Not so fast; here's how to count health sign-ups

  • Article by: STEPHEN T. PARENTE
  • Updated: January 30, 2014 - 6:30 PM

Plus, a little respect for the health insurance industry would go a long way.

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The Obama administration has invested considerable energy attempting to rebrand and relaunch healthcare.gov. On a near-weekly basis, Health and Human Services Secretary Kathleen Sebelius and her press office issue proclamations touting improving success in signing up more consumers through the website.

But sign-ups are the wrong success metric. A Holy Trinity of metrics must be achieved before a person is truly insured.

Invoking a core foundation of Christianity as public policy allegory may seem extreme. Yet prayer likely will be required for the administration to achieve its goal of 7 million exchange enrollees by March 31.

The central mission of the Affordable Care Act (ACA) is to reduce the number of uninsured to as close to zero as possible. Had the administration been serious about counting those no longer uninsured, it would recognize the Holy Trinity involved in the ACA successfully insuring someone new.

The first component is having the insurer actually receive correct notification through the exchange that someone wants to purchase a policy at the posted price. From press reports of IT vendor issues, we know this is not happening. This disconnect will keep healthcare.gov in the headlines through 2014 and dangerously close to the midterm elections for the administration.

The second metric is the government payment that must be wired from the Treasury Department if the person qualifies for a subsidy on the health insurance exchange. Consumers on healthcare.gov were led to believe that they would get instant coupon savings from the U.S. Treasury. The problem is that half of the insurance market is nonprofit, particularly regional Blue Cross Blue Shield plans and several large HMOs, including Kaiser Permanente. What profits do they get to draw from to pay for newly insured individuals for two or three months while waiting for a government transfer to arrive on the newly insureds’ account? That’s a pretty big no-interest loan the government must be hoping insurers will provide.

The final step is the newly insured making their first month’s payments for their new insurance contracts. Depending on the plan chosen, the majority of exchange enrollees will pay some premium. This is standard operating procedure for insurers. But as the Wall Street Journal has reported, the administration has realized that this could be a problem thwarting sign-up and it has sought to induce the insurers, through last-minute regulation, to make their coverage effective as of Jan. 1, even if the enrollee did not pay the first premium until after that date.

Only when all three of these conditions of ACA insurance coverage are met can the administration claim that a policy is effective and that it has delivered a newly insured soul to the new mythic brethren of 7 million. If not, the person is not insured, regardless of the spin of the Obama administration. Without meeting the conditions of the Trinity, you are counting e-whispers of success.

Why such a mess? It’s a mismatch of policy intent and execution.

President Obama sought to claim that under his leadership, America has now joined the community of nations with national health insurance. However, the ACA is not national health insurance. The president and his advisers knew there were far too many sacred policy cows in the way to attempt such a Hail Mary pass. Instead, they chose a policy playbook largely hewn from Gov. Mitt Romney’s Massachusetts health reforms combined with pieces from ye olde Heritage Foundation of 1991. They thought this would be a clever way to advance quickly what to them must have seemed a shrewd juggernaut with bipartisan wrapping paper.

Alas, the ACA became the polarizing moment for the administration when it emerged in the froth of the newly born Tea Party movement spawned from TARP and the 2009 stimulus bill.

The law that emerged relies on the private insurance industry to function, and therein lies the problem. The president and his senior political staff appear to loathe the industry for an array of reasons. In the case of the president himself, his experience battling insurers when his mother was dying of cancer likely did little to make him a fan.

This fundamental distrust of the industry is juxtaposed with the realization by the Obama administration that it can’t easily command or replace private insurers.

Furthermore, the growing recognition that the president’s political legacy will rely on an industry responsible for trillions of dollars’ worth of Medicare, Medicaid and commercial transactions must personally taunt on many levels.

The result was a failure to fully understand insurance underwriting and the back-office functions required to tie in. Had the president and his core team actually respected the industry and the value it brings to hundreds of millions today, their legacy would not need prayer to deliver it and needlessly uninsured people from peril.

 

Stephen T. Parente is the Minnesota Insurance Industry Chair of Health Finance and professor of finance at the University of Minnesota’s Carlson School of Management. He advised Sen. John McCain’s 2008 presidential campaign and has advised Republican senators drafting alternative health care reform legislation. He served as a legislative fellow for Sen. John D. Rockefeller IV, D-W.Va.

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