Obamacare's Insurance Exchanges Can't Price Insurance Properly

whitehouse.govwhitehouse.govObamacare’s exchange technology was always going to be trouble. The law’s boosters have suggested that comparing and buying insurance through the online health insurance exchanges will resemble comparing and purchasing travel accommodations through a web portal like Travelocity. That’s an oversimplification; it will probably be more like doing your taxes online.

And that’s if it even works. Which it may not.

For months, we’ve seen reports of lags and delays in the effort to get the exchanges up and running. And now, with less than two weeks to go, The Wall Street Journal reports that the pricing systems in the federally run exchanges that will operate in 34 states aren’t working:

Four people familiar with the development of the software that determines how much people would pay for subsidized coverage on the federally run exchanges said it was still miscalculating prices. Tests on the calculator initially scheduled to begin months ago only started this week at some insurers, according to insurance executives and two people familiar with development efforts.

"There's a blanket acknowledgment that rates are being calculated incorrectly," said one senior health-insurance executive who asked not to be named. "Our tech and operations people are very concerned about the problems they're seeing and the potential of them to stick around."

The pricing calculator is being developed by a government contractor, CGI Group, Inc., which has so far received $88 million to help build the exchanges, according to the Journal. But that’s less than a quarter of the total amount spent building the exchanges, which the Government Accountability Office put at $400 million earlier this year. 

But so far, at least, it appears to be an expensive failure.

Now, the exchanges aren’t open yet. So maybe everything will be fixed and ready to go next month when the exchanges actually open for enrollment. But that’s less than two weeks from now. And as the Journal’s report notes, tests on the calculator functionality were supposed to run for months, yet in some cases only began this week. That tells you how long the exchange designers initially thought would be necessary to make the calculator work. And it suggests that getting all the functionality up and running in the short time available will be a serious challenge.

If the online calculator doesn’t work, what then? The Journal’s story suggests that it may not be that big a deal: “People may still be able to sign up offline, even if the online exchanges aren't fully functional at first, several insurers said. And consumers have until mid-December to sign up for policies that start on Jan. 1.”

All true. But let’s put this in context. This isn't some minor coding glitch. The primary selling point—practically the entire point—of the exchanges was to create an online comparison shopping system for health insurance. A White House brochure on Obamacare’s benefits explains that the exchanges offer “one-stop shopping” that provides families the ability to “easily compare prices, benefits, and performance of health plans.” The purpose of the exchanges is to allow “millions of Americans to comparison shop,” explains a White House guide to the health law.

Comparing prices, in other words, is the central feature of the exchange.  But you can’t comparison shop if the pricing isn’t accurate. The whole thing breaks down. Basically, Obamacare’s exchanges have one job. And so far, at least, it seems they aren’t able to do it.

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • Lord Humungus||

    shreek said he's going to use the exchange... c'mon, tell us how great it is again.

  • Swiss Servator, Spare a Franc?||

    And that we could not criticize them until they went into effect, you wingnutz!

  • Loki||

    Is it wrong that I hope he gets colon cancer and can't buy insurance on the exchanges because they don't work?

    Of course he'll still go to grave screaming and yelling about BUSHPIGS! and CHRISTFAGS! while masterbating over a life sized cardboard cutout of Obama.

    But still, it's not too much to ask that his death be extremely painful and caused by something that he could have had treated early on if only he had been able to buy insurance like his Godking promised.

  • anon||

    Nobody could have ever seen this one coming!

    Oh wait.

  • anon||

    Comparing prices, in other words, is the central feature of the exchange. But you can’t comparison shop if the pricing isn’t accurate.

    Wait, wait... You mean, governments can't price goods and services as accurately as a (relatively) free market can!?

    Who'da thunkit?!?

  • Rich||

    Provides standardized, easy-to-understand information through the Exchange on different health insurance plans offered in a geographic region so families can easily compare prices, benefits, and performance of health plans to decide which quality affordable option is right for them.

    Ease up there, Peter and anon. The brochure never claims that the information will be *accurate*, merely "standardized" and "easy-to-understand".

  • anon||

    The brochure never claims that the information will be *accurate*, merely "standardized" and "easy-to-understand".

