There are few pieces of legislation that have worked their way into law with as many unknowns attached to them as the Patient Protection and Affordable Care Act. Also known as Obamacare, the PPACA is set to reform the entire health care system as we know it.
By mandating that individuals carry health insurance and requiring health-benefits providers to spend at least 80% of collected premiums on patient care while turning no one with preexisting conditions away, it's the hope of President Obama that quality of care and consumer access to health care will improve while premium costs fall. It's certainly a daring and revolutionary bill, filled with plenty of promise, and quite a few potential pitfalls.
However, the PPACA itself isn't set to go into full effect for another six months. In the interim there are far more pressing issues the administration has to deal with prior to its implementation. Namely, the technological implementation of the state- and government-run health exchanges and the educational aspect of getting the American public ready to purchase health insurance through new mediums. Both factors loom large with 50 state health exchanges needing to be ready by Oct. 1, just 93 days from today.
Technology is going to be a big hurdle
It's often forgotten as a crucial component to Obamacare, but the technology behind the state-run exchanges promises to be some of the most complex we've ever seen.
To begin with, the IT-interface isn't simply transferring information between point A and point B. There are actually a number of variables that need to be taken into account, such as whether a citizen, based on his or her income, would qualify for some sort of health insurance subsidy. In order for this to happen, a string of events needs to occur, including the verification of income from the Social Security department, eligibility rules from Medicaid, possible tax credits from the IRS, referrals from state agencies, and potential subsidies from the U.S. Treasury. One system has to be able to link all of these agencies simultaneously -- and not only do that, but get it done and be fully operational within the next 93 days!
It'd be a daunting task if all 50 states chose to set up their own exchanges using federal funds and if the contracted companies had years to do it in. Unfortunately, that hasn't been the case. Only 16 states chose to set up their own state-run exchanges. This means, in addition to overseeing the development of the infrastructure which will streamline the purchasing of individual health insurance, the government must also oversee the implementation of 34 state health exchanges on its own.
According to the Government Accountability Office, $394 million has been spent by the Centers for Medicare and Medicaid Services since the PPACA was passed in 2010 through March 31, 2013, in prepping for the Oct. 1, 2013, launch. Thus far, there have been numerous delays, but, according to the GAO, nothing that would put the exchange launch date off its target. Reviewing the GAO's contractor report, there are some key players responsible for developing this highly integrated cloud-based health information system for the government.
Perhaps no name stands out more in this process than Quality Software Systems, which was awarded a $55 million contract in 2011 to develop the federal data services hub that'll be responsible for certifying health plans being offered and ensuring they remain within compliance. The interesting thing worth noting here is that UnitedHealth Group (NYSE:UNH) subsidiary Optum actually purchased Quality Software Systems in 2012. This means a subsidiary of the largest health insurer in the country is helping develop the software that'll house health-benefits data.
Another beneficiary has been advisory firms like Booz Allen Hamilton (NYSE:BAH) which, based on the GAO's release, had been granted close to $38 million in contracts for consulting and technical advisory services as of March. Helping out the technical teams with everything from oversight and eligibility to the actual support and integration of all of this technology, Booz Allen Hamilton's reputation has a lot riding on a successful launch.
Staffing and education won't be forgotten
Although the technical side of the exchanges is one part of the puzzle, hiring and training an adequate number of staff to help with the October rollout in each state, and educating the public about their options, is an entirely different, and difficult, ballgame.
One of the bigger question marks relates to staff training. The GAO recently noted that the original plan for state-run exchanges was to have two grants, one in July and one in September, to help train the staff that will be at the front lines of helping people select their health insurance. The CMS, however, fell two months behind on these grants, and now there will be just one, in August.
The other key component that goes along with training the staff behind the technology is actually getting the word out to the public. You might think that Obamacare has been publicized enough since 2010 that everyone would have at least a rough outline of how the health care landscape will change next year, but that couldn't be further from the truth.
In March, a Kaiser Health Tracking Poll discovered that 48% of respondents reported hearing nothing at all with regard to whether their state was setting up a health exchange. Even more frightening, a poll by Kaiser Health released in early May showed that 42% of respondents were unaware that the PPACA was the law of the land. Furthermore, nearly one-quarter had no clue what the status of the bill was.
On top of being a concern for the government, staffing and education are a big concern for our nation's largest insurers, which have angled their growth toward adding on the roughly 16 million low-income earners who will now qualify for Medicaid. WellPoint (NYSE:ANTM) purchased Amerigroup for $4.5 billion, CIGNA (NYSE:CI) ponied up $3.8 billion for Healthspring, and Aetna (NYSE:AET) is buying Coventry Health Care for $5.7 billion, all with the purpose of locking up Medicaid-based members and the government money that comes along with them. If the education side of Obamacare fails to reach these currently uninsured individuals who could qualify for this subsidized health care, these three companies are going to be negatively affected.
Is the Fed ready?
The GAO has noted multiple delays in the technical and staffing aspects leading up to Oct. 1., but as of now the project remains on course. As for me, I would use history as a reference point in determining whether the Fed is ready.
For example, in 2003 the Medicaid Modernization Act was passed into law, however, it wasn't fully implemented until 2006 as Kaiser Health News notes. In the three years leading up to its implementation, numerous IT systems checks were run and work from a technological aspect continued all the way up to, and even after, its implementation. The initial rollout, though, was marked by numerous glitches that were eventually ironed out over time.
It's quite possible that consumers and insurers alike could be in for a rough couple of months as the trial-and-error phase sets in. Overall, I do suspect the government will meet its deadline, but would be surprised to see everything go off without a hitch.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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