The centerpiece of President Obama's new health law is a collection of government-sponsored insurance exchanges, in which people who shop for coverage on their own can purchase health insurance, and gain a taxpayer-funded subsidy if their income is low enough.
The exchanges are set to roll out on October 1, in less than two weeks. In other words, it's crunch time. And in this morning's (Sept. 20, 2013) Wall Street Journal comes word that the exchange software, for which the government has spent upwards of $88 million, still can't correctly calculate the amount of subsidies that an individual applicant is eligible for.
"There's a blanket acknowledgment that rates are being calculated incorrectly," one senior insurance executive told the WSJ. "Our tech and operations people are very concerned about the problems they're seeing and the potential of them to stick around."
The WSJ article was authored by Christopher Weaver, Timothy Martin, and Jeniffer Corbett Dooren. "If not resolved by the Oct. 1 launch date," they report, "the problems could affect consumers in 36 states where the federal government is running all or part of the exchanges. About 32 million uninsured people live in those states."
Glitches could lead to waste, fraud, and abuse
Here's how it works. The exchanges offer individuals a subsidy on a sliding scale, depending on your income, to purchase insurance. If your income is near the poverty line, you get almost a full subsidy. If you make two to three times the federal poverty level-say $25,000 to $35,000 a year for a childless unmarried adult-you get a partial subsidy. And if you make more than four times the federal poverty level-about $46,000 a year-you don't get any subsidy at all.
But tests on the software that calculates how much your subsidy is worth, if any, only began this week, according to the Journal reporters, even though they were "initially scheduled to begin months ago." If enrollees' subsidies are calculated incorrectly, it could mean that some people gain much larger subsidies than they're eligible for under the law, and others miss out on subsidies they would otherwise obtain. "On the surface, you'd think this is pretty easy for a website to give you a price, but behind the scenes, the number of variables is very high," says Michael Krigsman, an IT consultant.
In general, when there are problems like this, and the program rolls out anyway, the result is substantial amounts of waste, fraud, and abuse. We already know that the government will be relying on the "honor system" for people to report their incomes, and thereby their eligibility, for exchange subsidies. Combine that with the fact that the exchange software can't calculate what your subsidy actually is, and the result is that many people will be able to game the system to gain larger subsidies than the law intends.
HHS delays release of exchange insurance prices
Earlier this month, I and several of my Manhattan Institute colleagues published an interactive map that allows you to figure out how much Obamacare will increase individual-market insurance premiums in your state, relative to what you can purchase today. However, we are still waiting on more than 30 states to release their pricing information, because that information is being closely held by-you guessed it-the federal government; specifically, the U.S. Department of Health and Human Services.
I'd been told by Congressional sources that HHS had been saying that this data would be out on September 19. But now, sources tell me this data won't be ready until October 1, if even then.
Why not delay the whole law by one year?
These problems are yet one more illustration of the fact that Obamacare isn't ready for prime time. The law would work better-and minimize the potential for waste and fraud-if federal and state officials had more time to work out the kinks of the exchanges.
Kevin Counihan, chief of the Connecticut exchange, has publicly expressed his frustration with the Obama administration's flakiness. "Sometimes it feels like we're driving a car and then changing the tire at the same time," he told the Associated Press in March. "We're going to have a challenging enough time providing the quality of service that our residents deserve in Connecticut with the deadline that we have. If they keep adding new regulations, I'm sorry. We have to suddenly say, 'enough is enough.'" Counihan is one of the many people trying in good faith to implement the law who says, "I wish we had one more year."
That is what Republicans should have advocated, instead of threatening to shut down the government over Obamacare. There's still time for them to work with centrist Democrats to get it right.
Editor's Note: Avik Roy is a Senior Fellow at the Manhattan Institute. In 2012, Roy served as a health care policy adviser to Mitt Romney.