    Yay! Easy to understand information that's absolutely useless!

    And we get to pay to have this useless information, too!

  • robc||

    Calculation Problem.

    Again and again and again and again....

  • Pro Libertate||

    Will no one rid me of this turbulent law?

  • anon||

    Silly citizen, congress is elected to make laws, not repeal them!

  • Lord Humungus||

    $400 million? *FLUSH*

    It's like a SAP install.

  • Swiss Servator, Spare a Franc?||

    Ahhhh! Suffice it to say you have said the one word the employees of my company cannot stand!

  • Pro Libertate||

    What, it's?

  • Scruffy Nerfherder||

    I hear they're opposed to flushing.

  • Swiss Servator, Spare a Franc?||

    "SAP"

    Ahhhh! Now I have said it!

  • Brett L||

    install? No need to worry about that with SAP. It never actually gets installed.

  • John||

    Now, the exchanges aren’t open yet. So maybe everything will be fixed and ready to go next month when the exchanges actually open for enrollment

    Because if an IT system doesn't work in small scale tests a month before it is scheduled to go online, it is totally going to work when it is put online and inundated with users. And Sudderman thinks the Republicans believe in unicorns because they want to defund this disaster.

  • anon||

    They seriously put more testing and QA into video games than they have these exchanges that handle private information.

    What could possibly go wrong?

  • John||

    I am not an IT guy. But I have worked on IT projects and other projects that required large numbers of people to do something. It is so hard to develop an idiot proof system. IN large numbers, people will fuck up in ways you and your developers could never dream of. Your system has to be idiot proof and totally stable. Anything less and people will get so confused and frustrated they will give up and won't use it or even if they do, they will fill out the forms wrong and still fuck it up.

  • anon||

    It is so hard to develop an idiot proof system.

    Actually, it's nigh impossible. Especially when you have a huge target painted on your website that says "Hey, here's a huge stash of pretty much everyone's info that you might need to steal that person's identity. Please, pretty please, don't try to compromise our security!"

    It's going to be a disaster of the likes this nation has never seen. I predict a zero-day event in which everyone's information is stolen and the government is -forced- to shut it down to prevent everyone from suing the shit out of them.

  • Pro Libertate||

    This is why our education system is focusing on producing more, not fewer, idiots. Because we only need a relatively small number of developers, but we need lots of idiots to test everything.

  • anon||

    They're from the Government, and they're here to help.

  • John||

    That too. You have to make a system that is so easy to use even the average American can't fuck it up but is also secure enough to guard pretty much everyone in America's personal information.

    That can't fucking be done. Think of online banking. They make it easy, but in the end, if you are not smart enough to use it, the banks say too bad, just bank the old fashioned way. Here, they have even more security concerns than banks, but you can't turn anyone away. The system has to be usable by everyone. It gives me a headache thinking about it.

    And oh, the government is designing it. I am not sure we have adjectives strong enough to describe how bad this is. Biblical? Epic?

  • anon||

    You have to make a system that is so easy to use even the average American can't fuck it up but is also secure enough to guard pretty much everyone in America's personal information.

    Not only that, but you're also making everything available for an infinite time period by making it online, forever.

    Visa, MC, Sony, Blizzard... effectively everyone has been hacked while providing an infinite time period in which to access any vulnerabilities.

    It's not a question of if, but when. And with the government involved, it's going to be 10x worse.

  • John||

    And storage is so cheap and so portable. You know there will be root directories that will just have the important information in them, you know name, SSN, address, DOB, that kind of stuff. How many gigs is the Name, DOB, SSN of every person in the country? Not that many. Few enough to put it all on a terabyte hard drive and have the ability to steal anyone in America's identity with a single exploit.

  • Spoonman.||

    I am in IT and I have to make systems for smart, educated high-level corporate types to use, and they wreck shit in ways you wouldn't believe when I don't think five steps ahead.

  • Spoonman.||

    Not their fault, either - they are just using it in the way that makes the most sense to them. It doesn't make the most sense to me because I'm coming from the perspective of how it's supposed to work and how the backend works.

  • John||

    I have and do provide legal advice to people who build systems like what you are talking about.

