Asymmetrical Information - Megan McArdle

03.27.13

Will Obamacare's Exchanges Be Ready on Time?

The exchanges are the heart of the new health care system. There are increasing concerns that they may not be up on time.

There have been rumblings for a while about the possibility that the exchanges might not be ready in time to open on October 1st.  That's the date when the law says that they're supposed to be up and running, so that everyone can buy the insurance that they'll be legally required to have on January 1st, 2014.

I've been skeptical for a while.  It's a long time since I used to work on big IT installations, and maybe things have changed a lot.  But in my day (the late 1990s), I would have said there was no way that you could, starting in mid-February, get this kind of system up in time.  And mid-February was the deadline that HHS gave to the states to declare whether or not they would run their own exchange; until then, the government couldn't be sure how many it would be running in the states that declined.

You have a system that needs to interface with the IRS, a bunch of health insurers, and over 30state government systems in order to determine eligibility, and the amount of the subsidy.  You have very strict privacy and security requirements.  And you have six months.  I'm pretty sure my company wouldn't have taken the job.  I'm definitely sure we wouldn't have finished it by the deadline.  And we didn't even have the constraints that the federal government operates under: the onerous project bidding and procurement rules designed to prevent corruption.  Our clients were mostly banks, who could just pick up money and start hurling it at any problem they chose with no petty concerns about single-bid contracts.

Of course, I was on the server side, not the development side.  And it has been a long time; maybe these projects have gotten a lot easier to roll out.  (Readers who are doing these sorts of implementations now are invited to weigh in--particularly those who think it can be done.  I've heard a lot of IT folks saying it can't happen, not so many arguing that they'll be up and running come October 1st.)

But I'm not the only one expressing concerns.  Here's the results of a recent poll of senior executives at health insurance, taken at a conference they were attending:


So it's worth asking what happens if the exchanges simply can't go live on time?  The law says that you have to buy health insurance.   But if there's no venue for you to buy it, what do you do?  

Presumably, the administration tries to delay.  But to delay the implementation of the mandate, they need the cooperation of Republicans.  If I were the GOP, I'd pass a law repealing the mandate and sit tight, daring the administration to veto it.  And if I were the administration in that situation, I would--after a failed attempt to explain why it was better to delay the unpopular mandate than to repeal it--probably cave.

Of course, I am not a Republican, and they do all sorts of stuff that I wouldn't.  Moreover, I may be wrong about the exchanges.  After all, if it's likely that you won't make the deadline, it seems to me that the time to start asking for delays is now--when the thing is comfortably far off.  Asking for a delay on the eve of the deadline will be a great deal more embarassing.  And it's never good to be negotiating on the brink of a crisis.  Of course, I am not a Democrat, either, and I have an even poorer record of predicting what they will do.  

At this point, what we do know is that there are big questions, being expressed by people a lot closer to the situation than I am.  Hopefully, the administration will start providing some answers, and some details, instead of vague assurances that everything's fine.