Web Market is Big Test for Obamacare

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A vital part of Barack Obama's Affordable Care Act faces a crucial test in the coming months when the health care exchanges that are supposed to insure 25 million Americans start operating.

Source: Financial Times

A vital part of Barack Obama’s Affordable Care Act faces a crucial test in the coming months when health care exchanges that are supposed to insure 25 million Americans start operating.

By October, every state is supposed to go “live” with an online marketplace that will provide a single venue to buy insurance plans. Just as commercial websites provide competing prices for air tickets or insurance, the health care exchanges will provide easily comparable plans for the uninsured and small businesses.

The big question for the White House is whether this experiment will take off or crash.

One of the issues is whether the information technology undertaking will function seamlessly, with many of the systems yet to be tested.

A second is whether years of opposition to the health care law by Republican governors and legislators will affect consumers, creating a divide. Democrat states that support the reform have invested far more resources in trying to make the exchanges work.

“This is a Herculean task for the federal government and the states, unprecedented in terms of co-ordination and systems building,” said Sabrina Corlette, a research academic at Georgetown University.

Ms. Corlette said there were concerns about technology glitches when the government launched a prescription drug program for the elderly in 2005, but today it is popular and works well.

States run by Republican governors, including Texas and Florida, which have some of the highest rates of uninsured, opted not to create their own exchanges, leaving the task to the federal government, which has budget constraints.

So far, there is little public information available about whether the federal-run exchanges, 27 in all, are on schedule. California, Oregon, and Washington are further ahead than many in identifying insurers and choosing technology for their exchanges.

“Those three states have partisan support,” said Lauren Fifield, senior policy adviser for Practice Fusion, an electronic medical records start-up in San Francisco. “More important, they have payer support — aggressive plans that are willing to lead the way.”

California took an active approach in negotiating with insurers to take lower reimbursement rates and charge lower premiums.

The state released a list of 13 insurers in mid May. The typical medium-priced plan cost $276 per month, much lower than the $450 federal officials estimated in 2009.

UnitedHealth, Cigna and Aetna, three employer health plans, chose not to participate in California’s exchange but together they only account for 7% of the state’s market for individual plans, according to Citigroup.

Because there are so many potential customers in the state that do not have health coverage — about 5 million — many insurers were willing to lower rates in an effort to gain a lead in market share.

California followed the federal tiered system, demarcated by platinum, gold, silver and bronze plans, and made sure the participating insurers offered plans that conformed to the standards of each category so consumers could make comparisons.

It is the execution of these features that will ultimately differentiate the early adopter states from the laggards, Ms. Fifield said. Because people have little experience of shopping around for health care or paying attention to costs, the usability of the exchange websites and the presentation of the plans for sale will be the key to consumer satisfaction.

“Until now, individuals haven’t been forced to be consumers,” she said. “It remains to be seen what will be compelling, in terms of marketing tools.”

By October, if all goes to plan, people will be able to log on to their state’s health care portal and input basic identifying information.

A “federal hub” that combines data from the Department of Homeland Security on immigration status, from the Internal Revenue Service to check income and other bureaucracies will determine whether a person is eligible for tax subsidies, and how much.

The person can then choose between competing plans.

If eligible for subsidies, the federal government will make monthly payments to an insurance provider while monitoring income levels to ensure the person is not receiving too few or too many subsidies.

Revamp doubts

Since 2010 the U.S. has spent more than $14 billion revamping the outdated medical records system, an endeavor experts say has been a boon for software companies but has not yet achieved the White House’s goal of stemming care costs, writes Gabriel Muller in Washington.

Financial incentives to adopt electronic systems have attracted many medical professionals to convert their old health records. The government said more than half of U.S. doctors and 80 per cent of hospitals had digitized their records. But there are doubts about whether the incentives are helping to cut health care costs.

In full, www.ft.com/us (c) 2013 The Financial Times Limited