Conservatives are talking about the implementation of Obamacare in the same thoughtful way they talked about its enactment—that is, as an impending apocalypse. It won’t be, as I've noted previously. Most Americans get insurance through employers, Medicare, and Medicaid, and that will still be the case on January 1, when Obamacare’s big provisions take effect. But the minority who buy insurance on their own or have no insurance will see tremendous changes. And you don’t have to be Rush Limbaugh to have real concerns about how those changes will play out.
The Affordable Care Act (ACA) is one of the most complex laws ever enacted—partly because its sponsors had to make so many convoluted compromises. Obamacare is not just a federal project. States will be in charge of many crucial functions, just as conservatives wanted. But not all their officials are up to the task. And even officials in places where implementation is going well (California, Oregon, Washington, Maryland, Connecticut, and Vermont get the best reviews) are bracing for a rough start.
The administration expects the inevitable glitches, but nothing like a meltdown. It’s armed with a host of contingency plans. But the truth is, there’s no way to know for sure how well Obamacare will work at first. I wanted to sort out the hysteria from the well-founded fears, the bad-faith arguments from the legitimate worries, so I talked to people on the front lines—federal officials, state officials, insurance industry representatives, advocates, and organizers.
Here are the things that really could go wrong:
1 Not enough healthy people will sign up
Obamacare’s success depends heavily on the new health care exchanges, where anyone without employer-sponsored insurance can buy coverage, no matter what medical problems they have. But if the right kinds of people don’t sign up, the exchanges won’t function properly.
Health insurance needs lots of healthy people to sign up for coverage. Their premiums cover the big bills for the relatively small number of sick people. So if the exchanges don’t enroll enough young, healthy people, insurers will have to raise everyone’s premiums. In the worst case, this could create what actuaries call a “death spiral”: Rising premiums prompt people to drop out, causing premiums to increase even more.
To encourage participation, Obamacare offers generous income-based subsidies. If you don’t purchase insurance, you’ll be hit with a small financial penalty. Still, convincing healthy people to pay for insurance isn’t easy, even when it’s cheap. In the first year of the Children’s Health Insurance Program, in 1997, less than a million children signed up—a fraction of the eligible population. Since then, that number has increased to around eight million. But Obamacare is under far more pressure to prove itself early.
Administration officials say they’ve developed a sophisticated strategy for persuading young consumers, partly by applying the data-analysis techniques developed during the presidential campaign. “If there’s one thing we know how to do,” says a senior administration official, “it’s reach young people.” They’re also conducting person-to-person outreach through social media, churches, unions, and other groups.
But they’re doing this on a tight budget. The Bush administration spent $1.5 billion on outreach for the Medicare drug benefit. The Obama administration gets substantially lower funding to promote a more ambitious law to a less receptive population: Young people aren’t nearly as desperate for health insurance as seniors were for assistance with prescriptions. So far, congressional Republicans have refused requests for more funding. Nonprofit organizations are trying to fill the gap, but they may not be able to do as much as they would like.
Nor can the administration count on private-sector help, at least in states where political and corporate leaders oppose the law. Those just happen to be the states with the most uninsured. When Massachusetts introduced its reforms, enrollment became a civic cause; Red Sox players touted its benefits in TV ads. Nobody expects the Dallas Cowboys to do the same.
2 The computers won’t work
Obamacare supporters like to say that buying insurance online from the exchanges will be as simple as arranging travel on Expedia or Travelocity. This is highly optimistic. The health care law requires a vast electronic infrastructure to be created from scratch, so that every state has its own website. Some states are building their own; others are letting the federal government do it. The sites are supposed to go online on October 1, and it’ll be no small accomplishment if they work at all.
Consider what the new system has to do. First, it determines whether you’re eligible for Medicaid or for subsidized private insurance. If it’s the latter, it will figure out what subsidies, if any, you qualify for. To do that, it must verify your identity, residency, and income, which means communicating with the Social Security Administration, Homeland Security Department, and Internal Revenue Service. You’ll be presented with insurance choices, based on a separate set of communications with the carriers. Finally, the system will calculate your premium, taking the subsidies into account.
Ensuring all the different entities communicate seamlessly is a headache-inducing task—especially when some of the systems are old and idiosyncratic. Federal officials are particularly nervous about states that have asked Washington to run their exchanges but insist on determining Medicaid eligibility themselves. Many states already make Medicaid enrollment arduous. Under Obamacare, they could make it cumbersome to connect to Medicaid websites or force applicants to wait many weeks before hearing whether they qualify. On top of all this, the whole online operation has to run with ironclad security, given the sensitive nature of the data involved.
Officials have reportedly been testing the systems extensively, both internally and with outside troubleshooters. Despite stories of missed deadlines, the administration is confident the federal IT will function as planned. But among implementers, there’s plenty of angst. “Everybody will breathe a sigh of relief when it’s up and running,” one Democratic state official told me. It’s possible the websites will be a work in progress: The early versions could be rudimentary and, in the worst cases, officials would have to work around bugs until they can be fixed. Jon Kingsdale, who ran Massachusetts’s exchange and has been advising the states, told me most exchange directors “expect a rocky start.” But, he said: “Over time, they will learn, improve. October first is not the end, but just the start.”
3 Insurance companies will act like insurance companies
It’s not exactly comforting that Obamacare may need the good faith of insurers—the one group of health companies that resisted the law all along. The biggest fear is that insurers will jack up premiums, scaring consumers away.
Right now, insurers selling to individuals can make coverage very cheap, if they only offer such policies to relatively healthy people and don’t offer very generous benefits to anybody. Obamacare outlaws both practices. Insurance companies, worried that they’ll need to pay out more to hospitals and doctors, are going to raise premiums.
