While politicians in Washington argue over the Affordable Care Act, its ultimate fate is being decided far from Capitol Hill.
Amid the periodic repeal votes in Congress and activist campaigns on both sides of the debate, states from New York to California are striving to meet an Oct. 1 deadline to implement the heart of the healthcare law, the online insurance "exchanges" meant to enroll millions of Americans.
The law has already had a major impact on U.S. healthcare since its passage in 2010. Millions of young adults up to age 26 have received coverage under their parents' policies, seniors are receiving expanded drug coverage, and hospitals are experimenting with incentive programs designed to improve care and cut costs.
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Yet the success of Obamacare will ultimately rest on how well it delivers on its promise to extend coverage to the 49 million Americans who currently don't have health insurance. With the deadline just four months off, the prognosis is mixed.
"It is going to be a slow start," said Ana Gupte, a Dowling & Partners insurance analyst in Farmington, Conn. "I don't think the exchanges are fully ready to take in large numbers overnight. This is not going to be 'Turn this on and everybody's in the exchange tomorrow.'"
Even those states most on target have had to scale back consumer-friendly offerings in their effort to meet the deadline. Others are giving up running their own markets. New Mexico and Idaho this month said they would cede control of parts of their exchanges to the federal government.
States are rushing to solve technical hurdles even as they scrap features deemed too complex to set up by the deadline, said Jon Kingsdale, a Boston-based consultant advising exchanges. That risks making it harder for people to sign up. California, for one, won’t directly enroll poor Americans in Medicaid, the joint federal-state health program. New York and 10 other states have put off plans to negotiate lower premiums with insurers.
Some exchanges "are going to barely make it," said Kingsdale, former director of the Massachusetts exchange that became a model for President Barack Obama's overhaul.
Fourteen states and the District of Columbia are building their own exchanges, which will offer health plans for small businesses and people not insured through work. The other states will become partners with the federal government or leave the job entirely to the Obama administration. By law, the markets must open in October to sell coverage that starts in January.
The idea behind the new system is simple: Offer one-stop shopping and aid, making insurance easy and affordable.
In theory, people will go to one of the websites and key in basic information about income, family and employment. They can determine eligibility for government programs like Medicaid or for federal subsidies for private insurance. Those not covered by public programs will see a menu of private options selected by each state.
Consumers can then enroll in a plan and use the exchanges to pay premiums. In some states, such as New York, a separate exchange will cater to small-business employees.
While the goal is simple, the implementation is anything but. States need to set up powerful computer systems that can loop in insurers in real-time while sharing data with the Internal Revenue Service, state tax offices, Medicaid, Medicare, and other agencies in order to verify customer information. Once technical hurdles are cleared, state governments will need to get the word out to millions of people that they arere now eligible for insurance.
"It's been a Herculean task," said Ben Nelson, executive director at the National Association of Insurance Commissioners and a former U.S. senator from Nebraska who voted for the law. "There's so much diversity between the states. Getting that all sorted out has been a major effort."
Some states look like they'll be ready. New York hired contractors to prepare its exchange more than a year ago and has 80 staff members dedicated to the effort. It plans to spend $27 million next year training brokers and community groups to guide people through the healthcare law's new insurance options.
The state is also working with an advertising firm to reach the 2.6 million uninsured New Yorkers and has been modeling the law's effects on premiums for those who already have insurance. When ready, its website and call center will offer help in more than a dozen languages.
"We have been working hard at this for two years now," the exchange's deputy director, Danielle Holahan, said in a phone interview. "There's a lot of passion about what we're doing and what we're going to be able to accomplish."
California last week said it had chosen WellPoint Inc. and a dozen other insurers to offer plans in its new system. Individuals can expect to pay as much as 29 percent less than what small businesses now pay for coverage, said Peter Lee, the exchange's executive director, declaring victory over the "doom-and-gloom estimates" of the health-law's critics.
Some 5.3 million Californians will be eligible to purchase coverage and about half may be eligible for the subsidies.
The exchanges are expected to attract about 7 million people next year, rising to 24 million by 2023, the Congressional Budget Office estimates. Yet that number has been steadily reduced from 34 million in 2011, as states opt out of parts of the health overhaul and the Obama administration eases penalties for people who don’t buy coverage.
Insurers from WellPoint to Aetna, consequently, have been cutting their projections for new business. The stakes for the industry are high: The exchanges represent a potential windfall of $205 billion a year in added sales by 2021, according to an October report from PricewaterhouseCoopers LLP.
WellPoint, the biggest U.S. carrier for those buying their own coverage, slipped 1.3 percent to $76.98 in New York trading on May 24. The Indianapolis-based insurer gained 26 percent for the year through May 24. Aetna, based in Hartford, Conn., fell 1.8 to $59.31 and advanced 28 percent this year.
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While some states will offer "robust" exchanges, "a goodly number will have to make some tough decisions about what they can get done and what will have to wait for version 2.0 or 2015 or beyond," said Kingsdale, the Boston consultant.
In California, "I expect them to be up and running, but with a lot of glitches," said Carmen Balber, executive director of Consumer Watchdog, a Santa Monica-based nonprofit. "The websites will be a little funky, and it will be hard for people to get through. The gears won't all be oiled yet."
California, Colorado and Vermont are dropping plans for exchanges that directly enroll people in private insurance or public programs like Medicaid, according to data gathered by the National Academy for State Health Policy, a Washington-based research group.
Instead, shoppers will be told what they're eligible for and transferred to an insurer website or call-in line -- or simply told to make the connection on their own. In California, Colorado and Utah, customers will be handed off to private insurers to pay their premiums, adding another step to the process, according to the National Academy.
"That's a hand-off where somebody could potentially get lost," Kingsdale, a partner at Wakely Consulting Group, said in a telephone interview. "You're dealing mostly with the uninsured, who are hard to find and easy to lose."
States are also putting off plans that could have squeezed insurer profits, bowing to pressure from the industry and the calendar. Maryland, Washington state and the District of Columbia won't require carriers to standardize deductibles and copays, a step New York and other states are taking to help consumers compare plans.
California is one of only five states that is negotiating with insurers to lower premiums, according to the National Academy. Elsewhere, including in states such as Texas and Florida that will rely on a federal exchange, insurance companies won't face that kind of pressure.
States also are forgoing online tools that would let shoppers filter health plans by provider-network or customer-satisfaction scores. For now, the preference is for "bare-bones" approaches, said Heather Howard, program director at the State Health Reform Assistance Network, a Princeton, N.J.-based group advising 11 exchanges.
For insurance companies, the initial enthusiasm over a surge in business from the exchanges has dimmed somewhat. Growth is looking "much slower" than many had anticipated, WellPoint CEO Joseph Swedish told investors at a May 20 investors conference in New York.
Aetna, the third-biggest health insurer by sales, has cut its projections for the markets next year, CEO Mark Bertolini told analysts on an April 30 conference call.
"This is a two-year ramp to get the individual exchanges up to a level where customers are going to feel appropriate signing up," Bertolini said. "I think people are going to take a wait-and-see attitude."
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