industry. Because it turned out that, if you give people a good deal, and make the experience easy, they'll sidestep the middleman and buy on-line.
In the mid-2000's, I did a consulting gig for a big regional insurance broker which had just purchased a bunch of agencies in a bunch of different markets, and was looking for an organized small group market entry strategy. After a lot of trial and error, we built a software-enabled platform and process that would let small business owners and their employees shop for, compare, and apply for health plans.
The health insurers we shared our prototype with ignored us out of the room. Operations people LOVED it, because of the obvious paperwork and marketing efficiencies. Sales people HATED the idea, because they feared a health insurance version of what happened in the travel business: disintermediation of their third-party sales forces, which was they only vehicle they had for selling small group health coverage. We thought creating an alternative marketing channel would increase carriers' opportunities to lower costs and increase their leverage with their agents and brokers. Insurers (and most agents) could not envision a world that might not have them in it.
The purpose of those two little stories on the day before PPACA's health exchanges open for business is that, for nearly 20 years, insurers have had both the knowledge and the tools to "fix" many of the problems with the marketing and sales of health plans voluntarily. But chose, for their own reasons, not to employ them. And that the unveiling of health exchanges, based on a federal mandate, was maybe the only possible way to FORCE innovation into the insurance industry.
Health and life insurers have been the last holdouts against the inherent efficiencies built into web-based marketing, out of fear of transparency, standardization, and disintermediation of their brokers and agents. As a practical matter, exchanges represent an opportunity to strip away many of the strategies which insurers employ as business development retention tools: administrative complexity, paperwork, byzantine underwriting schemes, and convoluted language.
Insurers and brokers (and their surrogates among the Republican Party) have resolutely resisted the implementation of exchanges since their introduction in PPACA legislation. They've used every tool available to them to impede the development of exchanges, from withholding funding to Supreme Court challenges to refusing to implement state health exchanges in two-thirds of the states (thereby defaulting to the federal exchange, which represents an ironic decision by Republican governors to undermine their own states' ability to regulate exchange activity, while at the same time turning even MORE power over to the federal government).
By the time PPACA ran the Supreme Court gauntlet, only a little more than a year remained for the government to launch a dizzyingly complex logistical challenge. The rules and policies surrounding exchanges continued to change right up till last week, when the Administration announced that the small business exchanges known as SHOP exchanges wouldn't be open for business for at least another thirty days. Even as I write this, House Republicans are in the midst of a last-ditch effort to delay exchange implementation for a year, at the very least, if not repeal the law altogether and replace it with....what? A return to the status quo ante (as if those were "the good old days").
And yet, despite all that, effective October 1st, the virtual doors will open on public exchanges throughout the country.
What's going to happen?
As noted above, it's going to be a sh*tshow.
NOBODY is ready. And NOBODY knows what's really going to happen.
Insurers which, today, will still be processing and underwriting paper applications, suddenly will go paperless tomorrow. They have no idea what sort of volume to expect, how their interfaces with state and federal exchanges will operate, how the calculations of subsidies for applicants will actually work (when they work at all; in development, the government data base gets it right only about 2/3 of the time), who will apply, who will pay premiums, who will renew a year from now...Nobody knows.
Brokers will, at the very least, be relying on largely untested insurer-developed "exchange" platforms to assist both their traditional clients, and a hoped-for stampede of new clients. Every insurer of any size has developed its own "exchange" platform, which means agents will need to be trained on a variety of competitive exchange tools. Some will work better than others, but NONE have been terribly thououghly tested.
The federal government SURE isn't ready, despite the air of confidence the Administration is trying to portray. Were it not for the explosive nature of the politics surrounding Obamacare, the Administration would certainly have postponed the exchange launches for at least a couple of months, and maybe up to a year, to make sure its systems were ready for prime time. They didn't have that luxury, because a failure to launch by the always-arbitrary October 1st deadline would have set the wolves baying even more loudly. Our friends In Government know that the exchanges are being held together with spit and bailing wire, and powered by an army of chipmunks in cages, and that it will take at least a year to work the bugs out. Despite their public optimism, they have to be praying that early response to the exchanges will be slow, because if they face an avalanche of applicants, the whole system could crash.
