Insurance exchange deal signed with Web insurer sites
Call it Obamacare 2.0.
The federal government has signed five landmark deals that set the stage for major Web insurance markeplaces to enroll potentially millions of people in Obamacare, CNBC learned late Wednesday.
Those deals, experts have said, could dramatically boost enrollment in those marketplaces and help keep premium costs low—both key goals of the Affordable Care Act signed by President Barack Obama in 2010—by drawing customers who land at the sites of eHealthInsurance.com, GetInsured.com and others through Google searches, among other avenues.
The breakthrough, which came after months of negotiations, lays the groundwork for the Web exchanges to begin enrolling people who qualify for government insurance subsidies in the 36 marketplaces that the federal government is either running for individual states or in partnership with states this year.
Those solely federal or mixed exchanges, which cover areas where nearly 60 percent of the U.S. population lives, open enrollment Oct. 1.
CNBC.com first revealed Wednesday morning that eHealthInsurance.com had signed such a deal with the government—news that sparked a massive run-up in the stock of its parent company, eHealth, which was trading at one point as much as 30 percent over its opening price.
Hours later, it was disclosed that that GetInsured.com and three other site had signed similar deals with the Centers for Medicare & Medicaid Services. Other Web markets have also applied for similar deals, which are expected to be signed on a rolling basis, according to CMS.
"I'm pleased to confirm" that news, Chini Krishan, CEO of GetInsured.com told CNBC.com when asked about his company's deal. "We think this offers the potential to service millions of customers."
"I think it is going to make a major difference in enrollment rates," he added.
But for now, GetInsured, eHealth and all other Web-based markets remain effectively locked out of doing the same kind of subsidized business with the remaining 15 exchanges being operated by individual states and by the District of Columbia. Both California and New York have opted out of such deals, as least for the first year of their exchange's operation.
"We have worked to ensure that consumers will have a wide range of ways to sign up for health coverage this fall, including working to ensure Web-based brokers as part of this effort," said Brian Cook, spokesman for the Centers for Medicare & Medicaid Services.
"We have developed ways to integrate many private, Web-based brokers with the marketplace website, which will allow consumers to simultaneously apply for coverage and tax credits," he said. "We have signed agreements with several such brokers, incuding eHealth, that will allow them to sign consumers up for coverage."
Under the ACA, nearly all people who lack health insurance must obtain such coverage or face a fine.
To provide affordable insurance—without any prohibition on those with pre-existing health conditions—the law authorized the creation of government insurance marketplaces, or exchanges, where insurers can offer plans at different price points and benefit levels. Millions of people will be eligible to receive subsidies or tax credits that will offset some of the cost of those plans.
(Read more: Obamacare subsidy "cliff")
"It's been awhile coming, but I'm very pleased," eHealth CEO Gary Lauer told CNBC.com about his company's deal. "I think it's a smart move" by the Centers for Medicare & Medicaid Services, which oversees the federal exchanges, he added.
Under the deals, eHealth, GetInsured, and the other Web markets are being allowed access to the federal exchange data hub, which is necessary to allow would-be insurance buyers to have their eligibility for subsidies verified.
The deals are the first step toward giving eHealth permission to actually enroll subsidized customers in the exchanges' insurance plans, an approval that is now viewed as a "formality," according to a person close to eHealth.
(Read more: Doctors skeptical, clueless about Obamacare)
Now, eHealth and GetInsured are setting their sites on persuading those states operating their own exchanges to overcome their widespread resistance to partnering.
Lauer said he hopes those states "will follow the leadership of the federal government."
Krishan of GetInsured said, "It's our goal, intent and commitment to get all 50 states, and it is our goal to serve customers across the country."
The deals could earn eHealth and GetInsured a lot of money.
The former, for example, gets an average premium of about 7 percent for the plans it offers on its website, in the form of commissions paid by the insurance providers who sell the plans.
A March 2012 federal regulation gave Web-based insurance markets the ability to enroll subsidy-qualified people in the new exchanges. But the regulation left it up to the governments running those exchanges to decide whether to let the online markets do so.
Since then, eHealth's Lauer, in particular, has lobbied diligently to get the Obamacare exchanges to grant that permission but had been thwarted until this week.
(Read more: States control your health-care fate, not Obama)
Allowing private Web markets to sign up people on their sites may save the government money in enrollment costs, according to Lauer. It will also broaden the participant pool, he said, providing premium payments from younger, healthier people to balance the older and sick people who tend to generate benefit costs.
"Having us involved is going to expand the size of the pool, and all of that is going to help to mitigate risk, balance risk and hopefully keep prices and premiums stable," Lauer said.
Last year, eHealth drew 20 million visitors, half of whom were between the 18 and 34, he said.
—By CNBC's Dan Mangan. Follow him on Twitter @_DanMangan.