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Tony Ondrusek is founder and publisher of Insurance & Financial Advisor and IFAwebnews.com.

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Federal health insurance exchanges will not be online by Oct. 1, 2013, as required by the health reform law.

That is my prediction. But it’s more than just a shot in the dark, as the sweeping health reform law, known as the Affordable Care Act (ACA), continues to come unhinged.

Online insurance exchanges must be operational by Oct. 1 so Americans can begin to buy health insurance online and be covered by Jan. 1, 2014.

That is the day by which nearly all Americans must have health insurance, either purchased outright, with government subsidies or through a government-provided program.

Online health insurance exchanges represent one rail of the $1.3 trillion health reform track. (Some estimates go as high as $4 trillion in costs to taxpayers over the next 20 years.) The other rail is the requirement that most Americans have approved coverage (millions of union members and Congressional staffers are, of course, exempt from the law) with the promise of lower health insurance premiums.

That rail is bent beyond repair, as health insurance costs have risen far above what they would have had the law not been enacted. And predictions are that costs will climb even higher when the law is fully implemented, with the young and healthy paying the highest premiums. Not to mention smokers, who will be penalized thousands of dollars each year for their right to light up. The obese will not be penalized.

When President Obama and Congressional Democrats hatched the idea of having the federal government manage one fifth of the national economy, they assumed most states would create and run their own online insurance exchanges. They believed that the federal government would have to create and operate exchanges in only a handful of states, at most. It didn’t happen that way.

In fact, fewer than half the states agreed to create their own online exchanges. Some of those will likely open in advance of the Oct. 1 deadline. The others – operated by the federal government – face a less likely launch.

Most states defaulted to the federal government to create the exchanges for them, because they couldn’t reconcile state budgets to handle the ACA-required expansion of Medicaid, and because they cannot predict how many employers will shift their workers off group plans and onto the state exchanges. A worse-case scenario – which is possible given the lingering recession—could have forced some states into bankruptcy.

The Obama administration extended a November 2012 deadline into December to allow more states to sign up for the privilege of making their own exchanges. None bit the bait.

[See related stories: Sebelius extends health insurance exchange deadline to December
HHS adds new deadline extension for state health insurance exchanges]

And the extension is likely just a peek under the tent of the delays that are sure to come.

Now, the Department of Health and Human Services (HHS) is forced to create exchanges for more than 30 states, when it had planned to do it for about a half dozen or so. The problems are mounting.

During the fiscal cliff dealings on Jan. 1, Congress cut funding for nonprofits that are required to be operational in the states and online, so that now fewer than half the states will have nonprofits – part of the promise to have inexpensive plans for the citizenry.

[See related story: Fed cuts health insurance plan for those with pre-existing conditions]

Last week, the Obama administration cut funding for the pre-existing condition program that was part of ACA because – get this – it is not feasible and is losing money. A 12-year-old could have done the math on that and come to the same conclusion years ago.

In a story published on IFAwebnews.com last month, officials questioned how the administration could possibly have the exchange infrastructure in place by Oct. 1. Even proponents said it was an “iffy” proposition.

[See story: Exchange launch, operation questioned as fed is late with new rules]

And during a recent U.S. Senate Finance Committee hearing on the exchanges, Democrats (with a smattering of minority Republicans) expressed concern that HHS would not be able to meet the deadline, a scant seven months away.

Sen. Orrin Hatch of Utah asked HHS officials how they could possibly have the system set up, given that rules set up by HHS are just being dissected and implemented.

“We are making progress, we are on track and we will be ready,” Gary Cohen, director of HHS’s consumer information division, told the committee.

Hatch was unconvinced.

“I have a hard time understanding how the administration expects to have exchanges up and running by Oct. 1, especially when we have no details on how the exchanges will work in more than half the states,” Hatch replied to Cohen.