And hapless consumers CERTAINLY aren't ready. While political objections to Obamacare run high, the vast majority of Americans still know very little about the law and how it will affect them. Their ignorance will be compounded by stories of early problems with application, enrollment, and subsidy calculations, as well as by a truly mean-spirited and destructive misinformation campaign being waged in the media, both by "conservative" pundits and by the Koch brothers, who seem to be paying many of those pundits' salaries.
So, sure, it's going to be messy, noisy, and chaotic.
But that's not so bad, given the circumstances. Most revolutionary ideas begin their lives as very unpopular ideas. Most big projects experience problems at launch. And most of us learn by trial and error.
What's going to happen? Probably, in the first few weeks, not much. And that could be good.
Some of the bad news is, I think, that those who will flock to the exchanges, and who will battle through the errors and glitches to get enrolled as soon as possible, will be folks with health conditions. They'll probably find that, even with the promise of subsidies, the best plans with the best benefits will be very expensive. The subsidies are tied to the second-least-expensive "silver" health plans, many of which are built around very restrictive provider networks. Will they become discouraged?
The next wave will be individuals seeking subsidized coverage. Keep in mind that on the only public exchange extant, The Massachusetts Connector, about 90 percent of those enrolled are receiving some sort of subsidy.
The last groups to shop will be individuals who already have some sort of coverage. They could be stampeded toward the exchanges if they receive letters from their insurers telling them that their current health plans haven't been "grandfathered," and no longer comply with the government's criteria for "qualified health plans." But MOST folks with coverage participate in plans which have been "grandfathered" through 2014, so insurers can assure themselves that they'll be able to keep that business in place for at least another year, till things are working better.
There WILL be a stampede to some private exchanges, driven by large, self-insured employers who are already rapidly transitioning their employee and retiree health plans to the big guys' (Aon, Willis, Towers Watson) defined contribution exchanges. But this is sort of a non-event; the "exchanges" these companies are jumping to are really juiced-up Third-Party Administrators (TPA's), which already manage health plans for large companies. These providers have just added a defined contribution component to their systems, painted them a different virtual color, and named themselves "exchanges."
MOST people will come to the exchange gradually, the way most people adapt to new technologies: by messing around till they figure it out. It's important to keep in mind that this first open enrollment period is six months long, and that significant changes and upgrades will be made in the next six months to fix glitches and improve the customer's experience. Most folks will "walk through" the exchanges a few times before doing any serious shopping.
So, despite the noise, any stories about Day One of the exchanges will be very, very premature. The real issue isn't how things work on Day One, or Week One, or even Month One, but how many people have signed up by the end of March. My guess is the number will be lower than the Administration's forecast of seven million people; maybe half that number will have signed up by then.
The next big test will be how many of those who have enrolled in the early stages renew their coverage at the end of Year One. Satisfied customers will return; unhappy ones may find that the rapidly-evolving private exchanges will be better places to shop.
In the meantime, expect to continue to hear both sides in this "debate" rage on. Expect continued shenanigans in Congress, including continuing efforts by influential constituencies such as medical device manufacturers to gain advantages (or mitigate disadvantages) for themselves, at taxpayer expense.
In other words, expect the politics to continue.
That's how revolutions work. They're chaotic. They're messy. They are strongly resisted by those whose power comes from the status quo.
But the change is coming, starting tomorrow. The world is going to change, irrevocably. It's by no means a sure thing that all exchanges will work effectively, especially at the outset. Or that consumers will ultimately benefit (it is politics, after all). There will be winners and losers. We'll talk about those in subsequent months.
We won't REALLY know how well the exchanges work till probably the end of 2017.
The major lesson to come from this is that the political forum is the worst place to develop meaningful reforms.
But when the marketplace fails, it's the only other alternative.
So keep calm. Carry on. And enjoy the show...
It's been a long time coming.
Waaaaaay back in the mid-90's, some of COSE's leaders (before we were so rudely interrupted) began thinking about how to use good deals on small group health plans as an organizing factor based on which to create a branded, national small business association. Such a plan would have demanded the development of an automated platform and process for buying and selling small group health plans. I even got the opportunity to pitch the idea to a few investors.The consensus of those investors was that it wasn't terribly likely that people would ever buy insurance on-line.
