Obama administration prepares to take over Oregon’s broken health insurance exchange

April 24, 2014 - The Washington Post

The Obama administration is poised to take over Oregon’s broken health insurance exchange, according to officials familiar with the decision who say that it reflects federal officials’ conclusion that several state-run marketplaces may be too dysfunctional to fix.

In public, the board overseeing Cover Oregon is scheduled to vote Friday whether to join the federal insurance marketplace that sells health plans in most of the country under the Affordable Care Act. Behind the scenes, the officials say, federal and Oregon officials already have agreed that closing down the state marketplace is the best path to rescue what has been the country’s only one to fail so spectacularly that no resident has been able to sign up for coverage online since it opened early last fall.

The collapse of Oregon’s insurance marketplace comes as federal health officials are focusing intensely on faltering exchanges in two other states, Maryland and Massachusetts.

This month, the board of the Maryland Health Connection became the first in the nation to decide to replace most of its exchange with different technology. But Maryland did not obtain required federal approval before its vote. Federal officials remain uncertain whether the state exchange has the capacity to correct its problems and have not indicated whether they will give Maryland the $40 million to $50 million it says it needs to make the switch.

Massachusetts was in the vanguard of insurance exchanges, opening its own years before the 2010 federal health-care law. But the commonwealth’s insurance marketplace developed severe technical problems as it tried to make adjustments to interact with the federal system.

Taken together, the federal uneasiness about these and other failing state insurance exchanges is emerging now that the federal Web site, HealthCare.gov, is largely functional, attracting unexpectedly large numbers of people in the final weeks of the first sign-up period, which just ended. So far, about 8 million Americans have enrolled through the federal and state marketplaces.

The fate of these state-run exchanges has significance both politically and for consumers.

When the Affordable Care Act was enacted, the law’s authors envisioned that virtually every state would build its own exchange, for people who cannot get affordable insurance through a job and for small businesses. Only 14 states and the District have created exchanges. In the remaining three dozen states, Republican governors and legislators, as part of the intense GOP opposition to the law, have left their residents to rely on the federal insurance marketplace, which opened for business in October.

Some of the state-run marketplaces have prospered, including California’s, Connecticut’s and Kentucky’s. But others have been failures, placing a political stain on Democratic statehouses that were among the most enthusiastic in embracing the federal health-care law. In addition to the three states that are currently the focal point of administration officials, exchanges have faltered in a few other places, including Hawaii and Minnesota.

In each of the defective state exchanges, consumers have encountered a variety of obstacles in trying to sign up. Oregon’s consumers have been the only ones who have had to resort entirely to cumbersome paper applications because its Web site has never worked for individual sign-ups, despite nearly $250 million in federal funds spent to set up the exchange.

Just under 64,000 residents have enrolled in private health plans there. In becoming the first state to migrate to the federal insurance marketplace, Oregon is trying to make it easier for more people to sign up for health coverage in the future. But the switch also introduces new uncertainties to an already chaotic environment.

It is unclear, for example, whether people who have just chosen health plans through Cover Oregon will need to sign up a second time in the federal system for their new coverage to continue beyond this year. Nor is it clear whether insurers in Cover Oregon will switch to the federal marketplace, or whether the state will preserve some of the approaches its exchange has employed with enrollment assisters and insurance agents.

As in Maryland, Oregon is led by a Democratic governor, John Kitzhaber, who has been an outspoken proponent of the federal health-care law. The state has, in general, been a leader in innovative policies to promote access to health care and other social services.

“It makes a lot of sense for Oregon to rely on federal technology that is working well today,” said Joel Ario, a health-care consultant and former Obama administration health official in charge of insurance exchanges. “But the bigger question is what this means for Oregon’s leadership role on Medicaid reform and other Kitzhaber initiatives” to control health-care costs.

Republicans immediately capitalized on the imminent closing. Rep. Greg Walden (R-Ore.) lambasted the state exchange as “the worst financial failure in information technology in state history — and it was completely avoidable.”

It has been increasingly clear in recent months that Cover Oregon was failing. The exchange hemorrhaged staff, including an executive director, acting director and, just this week, its chief operating officer. It is currently run by a consultant whom the governor hired to assess what was going wrong.

Another consultant’s analysis for Cover Oregon recently concluded that it would cost $4 million to $6 million to move to the federal insurance marketplace, a fraction of the expense of refurbishing the exchange’s existing technology.

According to the officials, who spoke on the condition of anonymity about discussions that have not been made public, leaders of the federal Centers for Medicare and Medicaid Services, the agency overseeing the insurance marketplaces, advised Oregon officials that they did not believe the state had the ability to repair its own exchange.

The two sides have been negotiating the details of the transition, including exactly how much help the federal government will furnish. The negotiations are expected to conclude in a series of meetings in Washington early next week between federal health officials and exchange representatives from Oregon, Maryland and Massachusetts.

On Thursday, a technology working group for Cover Oregon reached an informal consensus to recommend to the governing board that it join the federal insurance marketplace. A spokeswoman for Cover Oregon, Ariane Holm, disputed that the decision is final, saying “the Cover Oregon board is the only group with authority to make decisions about next steps.”

Aaron Albright, a spokesman for the Centers for Medicare and Medicaid Services, said the agency is “committed to working closely with states to support their efforts in implementing a marketplace that works best for their consumers. ”

Jason Millman contributed to this report.