    Only an idiot working in Congress who has no knowledge or experience of how this stuff works could have thought "we will just create online exchanges were people can buy insurance" and think it was a practical idea much less an easy to execute one.

  • Adam330||

    Well it can't be impossible to create online exchanges to buy health insurance. E-health insurance managed to do it. This goes another step though and tries to integrate bunch of other federal and state systems into it to calculate and provide subsidies.

  • Swiss Servator, Spare a Franc?||

    Sovereign Immunity, bitchez!

    Take your petty complaints to the Court of Claims and maybe you will get $217.32 in 10 years...

    http://www.uscfc.uscourts.gov/about-court

  • Rasilio||

    Do you honestly think they'll catch it that fast?

  • Brett L||

    You can't idiot proof a system. The world can turn out a better idiot faster than you can turn out a tighter system.

  • Brett L||

    IT projects only go in one direction once they are behind. You know why? Because the PMs already cut the technical guys' work estimates by 20% to be "competitive". I am going to be within 1% on the hours on a medium sized project I estimated for my team. We are going to be 20% over the figure in the project plan. Why? Because they got a fixed-price project and then asked us how many hours it would take. Then, instead of limiting the scope or lowering their profitability expectations, they just put in the number of hours that hit their target margin.

    And we're actually a good company in this regard. Waaay more competent than many I've worked for/with.

  • John||

    Here is what looks like is going to happen. The exchanges are going to crash or be so hard to use people won't bother. There will be millions of people who don't have health insurance, face the prospect of being penaltaxed as a result, but won't have the ability to buy insurance thanks to the exchanges not working, and that is not counting the people who will buy fake insurance thinking it is real thanks to one of the "certified navigators".

    When this happens, millions of people are just going to ignore the Penaltax and refuse to pay it. The numbers will be so large that even the IRS won't be able to enforce it in the face of such widespread disobedience. At that point, Obamacare will just be a giant regulatory mess that did nothing but cause a bunch of people to lose their insurance and a bunch of others to pay through the nose for worse insurance than what they had. But there will be a silver lining. People will realize that if enough of them ignore the IRS, there is nothing the IRS can do about it. I wish government loving liberals luck with that.

  • John||

    And I will also add, that there will be millions of other people like me who has insurance but will refuse to answer the question about it on our tax return and also not pay the penaltax. I have never seen a federal government action so stupid and so ripe for mass civil disobedience than the mandate.

  • anon||

  • From the Tundra||

    the fizzif!

  • Loki||

    IOW, at the end of the day most people just ignore the law, ignore the government's idiocy, and just carry on as usual. The only ones who won't be able to get away with that is pretty much anyone trying to run a business. Which to left-tards like Obama is a feature, not a bug.

    I imagine it'll be a lot like midieval times. I suspect that most of the "commoners" pretty much just ignored the pronouncements of the kings and lords and just went about their business hoping not to be noticed.

  • John||

    Or what happens in third world countries today. The other issue is that the IRS doesn't know what qualifies as "insurance" for the purposes of the penaltax. I would be a large sum of money that thousands if not millions of taxpayers who have insurance are going to dutifully fill out their tax forms telling the IRS as much only to have the IRS erroneously classify their insurance as not qualifying. Add to this the ground swell of civil disobedience of people pissed off about Obamacare who just won't fill out that part of their form and not pay the tax either.

    I am seriously thinking about doing that. I have never engaged in civil disobedience in my life. But this might be the time. I have insurance. So if the IRS comes back at me, I could say "I thought I filled that out. Here is my insurance." What are they going to do? And if a few million people like me refuse to do it, what then?

  • Juice||

    and it will all be the fault of the obstructionist Republicans.

  • Spoonman.||

    It sure seems like these exchanges will be a big disaster, which will be hilarious. I guess that's why the message is that most people won't want to use them.

  • John||

    Thanks to the mandate and Obamacare throwing so many people out of their insurance, they will have to or pay the penaltax. You watch, they won't use them and refuse to pay the penaltax.

  • Adam330||

    I think there is an option to apply for insurance on paper. I'm sure they've staffed up to handle that. Hah.

