Insurers caught in the middle of Obamacare crisis

Jill Wechsler, a veteran reporter, has been covering Capitol Hill since 1994.The error-plagued rollout of healthcare.gov has exposed extensive weaknesses in the federal system to sign up individuals in new healthcare plans. While government officials say that operations for determining eligibility and enrolling consumers in plans have been fixed, they admit that they don’t have programs in place for reconciling consumer enrollment data with issuers and for channeling financial information to insurers.

Officials at the Centers for Medicare and Medicaid Services (CMS) stated last month that about 30% of the federal marketplace operation is still being developed and won’t be fully functional until mid-January.

The revelation was made at a hearing on Nov. 19 before the House Energy & Commerce Committee. The purpose was to discuss security risks and potential for exposure of personal health information through the troubled online system. Henry Chao, CMS deputy chief information officer, reported that financial management tools and back-office accounting systems were still being developed, even though they are critical to ensuring correct payments to insurers.

It was unclear if insurance sites and online web brokers could connect to the federal exchange system to verify enrollee subsidy eligibility. Insurers continue to report errors and have raised concerns that consumers will find they don’t have coverage in 2014.

In a conference call, CMS spokeswoman Julie Bataille said that back-end financial tools will “come online over time,” adding that mid-January was when those operations will be working. The first priority for CMS, she said, is to fix front-end programs affecting consumers directly. Systems for monthly enrollment reconciliation, financial management and risk adjustment would come later.

Push for direct enrollment

President Obama simultaneously unveiled his “bypass” strategy, informing industry and state insurance commissioners that insurers could legally extend “substandard” policies for a year and to encourage individuals to seek direct enrollment through company websites. Gary Cohen, director of the CMS Center for Consumer Information and Insurance Oversight (CCIIO), informed state officials that issuers could continue coverage under individual and small-group non-grandfathered policies through 2014.

This followed an Obama speech on Oct. 30, where he attacked the pre-reform cut-rate plans offered by “bad-apple insurers,” blasting industry for routinely dropping thousands of high-cost customers every year.

Insurers expressed concern about the request to continue previous coverage, noting that new plans and rates were designed for 2014 based on certain legal and market assumptions. Costs may soar if healthy individuals stay in the old, cheaper policies. States expressed uncertainty that the change was legal, and consumer groups noted that individual insurer sites won’t present alternative coverage options and subsidy calculations.

Obama offered modified risk corridors as assistance for plans, but specifics were murky. There’s also a lack of financial management software needed to calculate added risk.

A March report from McKinsey & Co. had warned of serious reform implementation problems, particularly the lack of a single empowered decisions-making authority to implement reform. It also cited heavy reliance on outside contractors and a lack of time for full pre-testing of the website. Healthcare.gov rolled out despite the problems.