This was about a year before Progressive launched an on-line revolution in car insurance, and more broadly, on the p&c industry. Because it turned out that, if you give people a good deal, and make the experience easy, they'll sidestep the middleman and buy on-line.
In the mid-2000's, I did a consulting gig for a big regional insurance broker which had just purchased a bunch of agencies in a bunch of different markets, and was looking for an organized small group market entry strategy. After a lot of trial and error, we built a software-enabled platform and process that would let small business owners and their employees shop for, compare, and apply for health plans.
The health insurers we shared our prototype with ignored us out of the room. Operations people LOVED it, because of the obvious paperwork and marketing efficiencies. Sales people HATED the idea, because they feared a health insurance version of what happened in the travel business: disintermediation of their third-party sales forces, which was they only vehicle they had for selling small group health coverage. We thought creating an alternative marketing channel would increase carriers' opportunities to lower costs and increase their leverage with their agents and brokers. Insurers (and most agents) could not envision a world that might not have them in it.
The purpose of those two little stories on the day before PPACA's health exchanges open for business is that, for nearly 20 years, insurers have had both the knowledge and the tools to "fix" many of the problems with the marketing and sales of health plans voluntarily. But chose, for their own reasons, not to employ them. And that the unveiling of health exchanges, based on a federal mandate, was maybe the only possible way to FORCE innovation into the insurance industry.
Health and life insurers have been the last holdouts against the inherent efficiencies built into web-based marketing, out of fear of transparency, standardization, and disintermediation of their brokers and agents. As a practical matter, exchanges represent an opportunity to strip away many of the strategies which insurers employ as business development retention tools: administrative complexity, paperwork, byzantine underwriting schemes, and convoluted language.
Insurers and brokers (and their surrogates among the Republican Party) have resolutely resisted the implementation of exchanges since their introduction in PPACA legislation. They've used every tool available to them to impede the development of exchanges, from withholding funding to Supreme Court challenges to refusing to implement state health exchanges in two-thirds of the states (thereby defaulting to the federal exchange, which represents an ironic decision by Republican governors to undermine their own states' ability to regulate exchange activity, while at the same time turning even MORE power over to the federal government).
By the time PPACA ran the Supreme Court gauntlet, only a little more than a year remained for the government to launch a dizzyingly complex logistical challenge. The rules and policies surrounding exchanges continued to change right up till last week, when the Administration announced that the small business exchanges known as SHOP exchanges wouldn't be open for business for at least another thirty days. Even as I write this, House Republicans are in the midst of a last-ditch effort to delay exchange implementation for a year, at the very least, if not repeal the law altogether and replace it with....what? A return to the status quo ante (as if those were "the good old days").
And yet, despite all that, effective October 1st, the virtual doors will open on public exchanges throughout the country.
What's going to happen?
As noted above, it's going to be a sh*tshow.
NOBODY is ready. And NOBODY knows what's really going to happen.
Insurers which, today, will still be processing and underwriting paper applications, suddenly will go paperless tomorrow. They have no idea what sort of volume to expect, how their interfaces with state and federal exchanges will operate, how the calculations of subsidies for applicants will actually work (when they work at all; in development, the government data base gets it right only about 2/3 of the time), who will apply, who will pay premiums, who will renew a year from now...Nobody knows.
Brokers will, at the very least, be relying on largely untested insurer-developed "exchange" platforms to assist both their traditional clients, and a hoped-for stampede of new clients. Every insurer of any size has developed its own "exchange" platform, which means agents will need to be trained on a variety of competitive exchange tools. Some will work better than others, but NONE have been terribly thououghly tested.
The federal government SURE isn't ready, despite the air of confidence the Administration is trying to portray. Were it not for the explosive nature of the politics surrounding Obamacare, the Administration would certainly have postponed the exchange launches for at least a couple of months, and maybe up to a year, to make sure its systems were ready for prime time. They didn't have that luxury, because a failure to launch by the always-arbitrary October 1st deadline would have set the wolves baying even more loudly. Our friends In Government know that the exchanges are being held together with spit and bailing wire, and powered by an army of chipmunks in cages, and that it will take at least a year to work the bugs out. Despite their public optimism, they have to be praying that early response to the exchanges will be slow, because if they face an avalanche of applicants, the whole system could crash.
