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Soft Launch May Not Be Threat to Exchanges—but Hard Landings Will

By John Reichard, CQ HealthBeat Editor

September 5, 2013 -- Since its birth, the health law has had one Damoclean sword or another suspended over it. The latest: Will health insurance exchanges actually launch given the complex streams of data they must coordinate?

Right up until the exchanges' scheduled debut 26 days from now, the answer to that question won't be known for sure. But there's little evidence at the moment to suggest that exchanges won't ever launch, or that any delays will be so serious as to keep the uninsured from getting coverage by the start of 2014.

"Soft" launches here and there, or maybe in every state, loom as a possibility. That means the capacity to enroll people in coverage may be limited in the days right after exchanges are scheduled to open Oct. 1. But that date still leaves three months for Americans to get signed up before their coverage actually begins Jan. 1—a cushion that gives time to fix data problems.

Boding well, too, for the ultimate survival of the law (PL 111-148, PL 111-152) is the growing body of evidence, strengthened recently by a new Kaiser Family Foundation survey, that premiums offered on exchanges for 2014 coverage will be within the reach of most buyers.

But if soft launches and rate shock aren't a menace to the success of exchanges, a hard landing may be, in the form of "benefit shock" when the newly insured realize they'll face huge deductibles before their new insurer begins to pick up a share of their medical bills.

Insurance industry consultant Robert Laszewski, who coined the term, notes that even those on the left are worried that subsidies in the health care law are too small to keep young and healthy people from feeling overwhelmed by their out-of-pocket costs for health coverage. There are also concerns about whether those young adults they will keep coming back year after year to exchanges in numbers big enough to offset the costs of sicker enrollees and keep premiums affordable.

Feverish Last-Minute Efforts

The people at the Department of Health and Human Services (HHS) and in the states building the exchanges are working feverishly to meet the Oct. 1 deadline and the implementation effort is showing signs of stress. Meanwhile, Republicans hostile to the law are throwing up roadblocks. Rep. Kevin Brady, R-Texas, chairman of the House Ways and Means Health Subcommittee, has said he doesn't think many of the exchanges will even open.

Perhaps the biggest source of uncertainty is the federal "data hub," a mechanism that routes to exchanges the various streams of data they'll need to verify citizenship, determine income, establish eligibility for subsidies to buy coverage, and determine the size of those subsidies. It involves linking databases maintained by state agencies, the Department of Homeland Security, the Social Security Administration. and the Internal Revenue Service.

The HHS Office of the Inspector General recently raised eyebrows with a report revealing that HHS won't certify the federal data hub as secure until the day before the exchanges are set to open. The original HHS schedule called for that certification by Sept. 4.

Failure to certify by Oct. 1 would either mean operating exchanges without assuring sensitive personal data are secure, or putting off the opening of the exchanges until the data are secure. Since the data hub is needed to operate both the federal insurance exchange and the state-run exchanges, every exchange in the country would be affected.

Also, HHS officials confirmed in recent days that the signing of final contracts between HHS and insurers to offer coverage on exchanges is being delayed by several days, until the middle of September. The delay gives HHS more time to assure insurers that their plans are displayed accurately on exchanges before they formally agree to offer coverage and to resolve any remaining technical issues to the satisfaction of participating insurers.

Meanwhile, the navigators to which HHS has given grants to help exchange customers sign up for coverage face demands for information from Republican leaders of the House Energy and Commerce Committee. Another headache for health law promoters is the widespread ignorance about exchanges among young adults, the very population they need to keep premiums affordable in the long run. According to a survey by The Commonwealth Fund, only 27 percent of 19-to-29-year-olds are aware of the marketplaces.

Around-the-Clock Work

But virtually around-the-clock efforts are underway both within federal and state governments and the insurance industry to stand up the exchanges by Oct. 1, sources say.

At the end of August, the Centers for Medicare and Medicaid Services (CMS) posted a 300-page final rule on exchanges, the last major regulation the agency had to get out before exchanges open. CMS officials have suggested that the inspector general's report raising questions about the federal data hub was based on older information, and they downplay the significance of the delay in signing final contracts with insurers.

"We remain on track to open the marketplace on time on Oct. 1," said CMS spokesman Brian Cook in an email message earlier this week asking about the delay. CMS is an a "plan preview period" that allows insurers to ensure that their plans are displayed accurately by exchanges. Through the delay of a few days, "we are providing them with flexibility and time to handle technical requests," Cook said.

There are also some signs that the insurance industry will launch its own aggressive efforts to market plans sold on exchanges even as Congress denies HHS the money it wants for outreach, and that the young themselves may be more interested in getting coverage than the stereotype of them as "young invincibles" uninterested in getting coverage makes them out to be.

Humana recently announced a partnership in which it will sponsor events at YMCAs in states in which it will offer health coverage on exchanges. The events during the health care law's initial six-month enrollment period will give people information on coverage options under the health care law. Also, GoHealthInsurance, an online brokerage company, has inked an agreement in which the tax preparation firm H&R Block will offer its own branded service giving clients the ability to shop and sign up for coverage under the health care law online, using premium subsidies if they qualify. Where government falls short on outreach, market incentives may motivate industry efforts that at least partly fill the breach.

Also, according to the Commonwealth Fund survey, the market for exchange plans among young adults may be better than some analysts predict. "The stereotype of 'young invincibles' assumes that young adults go without health coverage because they believe they do not need it," the survey said. "But there is considerable evidence suggesting that affordability is the key reason young adults are not enrolled in a health plan."

It noted that following passage of the mandatory coverage law in Massachusetts, the uninsured rate among 19- to 26-year-olds fell from 21 percent to 8 percent. The strong growth in coverage from the part of the health care law that lets young adults stay on their parents' coverage "demonstrates the importance of health insurance to this age group and their families," the survey added.

In addition, it reported "high enrollment rates among young adults offered health benefits through their jobs," suggesting that young adults want to have coverage when it is affordable. The Commonwealth Fund analysis said subsidies "will keep premium costs low for most young adults covered through the marketplaces."

Benefit Shock

But insurance industry consultant Laszewski isn't exactly upbeat about the future of exchanges and suggests their launch could be rocky.
"The delays and glitches continue to mount," he says. "Already, Oregon has said they will do a soft launch by delaying web-based enrollment by two to four weeks" with consumers able to sign up only through insurance agents and partner organizations initially. And California, the state that has invested heavily in a new exchange, "has also said it is seriously considering some sort of soft launch" to give more time to vet its systems, he noted.

A bigger issue than rate shock, he added, "may well be benefit shock—that consumers will look at what they will be getting for their premium payments and that they will be surprised at what their out-of-pocket costs will be before they get anything." If enrollment in exchanges is held down by early administrative problems that deter would-be buyers, and if healthy people have concerns about just how much value they'll get for paying hard-won income for insurance, "that will lead to a pool of insured that is too often sick rather than healthy," potentially making 2015 premiums and 2016 premiums in exchanges more costly, he predicted. "This is the real long-term threat the ACA faces."

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