  • Loki||

    What a fucking joke. This should put to lie the myth that the government can do anything without fucking it up royally. It's just software. How many private businesses have made their living creating software that's just as algorithmically complex, just as many if not more lines of code than are required for these stupid ass exchanges for less time and money than the government on this shit?

    Of course none of this convince the libderps that support this shit that maybe governemnt isn't the all knowing, all seeing talisman of all that is good that they believe it to be. Of course not, nothing ever will. They'll just blame its failure on OBSTRUKSHUNIST RETHUGLICANTEABAGGERZ!!!!1!!! Because... Obama!

  • Rasilio||

    " It's just software. How many private businesses have made their living creating software that's just as algorithmically complex, just as many if not more lines of code than are required for these stupid ass exchanges for less time and money than the government on this shit?"

    Um, none because this software is hard as shit to make work the way they want it to work.

    That is where the government really fucked up, no actual software company would have taken on a project of this magnitude with just 2 years to deliver. They'd have scheduled 5 - 6 years with an initial delivery of some subset of the functionality in 2 years.

    Even then this is the type of IT project which runs about a 50% failure rate in private industry, and by failure I mean the entire fucking project is scrapped as a waste of money that will never work before it is delivered.

  • Fluffy||

    I just don't understand this.

    They aren't doing the part where they have real-time IRS income verification for this iteration of the exchanges. They were supposed to, but they bagged that.

    So that means they're going to have to use stated income.

    So with the data points:

    STATED_INCOME
    FAMILY_SIZE
    PREMIUM_RATE

    You can look up the amount of the premium subsidy from a single table.

    A table it would take about an hour to make and populate with plan premium information from the insurers.

    People are used to the idea that figuring out if you qualify for government assistance is complicated, but it's really not. Not with SQL it ain't.

    What did they do with the $88 million if not this?

  • Scruffy Nerfherder||

    What did they do with the $88 million if not this?

    Hookers and blow?

  • From the Tundra||

    Nah, probably just wasted it.

  • anon||

    Would've been better spent.

  • Scruffy Nerfherder||

    I can imagine the arguing over who would get the contract for the database backend. I'm guessing Ellison came out on top, bootlicker that he is.

  • John||

    It does seem odd that websites like Orbitz can instantaneously give you prices for pretty much every different airline in the world on any route in the world and they can't do this.

    I would also point out that many insurance companies manage to let you compare rates of their competitors. They manage to give you a rate from a company that won't even cooperate in giving them one.

  • anon||

    I would also point out that many insurance companies manage to let you compare rates of their competitors. They manage to give you a rate from a company that won't even cooperate in giving them one.

    That's because corporations have an interest in providing you with their competitor's prices; they hire people specifically to do this.

    The government has no interest in providing you any price, let alone the lowest price. It's just going through the motions.

  • Spoonman.||

    Yeah, I don't get it. How goddamn hard could that be?

    Maybe the hard part came with all the backdoors and weird shit the government wanted to "nudge" people.

  • Loki||

    ^This^

    The only hard part of this should be the computer security/ privacy protections, as was discussed above. The rest of it shouldn't be that hard, really. The ineptitude is simply mind boggling.

  • Rasilio||

    They still have to build it with that capability in mind (not to mention they were initially planning on delivering that day 1 and probably had a fair part of that feature set coded before they stopped working on it and they probably had to go write completely different code that was not initially planned for to make it work this way) and get it to run on a server farm capable of handling thousands of transactions a second with replicated databases and at least some minimal levels of security.

    Not to mention that it still needs to interface with the Social Security administration, Health and Human services, Homeland security and all of the insurance companies themselves

  • Ken Shultz||

    "The pricing systems in the federally run exchanges that will operate in 36 states aren’t working."

    And people are supposed to start enrolling next month?

    I wouldn't worry about it too much. Because the penalty for not having insurance isn't a penalty, anyway--it's a tax. And they can't put you in jail for not having insurance.

    Yeah, the IRS can still make your life miserable, garnish your wages, ruin your credit, etc., but that'll only happen to people who can't afford to pay and who can't afford excellent legal representation when the IRS comes knockin'...so I wouldn't worry about it.

