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These 5 States Are Obamacare's Biggest Roadblocks Thus Far

By Sean Williams - Dec 16, 2013 at 12:31PM

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Enrollment in Obamacare's health exchanges rose by 243% in November, but these five states were of little help.

It's been two and a half months since the Obamacare health exchange marketplaces opened for business and sign-ups are slowly beginning to pick up the pace, according to the Department of Health and Human Services. The agency last week released enrollment data through the first two months.

With the federally run Healthcare.gov website proving nonfunctioning for many consumers in the 36 states which its serves, and even some state-run health exchanges still working out their own glitches, total enrollment is pacing well below HHS' goal of enrolling 7 million currently uninsured people by the March coverage cutoff date.

Through the first two months, 364,682 people had signed up, with an additional 803,077 people being determined eligible for Medicaid or Children's Health Insurance Program assistance. The number of people who completed the application process but had not yet selected a plan grew by 1 million to 1.9 million.

There are two ways of looking at this data. From the optimists' perspective, having 39 million people visit the Obamacare website and 1.9 million people complete the arduous application and identification process clearly shows interest by uninsured people in obtaining health insurance. It seems unlikely that this group of people would complete the application process on a lark, so you can likely expect these applicants to become full enrollees as the March coverage cutoff approaches.

However, from the "glass half empty" perspective, you can't count your chickens until they're hatched, and 364,682 full enrollees over two months is pretty paltry. Furthermore, the bulk of the sign-ups are likely to be people who are the sickest or most in need of care and those who qualify for Medicaid due to their income. Without the addition of young adults to Obamacare, insurers will not be able to maintain the rates established this year and we'll see costs potentially move significantly higher beginning next year.

Five states holding Obamacare back
Yesterday we looked at five states that, through the first two months, have contributed 55.5% of all enrollments. Today, we're turning the tables and looking at five states that were major stumbling blocks for Obamacare through the end of November.

These five states are: 

State

Number of Full Enrollees

Oregon

44

North Dakota

265

South Dakota

372

Alaska

398

Delaware

431

Source: Department of Health and Human Services (link opens PDF).

Cumulatively, these five states managed to enroll just 1,510 people through two months. That is pretty miserable considering that Vermont's state-run health exchange has been practically nonfunctional -- and the state has the second-lowest percentage of uninsured residents in the country, behind only Massachusetts -- yet it's still been able to enroll nearly 5,000 previously uninsured people.

There are certainly a few similarities worth noting here.

First, lower-populated states would be logical choices to bring in a smaller number of enrollments. This is why figures from Alaska and North Dakota are understandable, but states like Oregon deserve a wag of my finger! But more so than just total enrollment, all five states are significantly below the national average of signing up 20% of total applicants. With the exception of Oregon, which is trolling along at an abysmal 0.2% enrollment-to-full applicant rate, the remaining four states above are only enrolling between 10% and 15% of people who have completed the application process.

Secondly, technical issues are still a big problem. Obviously, the fix to Healthcare.gov should help remedy sign-ups in North and South Dakota, Delaware, and Alaska, but the Oregon fiasco is entirely on the state and its independent contractor, Oracle (ORCL -0.58%). Oregon has certainly had its fair share of Medicaid enrollees, according to the Oregonian newspaper, but the shortcomings in the state's online health exchange have led to top website officials stepping down and some 20,000 people potentially losing their coverage on Dec. 31 with little chance of getting insurance by the coverage cutoff date. 

Who's losing out?
The clear loser here would be any hospital or outpatient center operator that has exposure to these five states. Hospitals are counting on more people to be insured, which theoretically should lower their annual revenue write-off for patients who couldn't pay for services rendered. Specifically, small hospital operator Select Medical (SEM -3.03%) has hospitals in South Dakota and Delaware, as well as physical therapy facilities in Alaska and Delaware. If these states continue to demonstrate weak enrollment, Select Medical's bottom line may see only a marginal bump higher. 

The other big loser in this process has been federal and individual state contractors. Despite successes in California and New York, as well as the completion of Healthcare.gov's fix for a majority of citizens, the onus of blame for much of the technical glitches associated with these websites falls on the contractors.

Canada's CGI Group (GIB 2.57%), for example, might win the award for most finger-pointing amassed in one year for a private enterprise. CGI Group is the contractor responsible for building Healthcare.gov and is also the primary contractor behind Vermont's predominantly nonfunctional health exchange. These low figures, even if they are from Oregon and other federally run states, reflect poorly on the information technology infrastructure sector as a whole, and especially on CGI Group, which could lose future orders over this debacle.

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