The implementation of the Affordable Care Act has taken on new levels of complexity due to the slipshod rollout of the federal online health marketplaces. While consumers in states like California have had success using their own proprietary marketplaces, millions of consumers nationwide have not fared the same.
Healthcare.gov website issues
The online health marketplace, HealthCare.gov, made headlines for all the wrong reasons on October 1. A series of glitches kept consumers from enrolling in healthcare plans and, in many cases, from even creating a profile to search available plans. In the following weeks the House of Representatives heard testimony from Secretary of Health and Human Services Kathleen Sebelius, representatives from the Centers for Medicare and Medicaid Services, and the various contractors working on the project.
Testimony indicated that contractors were unable to perform comprehensive end-to-end testing of the system before its rollout. Reports in the last few days illustrate a system incapable of handling traffic greater than 500 simultaneous users mere days before the launch, and that the significant technical issues with the site were known but did not compel the administration to delay the launch.
Contractor Quality Software Services Inc. was the administration’s choice to overhaul HealthCare.gov for full functionality by November 30. The new proposed date is only two weeks ahead of the consumer deadline to purchase a healthcare plan to take effect on January 1; after December 15, consumers may be subject to waiting periods before they can use their coverage.
However, during a congressional hearing Tuesday, technology experts testified that the site is not secure for users and should be entirely rebuilt.
With the December 15 enrollment deadline looming, the Obama administration is looking for workarounds to get the ACA rollout back on track.
President Obama has faced harsh criticism over the last several weeks when insurance providers began issuing notices to consumers that their current, non-ACA-compliant plans would be canceled at the end of the year. In response, he has issued an executive action allowing insurers to extend non-compliant policies for an additional 12 months.
Though insurance commissioners in some states have approved the extended plans, many other states are choosing to continue business as usual. The primary concern of insurance companies is that an insufficient number of healthy consumers will sign up for new policies, effectively raising the cost of care across the board for sicker patients who will now be covered. The difference in policies and costs could lead to a significant premium hike when 2015 rates are released this spring.
Purchasing outside the marketplace
Consumers have always had the option of purchasing healthcare through their insurance provider or a broker, rather than through the marketplace. The downside, of course, is that up to this point consumers have only had access to subsidies by purchasing directly from the marketplace.
Now, insurance carriers are on the way to direct enrollment capabilities. The Centers for Medicare and Medicaid Services have implemented technical solutions to their system which would allow health insurance companies to accept subsidy applications directly rather than redirecting eligible consumers to HealthCare.gov, which has been the standard response thus far.
There are still important hurdles to cross before direct enrollment is a fully viable option. Direct enrollment does not allow consumers to comparison shop as they can on the marketplace. In addition, the online marketplace is not yet set up to process and disburse subsidy payments to insurers. This potential complication may prevent many health care companies from immediately providing the option to apply for subsidies on their Web sites.
Going without insurance?
Of course, some consumers may choose to avoid purchasing insurance entirely.
Consumers whose health insurance costs would exceed eight percent of their income are exempt from the individual mandate. Non-exempt consumers will be subject to a graduated tax penalty for not carrying insurance, beginning in 2014 at the greater of $95 or 1 percent of adjusted gross income above $10,150. By 2016 the penalty will be the greater of $695 or 2.5 percent of income.
Young, relatively healthy consumers may be subject to higher premiums in areas that do not adjust premiums for age, while having coverage will protect them from out-of-pocket costs exceeding $6,350 for an individual in any given year. For these consumers, paying for certain types of care directly and paying the penalty will be less expensive than purchasing insurance; however, as they seek treatment for more serious ailments the cost difference begins to favor carrying some type of coverage.
The question of to purchase or not to purchase, then, becomes a gamble between the up-front cost of coverage and the chances of greater out-of-pocket costs down the road.
As important deadlines draw near, these challenges pose a real threat to the short-term success of the Affordable Care Act. Consumers relying on the federal health exchange to purchase insurance would be well advised to research every available option and, certainly, to hope for a more functional HealthCare.gov in the coming weeks.