  • John||

    Yeah, the IRS can still make your life miserable, garnish your wages, ruin your credit, etc., but that'll only happen to people who can't afford to pay and who can't afford excellent legal representation when the IRS comes knockin'...so I wouldn't worry about it.

    That is the beauty of it Ken. There are going to be so many people fucked by this, the IRS won't be able to do anything about it. No one is going to pay that tax.

    If you are an average person and you don't have insurance and you make an honest effort to buy insurance through one of these exchanges only to have the thing crash and not give you a rate, why would you pay the tax? People will try to obey the law. But when they try and fail, they are going to say fuck it, if the IRS calls I will tell them I tried and couldn't. And once people figure out that everyone is doing that and the IRS never calls, the game is up.

    Our entire tax system depends on voluntary compliance. The liberals are so stupid, they are going to destroy the whole tax system with this if they are not lucky.

  • Juice||

    Our entire tax system depends on voluntary compliance.

    Say what?

  • John||

    Yes it is. If everyone put their withholdings at zero and then just refused to pay the difference at the end of the year, there would be nothing the IRS could do about it. If businesses in large mass just started not sending in withholding, we would be screwed.

    Moreover, if people just took outrageous and false deductions such that their tax rate ended up zero, the IRS would be screwed. The whole system depends on the vast majority of people being honest.

  • Adamsmith1776||

    This can all be fixed in a nanosecond by having the carriers contract with ehealthinsurance.com. Ooops--that is what they already do--so why do we need the exchanges again?

  • Loki||

    Because ehealthinsurance.com is a private entity. And therefore EVUL PROFITS!!!11!!!!1!!!

  • Rasilio||

    Because ehealthinsurance.com does not do realtime validation of immigration status, medicare eligibility, and identity.

  • Adam330||

    Ok, so e-healthinsurance gives you a provisional policy and sends you a notice in the mail telling to you to mail in proof of identity, etc.

  • PapayaSF||

    I wonder if the pricing calculation problems have to do with the connections with other agencies. Look at this chart. The online calculator is on the middle right, but in the upper left it indicates that the system has to connect with the IRS and Treasury to verify income, and apply tax credits and subsidies and "cost reduction" (how is that different from a subsidy?).

    Connecting giant new IT systems to older, unrelated IT systems is often very difficult.

    My loyal Democrat friends think all this is just a matter of "working out the bugs and glitches," but far simpler government IT projects has failed miserably.

  • RG||

    Especially if they don't have good documentation on the older system designs, data ponts, etc.

  • anon||

    Especially if they don't have good documentation on the older system designs, data ponts, etc.

    HAH! Good documentation! You made me laugh.

  • Swiss Servator, Spare a Franc?||

    Have they even gotten around to Y2K repairs on those yet?

  • Spoonman.||

    Shit, they probably have eight tables named "Name" in those old ones.

  • Brett L||

    Pssh. They probably all have 8-character table and field names because they're on Big Iron somewhere.

  • Spoonman.||

    A big problem with compressing your schedule is that at least one representative from each stakeholder group will decide that business rules, validation lists, field size limits, and the like are for chumps and just send you piles of garbage that they spent weeks on.

    When that happens to me we say "ok, you're getting moved to the next group", but that isn't an option here.

  • Brett L||

    They were doing fonts and colors until April. Then they moved on to the verbiage on the login-screen.

  • Ron||

    The government will solve the f---up by dissolving all insurance and require everyone to be on a single government healthcare system and just raise everyones taxes. That eliminates the need for the exchanges since it will all be one source. Of course I think that was a feature of the bug to force people to scream for the government to take care of everything.

  • Brett L||

    OT: I'm probably going to be on the road to St. Pete by the PM Links, so I'll just leave the fact that Florida Man has a great getaway car even if he is terrible at being a super villain.

GET REASON MAGAZINE

Get Reason's print or digital edition before it’s posted online

  • Progressive Puritans: From e-cigs to sex classifieds, the once transgressive left wants to criminalize fun.
  • Port Authoritarians: Chris Christie’s Bridgegate scandal
  • The Menace of Secret Government: Obama’s proposed intelligence reforms don’t safeguard civil liberties

SUBSCRIBE

advertisement