And hapless consumers CERTAINLY aren't ready. While political objections to Obamacare run high, the vast majority of Americans still know very little about the law and how it will affect them. Their ignorance will be compounded by stories of early problems with application, enrollment, and subsidy calculations, as well as by a truly mean-spirited and destructive misinformation campaign being waged in the media, both by "conservative" pundits and by the Koch brothers, who seem to be paying many of those pundits' salaries.
So, sure, it's going to be messy, noisy, and chaotic.
But that's not so bad, given the circumstances. Most revolutionary ideas begin their lives as very unpopular ideas. Most big projects experience problems at launch. And most of us learn by trial and error.
What's going to happen? Probably, in the first few weeks, not much. And that could be good.
Some of the bad news is, I think, that those who will flock to the exchanges, and who will battle through the errors and glitches to get enrolled as soon as possible, will be folks with health conditions. They'll probably find that, even with the promise of subsidies, the best plans with the best benefits will be very expensive. The subsidies are tied to the second-least-expensive "silver" health plans, many of which are built around very restrictive provider networks. Will they become discouraged?
The next wave will be individuals seeking subsidized coverage. Keep in mind that on the only public exchange extant, The Massachusetts Connector, about 90 percent of those enrolled are receiving some sort of subsidy.
The last groups to shop will be individuals who already have some sort of coverage. They could be stampeded toward the exchanges if they receive letters from their insurers telling them that their current health plans haven't been "grandfathered," and no longer comply with the government's criteria for "qualified health plans." But MOST folks with coverage participate in plans which have been "grandfathered" through 2014, so insurers can assure themselves that they'll be able to keep that business in place for at least another year, till things are working better.
There WILL be a stampede to some private exchanges, driven by large, self-insured employers who are already rapidly transitioning their employee and retiree health plans to the big guys' (Aon, Willis, Towers Watson) defined contribution exchanges. But this is sort of a non-event; the "exchanges" these companies are jumping to are really juiced-up Third-Party Administrators (TPA's), which already manage health plans for large companies. These providers have just added a defined contribution component to their systems, painted them a different virtual color, and named themselves "exchanges."
MOST people will come to the exchange gradually, the way most people adapt to new technologies: by messing around till they figure it out. It's important to keep in mind that this first open enrollment period is six months long, and that significant changes and upgrades will be made in the next six months to fix glitches and improve the customer's experience. Most folks will "walk through" the exchanges a few times before doing any serious shopping.
So, despite the noise, any stories about Day One of the exchanges will be very, very premature. The real issue isn't how things work on Day One, or Week One, or even Month One, but how many people have signed up by the end of March. My guess is the number will be lower than the Administration's forecast of seven million people; maybe half that number will have signed up by then.
The next big test will be how many of those who have enrolled in the early stages renew their coverage at the end of Year One. Satisfied customers will return; unhappy ones may find that the rapidly-evolving private exchanges will be better places to shop.
In the meantime, expect to continue to hear both sides in this "debate" rage on. Expect continued shenanigans in Congress, including continuing efforts by influential constituencies such as medical device manufacturers to gain advantages (or mitigate disadvantages) for themselves, at taxpayer expense.
In other words, expect the politics to continue.
That's how revolutions work. They're chaotic. They're messy. They are strongly resisted by those whose power comes from the status quo.
But the change is coming, starting tomorrow. The world is going to change, irrevocably. It's by no means a sure thing that all exchanges will work effectively, especially at the outset. Or that consumers will ultimately benefit (it is politics, after all). There will be winners and losers. We'll talk about those in subsequent months.
We won't REALLY know how well the exchanges work till probably the end of 2017.
The major lesson to come from this is that the political forum is the worst place to develop meaningful reforms.
But when the marketplace fails, it's the only other alternative.
So keep calm. Carry on. And enjoy the show...
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