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Feds Face Challenges in Launching Health Exchange Feds Face Challenges in Launching Health Exchange

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Feds Face Challenges in Launching Health Exchange

With many states unwilling or unable to get insurance exchanges operational by the health law deadline of Jan. 1, 2014, pressure is growing on the federal government to do the job for them.

But health care experts are starting to ask whether the fallback federal exchange called for in the 2010 health reform law will be operational by the deadline in states that will not have their own exchanges ready.


“It will be an enormous uphill battle to get this thing launched on time,” said Robert Laszewski, a consultant and former insurance executive who is watching the effort closely. “They have a Herculean task, even if everyone was cooperating.”

The federal exchange – like the state models – would be a one-stop website where individuals and small businesses could compare insurance policy offerings on price, coverage, and quality.

The exchanges also will help applicants determine whether they are eligible for Medicaid or for federal subsidies or tax credits to help offset premium costs. Thus, the exchanges will need to incorporate a host of state and federal data on income, employment, and residency. Enrollment through the state and federal exchanges is scheduled to begin in the fall of 2013.


So how far along are the feds? 

It’s hard to assess, because the Obama administration has “been very reluctant to provide any updates on progress,” said Daniel Schuyler, a director at consulting firm Leavitt Partners in Salt Lake City, which is advising states on the establishment of exchanges.

The Department of Health and Human Services did not respond to requests for comment.

All but a few states accepted initial federal planning money for exchanges, and 28 of them plus the District of Columbia have received additional grants.

About a dozen have authorized establishment of exchanges, but even those may not be able to meet the deadlines for enrollment. Alaska, Florida, and Louisiana have said flat out that they won’t establish exchanges of their own. 


That guarantees that a federal exchange will be needed. But those crafting it face enormous technical, political, and financial challenges.

Technically, federal data from a host of agencies needs to be collected in one system, which then must be linked with differing computer systems in 50 states plus the District of Columbia.

Matt Salo, executive director of the National Association of State Medicaid Directors, notes that computer systems in some states are quite old and may need substantial upgrading. While the federal government is putting up 90 percent of the money for the upgrades, Salo said there is some question about whether there is enough “physical capacity in the IT systems world” to get it all done in time.

“Our members have been having conversations with the vendors since the law was passed, and they are coming to the gradual conclusions that no, they don’t have the capacity to do this everywhere in the time frame,” Salo said.

Political threats also abound. No one knows whether the Supreme Court will invalidate part or all of the law next year. It is also not clear how much funding will be available to launch and operate the federal exchange, and the 2012 presidential and congressional elections could delay or derail the entire process if Republicans are victorious.

Still, at this point Schuyler said he is confident that the Obama administration “will be able to provide a federally facilitated exchange” in time to meet the law’s requirements.

Although federal officials are saying very little about their progress, they have signed contracts worth more than $150 million with several private contractors who are working on creating the federal exchange. Late last month, Oregon’s top insurance regulator, Teresa Miller, was hired by the Department of Health and Human Services to oversee development of health insurance exchanges.

The administration is taking a three-pronged approach, says Schuyler, who formerly was director of technology at the Utah Health Exchange.

First, a Federal Data Services Hub is being built to pull together needed information across agencies, such as the IRS and Social Security. States will be able to “plug in” to that data hub if they run their own exchanges. HHS has signed a five-year contract worth roughly $69 million with Columbia, Md.-based Quality Software Services to set up the hub.

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