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Jon Kingsdale: It’s not just the website that needs fixing

WASHINGTON — "The Affordable Care Act is not just a website. It's much more," President Barack Obama said last month.

This focus beyond short-term technical problems is meant to bolster the faith of those, like me, who support the Affordable Care Act.

However, it will succeed only if the administration does much more than fix the website.

As HealthCare.gov — the main door to insurance shopping for 13 million of the 17 million uninsured who are eligible for subsidies — gets patched up in the coming weeks, the government must also prepare the world's largest insurance store to meet two equally daunting challenges.

The first is to get enrollment, billing and premium collections working smoothly. In 2006, when we launched the Massachusetts Health Connector, my team encountered start-up problems. Tracking billing and collections was a much bigger challenge than getting our website to work.

Here's why: Enrollees are not covered until their first month's premium is received. In the individual insurance market, premium billing and collection is difficult to track. Folks frequently pay late or in weekly installments, or send too little or even too much.

And when they stop paying, they often do not notify the insurer; the company must determine whether it is an intentional termination, an oversight, or a lost or late payment.

An estimated 27 percent of those who will be eligible for tax credits under the ACA do not have checking accounts. So they must use cash, money orders or prepaid debit cards.

Under the health care law, premium billing and tracking will be even tougher. There are hundreds of prices across each of the thousands of plans in the federal marketplace. Having enrollees pay partial premiums, and the IRS issue tax credits for the rest, means twice as much billing.

Calculating subsidies based on personal income tax filings also creates security issues:

In addition to the problems with verifying consumers' identities online, which have created delays on HealthCare.gov, tens of thousands of unlicensed "navigators" are fanning out across the country to help folks enroll. Many of these people don't have to submit to thorough background checks, although they will gain access to personal financial information.

In Massachusetts, we received about 100 visits to the site for every one enrollment. If the tens of millions of hits for the federal exchange in October eventually translate into millions of customers, the accuracy of the enrollment data will be tested under the pressure of high volume.

If insurers cannot track and collect premium dollars each month, the extra work of doubling back with customers and insurers will frustrate consumers and delay coverage.

What Obama points to with justifiable pride are good prices for good coverage.

But there lies the second potential pitfall. Comparing prices in 2014 to those in 2013 is an "apples to oranges" exercise because the health plans on the exchange are new, and many of them differ considerably from older ones.

The president is correct in pointing to the substandard quality of much of the individual coverage that is being phased out.

We did that in Massachusetts as well, replacing an estimated 150,000 individual and group insurance policies that lacked prescription drug coverage and other basic elements.

Because the exchange makes it easy for consumers to compare premiums, by next autumn they will be able to see premium increases, state by state and congressional district by district. The insurance shopping season is scheduled to open on Oct. 15, 2014 — 20 days before the midterm elections.

Why is this an immediate challenge? Because the hundreds of insurers offering plans on the federal exchange will begin pricing for 2015 in just a few months.

Fortunately, October was an early shopping month, mainly for browsing and for those who are sick and highly motivated to get coverage.

It wasn't an important month for enrolling the "young invincibles" — uninsured young people who don't think they need health care — who will subsidize older, sicker enrollees. But the longer HealthCare.gov remains clogged, the more young invincibles will be discouraged from joining.

Insurers must set rates for 2015 in some states by the end of February, and in most states before June.

They can't raise their rates on plans in the federal exchange now; their prices are locked in for next year. Nor can most carriers recoup any 2014 losses by raising premiums for 2015:

Unless most competitors do the same, hiking premiums will chase away any healthy customers they have. But that is the imminent danger — a general rise in rates among health plans on the federal exchange.

The administration can try to head off the problem, or it can blame insurers after the fact. To convince skeptical CFOs that October 2014 will be very different from today, first the website and the information systems behind it must work.

Additionally, the administration has to prove that it can effectively manage the world's largest commercial health insurance store. And the president has only a few months to do so.

A health insurance exchange is more than a website. It is an insurance store, and to manage it well requires insurance experience, technical know-how, and savvy marketing and sales tactics.

The administration has a few months to put together a management team with these skills, dedicated exclusively to running the world's largest store for private insurance.

The Centers for Medicare and Medicaid Services have talented staff, and Jeffrey Zients, a former budget official who's been called up to help fix the federal exchange's online enrollment, may be just the guy to corral wayward technology vendors.

But selling insurance is not what policy analysts and turnaround specialists do. I had 45 employees dedicated to operating the Massachusetts Health Connector; California has budgeted more than 300. Who's minding the federal store?

If the administration fails to convince hundreds of insurers that the federal exchange will do a superb job marketing their products next fall, what then?

Premiums will jump, Democrats will blame "greedy" insurers, regulators will review rates and push for price controls. And Republicans can credibly crow: "We told you so."

Kingsdale, who oversaw the Massachusetts health insurance exchange from 2006 to 2010, has provided actuarial and other technical assistance for the Obama administration's Affordable Care Act.


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