The Department of Health and Human Services estimates that some 25 million Americans will be buying health insurance through Affordable Care Act-certified exchanges within the next few years. But that and a lot of other HIX outcomes remain to be seen.
Enrollment, IT, financial sustainability, competition, regulatory complexity and Republican recalcitrance are the main challenges facing ACA exchanges.
A few more months please?
Considering HHS's enormous task in setting up federally-facilitated exchanges in 24 states -- something federal health officials apparently were not expecting -- one wonders how many HHS employees and contractors were working over the holidays, and how many will be doing overtime in the coming months.
Some observers think HHS and state exchanges won't be able to meet October enrollment deadlines and could collapse under the weight of their own ambitions.
"I think we should absolutely expect a delay," Scott Lundstrom, IDC Health Insights group vice president, said. "As someone that watches large organizations deploy large systems every day, I don't see any of the telltale's that I would look for in a deployment here."
With a few billion dollars needed to build HIX technology linking exchanges, the Internal Revenue Service, consumers, health plans and Medicaid administrative systems, Lundstrom calls the current HIX build up "one of the largest deployments of IT that we as a nation have tried to do in recent history."
"We don't have a running pilot, we don't have a consensus on how it's going to be done but we're going to light it up, nationwide, in 10 months," Lundstrom said. "I don't believe it. I don't believe that there's an ice cube's chance that we are going to light this thing up successfully on time."
California as HIX sustainability test-case
California is one of those consistently Democratic states enthusiastically implementing the ACA, and its state HIX, Covered California, will probably have the largest HIX by enrollment, if it gets as many buyers as it predicts. Covered California is also going to be an experiment in financial sustainability, receiving no state funds and planning to be self-sufficient by 2017.
The California government has more than $600 billion in debt and lawmakers were so desperate, some might say delirious, that in next year's budget they included $45 million that assumes "fiscal cliff" federal spending sequestration will happen and states will start getting a portion of estate taxes.
That fiscal chaos as the backdrop, Peter Lee, Covered California's executive director and a former CMS official, knows well that the HIX "can never go to the state general fund." Indeed, that's specified in the exchange's charter.
As part of its sustainability plan, Covered California has requested $700 million in federal funding, in addition to the $230 million received so far. After that, the exchange plans to sustain itself through mix of premium fees on plans sold in and out of the exchange, insurer fees, customer fees and fees for supplemental coverage.
How steep those fees are, and Covered California's likelihood of meeting its sustainability goals, depends in large part on enrollment.
And with California ranking as the world's eighth largest economy and being home to some 38 million people, Covered California's success or failure with enrollment and financial sustainability may inform the future decisions of states like New Jersey that are currently opting for the federal exchange, for want of more cost details rather than spite.
Covered California officials have estimated several scenarios for enrollment. In the base estimate, subsidized and unsubsidized enrollment in the exchange is expected to grow from 500,000 to 1.6 million by 2017. In the enhanced estimate, which the board has set as its target goal, about 2.3 million Californians would buy coverage by 2017.
Under the enhanced scenario, the premium fee would start at 3 percent, drop to 2.5 percent in 2016 and drop to 2 percent thereafter, generating about $138 million in revenue in 2014 and more in subsequent years. Under the base scenario, the premium fee would start at 3 percent and reach 4 percent in 2015, to compensate for lower enrollment.
Covered California's costs during 2014 are estimated at $390 million, covered by both federal grants and premium-generated revenue. In 2015 the costs are estimated to level out at around $315 million. As federal funding ends in 2015, Covered California expects revenue to increase with enrollment to fill the gap. The exchange, under its founding legislation, also must establish a three month cash reserve.
Anti-individual mandate warriors' last stand
The Cato Institute's Michael Cannon and other anti-ACA activists have been encouraging Republican-led states to refuse the HHS's "bribes" to build state-based exchanges, and instead do nothing and have HHS build federally-facilitated exchanges.
Federal exchanges can't administer individual mandate premium subsidies or employer mandate taxes, Cannon argues, because the ACA reads that subsidies can be administered through an exchange "established by a state."
So states that opt for federal exchanges, Cannon and others argue, can shield their citizens and businesses from the individual and employer mandate's requirements and taxes.
In what's sort of the last, best hope for anti-ACA activists, Cannon's argument has morphed into a lawsuit filed by Oklahoma attorney general Scott Pruitt challenging IRS rules for administering premium tax credits in federal exchanges.
Justice Department lawyers say that Oklahoma has no standing, since it's not an employer (some Oklahoma employers are trying to sign on as plaintiffs). And federal lawyers and the IRS cite the Congressional Budget Office (CBO) in saying that Congress had no intention of limiting the tax credits to state exchanges.
"The CBO predicted there would be tax credits issued in all states," Cannon wrote in Reuters recently. "That does not, however, establish congressional intent to offer tax credits in federal exchanges, much less statutory authority to do so." The lawsuit, filed in eastern Oklahoma federal court, is likely to drag on throughout 2013.