It's officially crunch time for President Obama and the thousands of workers nationwide who've been hired to help promote the Patient Protection and Affordable Care Act, known also as Obamacare, to the American public.
In a matter of 17 days, the state-run health exchanges are set to open for business, and assuming everything is running according to plan, people in each individual state -- whether it be a state that decided to set up its own exchange or one set up by the federal government -- should be able to transparently and openly see what health-care options are available to them, and to purchase health care on their own behalf.
The implementation of the technology and educational manpower needed to make this law come together has been in the works for nearly three and a half years. But based on certain aspects of implementation thus far, that still may not be enough time to get everything off the ground on-time for an Oct. 1 launch.
Although officials maintain that Obamacare's health exchanges are prepared to open for business on Oct. 1, I can't help pointing out multiple delays and/or failures to communicate that could put this date in jeopardy.
The employer mandate's costly delay
For one, in early July we found out that the Obama administration would be pushing back the full enforcement of the employer mandate -- the part of the bill that requires businesses with 50 or more full-time employees to supply those employees with health insurance options or face a penalty of $2,000 to $3,000 per employee -- until Jan. 1, 2015. The administration's view of the delay is that it would give everyone, including insurers, ample time to gauge how quickly individuals took to the individual health-insurance exchanges. While that's a valid point, it's also no secret that the technological oversight and potential penalty enforcement needed to ensure that businesses were complying with the law was going to be difficult to fit into the already tight schedule. On top of this, the Congressional Budget Office estimates the delay will cost $12 billion!
The often forgotten downside of this move is that it puts workers in many industries at a disadvantage for up to a year and a half. The reason they're at a disadvantage relates to the move by some businesses to cut back employees' hours below the 30-hour mark (what's deemed full-time by the PPACA) so as to avoid needing to supply health insurance to their workers and avoiding the chance of a penalty altogether. The employer mandate delay gives business another year and a half to essentially decide whether they want to supply health insurance to their employees, take the penalty, or simply cut back hours of previously full-time employees, as movie theater chain Regal Entertainment (NYSE: RGC ) did in April as a direct result of Obamacare. My suspicion is we may wind up seeing more of the latter over the coming year.
Daunting technical delays
It's my best guess that the employer mandate was pushed back (among other reasons) because of the enormous amount of stress it would place on the existing technology. What is absolutely concrete, though, is that technical issues, and the need to be flexible with policies and pricing, delayed the Department of Health and Human Services from signing off on insurers' policies on federally run health exchanges between Sept. 5 and Sept. 9 as it was originally planned. Although the expected signing-off of federal health policies by the HHS was pushed back only about a week, it nonetheless highlights the daunting technical delays yet to be overcome with this sweeping health reform.
Too few people and businesses are "in the know"
The educational shortfalls of Obamacare also have to be a bit of a concern. In August's Kaiser Family Foundation poll, two particular questions struck me as particularly worrisome. The first asked respondents whether they realized that the PPACA was the law of the land. A clean 44% of respondents had no clue, with 31% not knowing, 8% assuming Congress overturned it, and 5% thinking the Supreme Court overturned the bill. The other question involved whether individuals had heard "a lot," "some," "only a little," or "nothing at all" about their own state's health exchange. A staggering 70% are still in the "only a little" or "nothing at all" category, compared with 79% in June 2013. While this is progress, it doesn't project the image that people will be able to make smarter decisions about their own health-care choices when Oct. 1 does roll around.
Small businesses aren't much better off. Although employers were essentially given a free pass until Jan. 1, 2015, to get their act together, small businesses that are regulated under the Fair Labor Standards Act with at least one employee and $500,000 in annual revenue are required by law to inform their employees about the Oct. 1 start date for the state-run health exchanges. Should these small businesses not do this, they are subject to an ongoing $100 per-day fine. Sure, that's not a huge fine, but look at the various news media sources that have interviewed some of the nation's small businesses, and you'll discover that a large portion of these businesses had no clue that there was a $100-per-day fine attached for not informing current employees about their individual health-exchange options. As an added kicker, it isn't exactly understood how the government will track and enforce this penalty!
Who would suffer if there's a delay
As should come as no surprise, from a business perspective, insurers and hospitals would be on the outside looking in if there's an insurance exchange delay of any form. WellPoint (NYSE: WLP ) and CIGNA (NYSE: CI ) would certainly feel the pinch, as both made sizable transactions (WellPoint purchased Amerigroup for $4.5 billion and CIGNA bought Healthspring for $3.8 billion) following the passage of Obamacare in the hopes of adding some of the 16 million newly eligible Medicaid patients under the proposed Medicaid expansion. If the opening of the health-insurance exchanges experiences any delays, then these insurers are not going to meet Wall Street's already pumped up profit expectations in 2014.
Hospitals are also on the hook. The nation's largest hospital operator, HCA Holdings (NYSE: HCA ) , wrote off 10.25% of its revenue, $3.77 billion, in 2012 just because of uncollected services rendered. In other words, it provided nearly $3.8 billion in care to people who were uninsured and couldn't pay. HCA is counting on everything to go smoothly with the implementation of this law so that its doubtful account provision will begin to fall and its profits can head higher.
But don't forget about individuals, either. There have been quite a few people who've had their health insurance dropped by their employer who expected the employer mandate to go into effect on Jan. 1, 2014, so these folks will be looking for a new insurer to call their own in a matter of weeks.
Is it time to worry?
Even though Oct. 1 is less than three weeks away, I don't think the time to worry has arrived just yet -- and I'll tell you why. A precedent has been set in previous health-reform attempts that the government will scramble at the last second to get everything online, and that there will be technical glitches, but that it will all eventually work as planned.
Don't believe me? Back in December 2003, when George W. Bush signed Medicare Part D into law -- a comprehensive drug benefits reform designed to help older Americans -- and leading up to its Jan. 1, 2006, full implementation date, more people than not viewed the bill unfavorably. Furthermore, even though the implementation date was met, technical glitches did arise during the enrollment process for some individuals. Is this sounding at all familiar yet? Despite the glitches, following a few weeks of frantic fixes everything has been running properly with Medicare Part D enrollment ever since.
I suspect we'll see something similar occur with Obamacare. We may not see as many technical snafus as we witnessed with Medicare Part D, but instead we may be subjected to a learning curve as Americans acquaint themselves with the law and become educated about their choices. I highly, highly doubt this will be a smooth transition come Oct. 1, but I also, using previous precedence, I don't think consumers or investors in the aforementioned stocks have any reason to be worried just yet.
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