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2013: The Health Insurance Exchange Cometh


The states’ online health insurance exchanges form the cornerstone of the 2010 health care reform law.  It is through them that people will receive the benefits of the Affordable Care Act (ACA) and those benefits, by law, will be available starting January 1, 2014.  To make that possible, the exchanges must be up and running October 1, 2013, in order to process the 27 million people expected to participate.  That’s less than 7 months from now.  Many experts, however, doubt that this deadline can be kept by most of the states.  If true, this will have serious consequences.

What it is and why it’s important

Exchanges(n) are, by definition, organized market places for trading in specific types of goods.  The New York Stock Exchange is one example.  The state health insurance exchanges being set up are online internet-based market places that will make available 5 types of government approved health plans, represented by any number of health insurance companies.

But the exchanges defined by the ACA are much more than places to buy and sell health insurance.  These exchanges will also process requests for government subsides and tax credits and qualify more people for Medicaid, the government health insurance for the poor.  They will serve as the portals to people who, until now, had little or no health care coverage, one of the biggest objectives of the health care reform law.

Who Can Use It

Unlike most exchanges, only certain people can use these online systems.  To qualify, individuals must be either unemployed, receive inadequate or no insurance from an employer, or have an income level that qualifies them to receive government tax credits and subsidies to purchase health insurance through the exchange.   Others, whose income falls  133% below the poverty level can use the exchange to apply for Medicaid. (within states that have agreed to cover this expansion of Medicaid eligibility)  Small businesses with up to 100 employees can also use the exchange to provide employees with health coverage.

Complications in Building the Exchanges

Simply determining eligibility will be a daunting computer programming task.   To determine who qualifies, each system must interact with data sources from Social Security (for identity), IRS (work employer status) Homeland Security (immigration status),  state Medicaid agencies and other government offices.  Information on what health plans are offered by each company in each state and exactly what benefits are covered and how much employees must contribute is information that’s not easily available.  How this data is captured and stored has to be developed and implemented.  The logic for determining exactly who’ll be eligible to receive benefits is based on government regulations, a moving target.  In the last year alone, Health and Human Services (HHS) issued 70,000 pages of guidance.

This promises to be a daunting computer programming endeavor.  Designing and setting up such a complex online system will rival any commercial or government system ever built. Computer systems a fraction of this size take years to build, are very often delayed; and many efforts fail altogether and are scrapped.

Unfortunately, faced with the uncertainly of the Supreme Court decision, the initial lack of essential requirements from HHS, and unwilling to risk the estimated $30-40 million needed to build such an enterprise, most states delayed development of an exchange despite the looming deadline.

Given the immense scope and complexity of this task,  health care and IT analysts predict many states won’t make the October 1 exchange enrollment start date.  John Goodman, health care economist, predicts that besides Massachusetts and Utah with existing exchanges, only Maryland and maybe Colorado will have an exchange operational by the October 1 deadline.

What happens if exchanges are not up in time?  Theoretically, people can qualify for government support and enroll in approved health plans without an online exchange.  They can do what they did before there ever was an internet: stand in line at state government agencies, fill out paper forms and go home and wait for a letter in the mail.  That narrow funnel won’t accommodate the millions who will flood the system with their requests for health insurance and public assistance.

The success of the ACA depends on a significant number of previously uninsured people becoming insured.  A low initial turnout, regardless of the reason, would be an embarrassment and cast yet another shadow on the already beleaguered  health care reform law.


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