Analysis: Obamacare struggles to meet make-or-break deadline

The White House, and federal agencies including the Department of Health and Human Services (HHS) and the Internal Revenue Service (IRS), must ensure that working marketplaces open for enrollment in all 50 states in less than 80 days, and are responding to mounting pressure by concentrating on three essential areas that will determine whether the most critical phase of Obamacare succeeds or fails.

"The administration right now is in a triage mode. Seriously, they do not have the resources to implement all of the provisions on time," Washington and Lee University professor Timothy Jost, a healthcare reform expert and advocate, told an oversight panel in the U.S. House of Representatives last week.

Current and former administration officials, independent experts and business representatives say the three priorities are the creation of an online portal that will make it easy for consumers to compare insurance plans and enroll in coverage; the capacity to effectively process and deliver government subsidies that help consumers pay for the insurance; and retention of the law's individual mandate, which requires nearly all Americans to have health insurance when Obama's healthcare reform law comes into full force in 2014.

Measures deemed less essential, such as making larger employers provide health insurance to their full-time workers next year or face fines, and requiring exchanges to verify the health insurance and income status of applicants, have already been postponed or scaled back.

"The closer you get to the actual launch, the more you focus on what is essential versus what could be second-order issues," said a former administration official. "That concentrates the mind in a different kind of way, and that's what's happening here."

But the risk of failure in the form of major delays is palpable, given the administration's limited staff and financial resources, as well as the stubborn political opposition of Republicans, who have denied new money for the effort in Congress and prevented dozens of states from cooperating with initiatives that offer subsidized health coverage to millions of lower income uninsured people.

Any further delay could help Republicans make Obamacare's troubles a focus of their campaign in next year's congressional midterm elections and in the 2016 presidential race.

HHS denies that its strategy has changed and insists that implementation continues to meet the milestones laid out by planners 18 months ago.

"All of the systems are exactly where we want them to be today. They will be ready to perform fully on October 1," said Mike Hash, director of the HHS Office of Health Reform.

White House officials acknowledge the approach of the open enrollment deadline has put a greater emphasis on priorities. They describe the strategy as a "smart, adaptive policy" and assert that delayed or scaled-back regulations demonstrate better policy decisions or flexibility with stakeholders, rather than a need to minimize distractions.

NO MARGIN FOR ERROR

Advocates point out that the reform, formally titled the Patient Protection and Affordable Care Act and informally known as Obamacare, constitutes the most sweeping healthcare legislation since the creation of Medicare and Medicaid, large successful government programs for the elderly and the low income that also faced fierce political opposition when they were created in 1965. Both required years of work after their launch to refine implementation.

The administration has already delayed or scaled back at least half a dozen health reform measures since last year. These include regulations involving star quality ratings for insurance company plans, the choice of insurance plans for small-business employees and a requirement that state Medicaid agencies notify individuals of their eligibility for federal assistance.

Other efforts that could still be delayed include deadlines for some health insurers to get their plans certified by HHS as well as requirements for how the insurance exchanges provide customer service.

House Speaker John Boehner and other House Republican leaders, warning of a "train wreck", have called on Obama to defer an essential task: the individual mandate, which requires people to have insurance coverage in 2014 or face penalties that begin modestly, but rise sharply by 2016.

But experts say it is the other essential tasks - establishing the high-tech capabilities necessary to process government insurance subsidies and create online shopping and enrollment for consumers - that could be most vulnerable with such a compressed timetable.

"The biggest hurdle is to get the systems up and running," said one health insurance official. "Nothing's happened so far that prevents you from being up and running on October 1. But there's virtually no margin for error."

The administration is working according to an ambitious schedule for testing a technology hub and its ability to transfer consumer data on health coverage, income, tax credits and other topics between federal agencies, insurance companies and states. The hub is already exchanging data between the necessary agencies.

A report from Georgetown University's Center on Health Insurance Reforms says state-run exchanges are on track for a successful October 1 launch and have exceeded federal minimum requirements in some cases.

Failure to have adequate systems in place by September 4, when HHS is due to give insurers final notice about which health plans are qualified to be sold on 34 state exchanges run by the federal government, could delay open enrollment by days or weeks but still allow the law's core reform provisions to take effect on January 1, experts said.

Insurers will have several days in August to review plan data as it would be presented to prospective enrollees in side-by-side comparisons online. The administration also needs to test the system with a wider audience than the IT experts working on the exchanges to make sure they are consumer-friendly.

Michael Marchand, spokesman for Washington's Health Benefit Exchange, said the state's online marketplace had conducted frequent tests with the federal data hub, which had worked well so far. But any last-minute changes to the government's requirements to its operations could throw a wrench into the IT system, he said.

"If you start adding or removing lines of code it could bring the whole thing down," he said. "As you add or take away pieces, you have to re-test from the beginning."

(Additional reporting by Patrick Temple-West in Washington and Sharon Begley in New York; Editing by Michele Gershberg, Martin Howell)