The committee chairman, Sen. Max Baucus, a Montana Democrat, asked how the “archaic” computer systems used by the Social Security Administration, the IRS and the Department of Homeland Security would all be able to talk with each other by Oct. 1, as required by ACA.

HHS and those agencies will test “the flow of data back and forth” between each other this spring, Cohen replied.

Other remarks from Democrats on the committee should have received lots of press attention, but little was given.

Sen. Ron Wyden, Democrat from Oregon: “We’ve got millions of people — working-class, middle-class people — who are going to be pushed into a regulatory health coverage no man’s land…They are unable to afford the family coverage through their employer and ineligible for the subsidy that could be used by dependents on the exchange.”

Sen. Maria Cantwell, Democrat from Washington: “You are overwhelmed by the details and technology, I get that point. … It seems as if the agency is taking pages out of the law.”

Sen. Bill Nelson, Democrat from Florida: “The people of Florida are going to suffer…I want someone to be held accountable for this,” in reference to cutting the nonprofit funding.

Some have predicted that having the exchanges up and running by Oct. 1, 2013 – in essence, creating a computer system that would rival those of NASA, the IRS, the Social Security Administration and every state motor vehicle administration combined – would not only be next to impossible, it would be a colossal .

If the comments from Senate Democrats at the recent committee hearing is an indication, those who passed “the bill so you can find out what is in it” (attributed to former House Speaker Nancy Pelosi) seem to be retreating from their blind support. Perhaps they are seeing the reality of what experts have said since the bill was debated in raucous town hall meetings when ordinary citizens were brought to the verge of revolt as the legislators insisted that the law would be the greatest thing since, well, sliced bread.

It IS the single-largest piece of legislation ever enacted by Congress. Also the most costly. And the most far-reaching, as the law’s tentacles reach far beyond health care, into federal income taxes (those who don’t health insurance and don’t pay penalties will have income tax refunds withheld…that’s why the IRS is managing the financial aspects of the law) and private medical decisions and end-of-life care and employment benefits and taxation (again, the IRS, as some capital gains are taxed to pay for ACA) and even into the tanning salon, as a federal tax on tanning salons is a direct tax to fund ACA.

On the outside, the Obama administration seems confident that implementation is moving along. But rest assured, behind the curtain is an administration biting its nails and hoping on top of hope that they can pull off the great caper.

It seems less likely they will be able to do so.

That’s my take.

 

5 Responses

  1. Tim Says:

    Very good article, it will be interesting to see how this all plays out! I think as an advisor, the last thing you want to do is put your clients in a situation where they need the exchanges to open on time. However, many people are counting on these exchanges opening by the New Year, especially with the federal high risk pool now closed. We’ll see I guess!

  2. Tony Garr Says:

    What are you going to say when this all works and because of your negative attitude, your clients suffer. The health care system is changing. Get on board or find another profession.

  3. Marcus Woodward Says:

    As a member of the Kentucky Health Benefit Exchange Advisory Board appointed by Governor Beshear as agent broker representative on the exchanhe and NAHU member, I can assure you that we, in Kentucky, are progressing on schedule for the opening on October 1, 2013 for open enrollment for January 1, 2014 effective dates. While it is daunting the Board and staff are working effeciently and diligently to bring the ACA to Kentucky on time.

    States without their own exchanges are particularly vulnerable to your skeptical prediction. Brokers and agents in Federal exchange states will be particularly vulnerable to massive market change.

    State based exchanges, at least here in the Commonwealth afford agent and bokers input into how the exchange will operate, giving them every consideration as to practices, commissions, and protecting their books of business

    Marcus Woodward

  4. CJ Says:

    Excellent article. Can’t believe this is not receiving more press attention. While states who are building their own exchange will likely be ready (what stage of readiness will vary considerably) those relying on the Federal exchange are going to be in a tough spot. Acknowledging this has nothing to do with an individual’s support of PPACA or not, it is just a fact that administration has overpromised and will underdeliver on this.

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