Health exchanges hit some snags

As we get closer to the Oct. 1 deadline for the launch of health exchanges, a key part of President Obama’s health care reform law, there seem to be several issues that still need to be worked out.

One of the stories in today’s Wall Street Journal coverage was about a computer glitch making it difficult to determine pricing:

Less than two weeks before the launch of insurance marketplaces created by the federal health overhaul, the government’s software can’t reliably determine how much people need to pay for coverage, according to insurance executives and people familiar with the program.

Government officials and insurers were scrambling to iron out the pricing quirks quickly, according to the people, to avoid alienating the initial wave of consumers.

A failure by consumers to sign up online in the hotly anticipated early days of the “exchanges” is worrisome to insurers, which are counting on enrollees for growth, and to the Obama administration, which made the exchanges a centerpiece of its sweeping health-care legislation.

If not resolved by the Oct. 1 launch date, 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, but only a fraction of them are expected to sign up in the next year.

The remaining 14 states are running separate marketplaces with their own software. One of those states, Oregon, has already announced that it would delay some features to fix software bugs, though consumers will be able to enroll offline.

Enroll offline? I can’t imagine that’s going to go over well with the younger uninsured people many companies are looking to attract to the exchanges. But at least the federal government isn’t the only one experiencing problems with the software.

USA Today reported that exchanges are here to stay, especially as some large employers such as Walgreens begin to use them:

These private exchanges, which have only existed for about a year, are run by outside benefits companies and typically offer more insurance choices than those offered by employers. Employers contribute a set amount and employees choose which plan best suits their needs.

The Walgreen exchange, announced Wednesday with benefits company Aon Hewitt, is similar to the state exchanges required under the Affordable Care Act. In those exchanges or marketplaces, uninsured Americans will buy health insurance plans on their own that are often subsidized by the federal government. In this case, Walgreen provides the financial assistance.

In five years, more than a quarter of the estimated 170 million people now covered by insurance through their employers will be getting their benefits this way, according to research from consulting firm Accenture. At that time, enrollment in these private exchanges is expected to top that of the new state exchanges. That’s despite the fact most Americans are unaware of private insurance exchanges, Accenture says.

But it’s still unclear whether the contributions from employers, including Walgreen, will keep pace with the cost of health care, warns Ron Pollack, executive director of non-profit health care group Families USA. If companies keep paying “the same nominal dollar amount to its workers, that amount will cover a smaller percentage of premium dollars as premiums increase,” he says.

Reuters reported that Home Depot also planned to move part-time workers to the exchanges in an attempt to give them more options for coverage:

Home Depot Inc is shifting medical coverage for part-time workers to new public marketplace exchanges ahead of new benefits requirements under the U.S. Affordable Care Act, a spokesman said on Thursday.

The world’s largest home improvement retail chain announced its move shortly after a similar announcement from Trader Joe’s Co, a popular privately held grocery chain.

Home Depot’s change would affect roughly 20,000 part-time workers who previously had chosen the limited liability medical plan the company offered, spokesman Stephen Holmes said.

After December 31, companies can no longer offer those plans under the health law, also known as Obamacare.

“We’re going to shift them over to the public exchanges, where there are more options,” Holmes said.

The public exchanges being set up under the law will allow individuals to buy government-subsidized healthcare based on income. Enrollment begins on October 1.

A separate Wall Street Journal story said that larger insurers are skipping being a part of exchanges betting that many of those who sign up may have chronic illnesses:

When the consumer marketplaces for insurance go live Oct. 1, don’t expect to see much of familiar names like Cigna Corp. or Aetna Inc.

Instead, the insurance companies that are likely to draw attention on the exchanges—which are expected to enroll an estimated 7 million Americans in the first year—are lesser-known, and in many cases will be offering comparatively lower rates.

The biggest health insurers are eschewing many of the exchanges out of concern that many of the individuals who will purchase coverage need it because they have chronic illnesses or other medical conditions that are expensive to treat.

Too many sick patients could mean that the collective inflow of premiums insurers reap from the exchanges won’t cover their total costs. And it remains unclear how many young, healthy people will sign up.

Some large insurers, like Cigna, don’t sell insurance to individuals in most states, limiting their ability to launch plans on the exchanges since they don’t have a provider network in place.

As if finding insurance wasn’t confusing enough, now consumers will have to navigate unfamiliar companies, concerns about price quotes, and determine if public or private exchanges will offer the best deals. The clock is ticking to get this right and much of the Obama administrations’ reputation depends on it. What is certain is that insurers will see an increase in demand, consumers and likely profits, making this an important area for business reporters to watch in the coming year, especially given all the moving parts and angles to the story.