Obamacare's Federal Exchange System Still Isn't Fully Finished, and the Feds Don't Know When It Will Be Complete



One of the many bombshells discovered in the hearings over the botched launch of Obamacare's exchanges in 2013 was that, at launch time, it remained roughly 40 percent incomplete.

The back end, including systems needed to automatically communicate enrollment and payment information between the administration and insurers, hadn't been built at all. The federal exchange built to administer the law was practically a façade—a shiny exterior with nothing inside.

When federal officials admitted this, they first promised that the work would be complete by early 2014. Then the deadline was pushed to the middle of the year. Eventually it was pushed into 2015. The shiny front end was made to work. The back end was left incomplete. 

These incomplete back-end systems were not minor add-ons. They were a critical part of the federal exchange. A government spec sheet from early 2014 warned that "failure to deliver" the payment functionality "by mid-March 2014 will result in financial harm to the Government. If this functionality is not complete by March 2014, the Government could make erroneous payments to providers and insurers." The fate of the health insurance industry, the document said, was on the line.

We're now two months into 2015. The second open enrollment period is, at least officially, over. And the systems still aren't complete.

Instead, insurers are handling calculations manually, sending spreadsheets to the administration, and transferring funds based on those calculations. As Politico, which has consistently provided the best reporting on the outstanding problems with the exchange, reported earlier this week, payments are still being handled via what is essentially a manual workaround, the same workaround that has been used from the beginning. And at this point, Politico reports, "there's no clear date for when the automatic process will replace it." That sounds suspiciously like a warning that it could be a long time, if it happens at all.

Politico's report focuses on the ways that the workaround is time consuming and expensive for insurers. No doubt it is. But it is also potentially quite expensive for the public. As that spec sheet warned, without an automated system in place to calculate the exact payments due to insurers under the labyrinthine rules regarding individual subsidies and broader insurer backstops, there's a significant risk that the federal government will pay more than it actually owes. Right now, in essence, the insurers are handing the administration bills that cannot easily be checked or verified, and the administration is simply paying the tab, whatever it is.

Indeed, according to Politico, the administration already believes that the insurers are incorrectly estimating some of the payments due under the law.

If an automatic system ever does go online, sorting this out could be quite messy. Or, just as likely, the insurers will protest that it wasn't their fault the back end wasn't finished, and the administration will shrug its shoulders and not worry much about reconciling the tab.

Obamacare's broken federal exchange system is yet another reminder of the remarkable, outrageously expensive mismanagement that went into the project.   

All together, building the website cost in excess of $2.1 billion, according to a September 2014 Bloomberg News analysis. This is a $2 billion website—and not only does it still not fully work, almost a year and a half after it was supposed to have been complete, its failures are likely still costing us money.