Most people buying on the exchanges won’t notice this. If your income is at or below four times the poverty line (about $94,000 for a family of four), the subsidies limit what you’ll pay for a standard plan, no matter how high the premiums. But increased premiums would affect people who don’t qualify for subsidies, as well as small businesses that buy group plans. (Subsidies for businesses are lower than for individuals.) They would also drive up the overall cost of the law to the government, since higher subsidies would be needed to cover the rising premiums.
A lot of this depends on how insurers behave. Many people working on implementation worry that they will simply seize the opportunity to raise premiums, regardless of whether it’s necessary. Maryland’s insurance commissioner has hinted that she will reject a rate hike averaging 25 percent proposed by CareFirst. But officials in many states lack that power. Then there’s the danger that insurers will simply refuse to participate in the exchanges: Aetna corporate officers have told investors that the company might limit offerings or pull out of exchanges if they can’t get sufficiently high premium increases.
Administration officials say they expect strong competition. And it’s worth noting that the Massachusetts exchange, which most closely resembles the one the federal government is setting up, has generally only offered a handful of plans, and yet premiums have remained low. (The limited choice has also arguably been easier for consumers to navigate.) But Massachusetts gives officials power to aggressively negotiate bids, in order to drive down prices and encourage competition. In many states, exchanges will lack that authority. Jay Angoff, a former insurance commissioner from Missouri who worked on Obamacare, says it’s possible that what develops is “a government-compelled, taxpayer-subsidized market, but most of the inefficiencies of the [current] system are still there.” For insurers, that’d be the best of all worlds.
4 Rick Perry will seek revenge
Even in places where officials want to make Obamacare work, a smooth start isn’t guaranteed. But a bigger worry is the states where leaders aren’t interested in seeing Obamacare succeed—or are actively trying to make it fail.
More than half the states still haven’t agreed to expand their Medicaid programs, potentially leaving millions without insurance. And there are other ways hostile officials can mire the law in chaos and confusion. They can use their power over Medicaid to halt enrollment or decline to help resolve problems with insurers. (Good luck getting any help in Texas, where Governor Rick Perry has called Obamacare a violation of “our Constitution and our founding principles.”)
When it comes to Medicaid, all but the most hardened state-level adversaries should come around eventually. The federal government covers nearly the entire cost of the expansion, money most states won’t refuse. But at the federal level, opposition may prove implacable.
Complex legislation always has problems—drafting errors or issues the architects didn’t anticipate. The ACA is based on the Senate version of the bill, written with less technical precision because the effort to pass it was so difficult. In such situations, Congress usually addresses snags with narrow, uncontroversial measures. “In the real world, when we implement a law, we learn and we adapt,” says Drew Altman, president of the Kaiser Family Foundation. “It’s not quite ‘ready, fire, aim,’ but it’s close, especially for something as complex as this.”
So far, however, congressional Republicans are resisting even simple fixes. When a question arose over when employers will be responsible for providing coverage for employees, the criteria for calculating employee income was unclear. Congress could have easily settled the matter—but didn’t. The administration was forced to reduce employer responsibility for coverage—a decision that will potentially leave a few hundred thousand people uninsured.
The law doesn’t state explicitly that the federal government can offer tax credits when it’s running a state’s exchange—although it’s obvious that’s what the authors intended. Again, Congress could fix this with a few lines attached to any bill. But it won’t—enabling conservatives to file a federal lawsuit that could block the government from subsidizing coverage in states that aren’t setting up their own exchanges.
5 Obama will get smacked no matter what
Here are a few predictions of things that will happen during the first year of Obamacare: Many people will experience long waits before being able to see a doctor. Insurance companies will refuse to cover important treatments that doctors say are necessary. Employers will balk at the rising cost of providing care to their employees. These predictions are certain to come true— because they come true every year. And while Obamacare was designed to address some of these problems, they won’t all vanish overnight.
Perhaps my biggest fear about Obamacare is that the inevitable, predictable troubles become full-blown political firestorms, undermining the entire system. The national Republican leadership doesn’t share the goal of universal health care coverage and neither do Rush Limbaugh or the pundits on Fox. They’ve made it clear they want to get rid of the entire ACA and replace it with nothing at all. You can expect these forces to exploit even the slightest sign of trouble—even problems in the general realm of health that don’t actually have anything to do with Obamacare. “[The administration] own[s] the health care system,” says Mark McClellan, the former administrator of Medicare and Medicaid, who oversaw implementation of Bush’s prescription drug benefit. “And ... they only get the things that go wrong.”
This could have a snowball effect. Insurers could get skittish about participating in the exchanges and stop offering plans. Wavering state officials might come to the conclusion that it’s too politically risky to help federal officials to fix the system and instead let the problems pile up. Individual consumers might decide that it’s too expensive to purchase insurance on the exchanges and opt to simply pay the penalty instead. That’s the true nightmare scenario—that the predictions of doom become self-fulfilling.
That’s why expectations are so important. Starting in January, millions of people will get the kind of affordable, comprehensive, and stable insurance they never could before. This may be quicker to happen in some states than others—and the experience may not always be easy. But it will certainly be an improvement on the current state of affairs. And even those who anticipate difficulties also expect that things will get better over time. “I have described my expectations for 2014 as ‘bumpy,’ ” says economist Gail Wilensky, who was in charge of Medicare and Medicaid under President George H. W. Bush, “but something I assume the country will muddle through.”
Jonathan Cohn is a senior editor at The New Republic. Follow Jonathan on twitter @CitizenCohn