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Obamacare bombshell: IT official says HealthCare.gov needs payment feature

Tuesday, 19 Nov 2013 | 5:04 PM ET
Another 'black eye' for HealthCare.gov
Tuesday, 19 Nov 2013 | 3:00 PM ET
CNBC's Dan Mangan analyzes the startling admission by an Obama administration official that a large portion of the Obamacare web site has not yet been built.

Another day, another big, bad black eye for HealthCare.gov.

A crucial system for making payments to insurers from people who enroll in that federal Obamacare marketplace has yet to be built, a senior government IT official admitted Tuesday.

The official, Henry Chao, visibly stunned Rep. Cory Gardner (R-Colo.) when he said under questioning before a House subcommittee that a significant fraction of HealthCare.gov—30 to 40 percent of it—has yet to be constructed.

"We still need to build the payments system to make the payments [to insurance companies] in January," testified Chao, deputy chief information officer of the Centers for Medicare and Medicaid Services, the federal agency that operates HealthCare.gov.

That so-called financial management tool was originally supposed to be part of HealthCare.gov when it launched Oct. 1, but officials later suspended its launch as part of their effort to get the consumer interface part of the site ready. The tool will, when it works, transmit the subsidies that the government is kicking in for many enrollees to offset the costs of their monthly premiums.

'Completing this lap'

Hours later, however, a colleague of Chao's at the CMS revealed some good news for HealthCare.gov, saying insurers and online insurance marketplaces will very soon be able to directly start enrolling people in Obamacare insurance who qualify for government subsidies to offset its cost.

A set of software bugs on HealthCare.gov had, for more than six weeks, prevented individual insurance company websites and web brokers including ehealthinsurance.com, getinsured.com and GoHealthInsurance.com from interfacing with the federal site to verify enrollee's subsidy eligibility. That lack of so-called "direct enrollment" had undoubtedly played a role in what has been abysmally low levels of enrollment in Obamacare insurance.

(Read more: Low-bamacare enrollment)

"We do believe the the majority of the fixes for direct, online enrollment are addressed," said CMS spokeswoman Julie Bataille. She said that "in coming days," as insurers and online brokers make their own assessments of their systems, they could begin enrolling people.

EHealth spokesman Nate Purpura said, "We are still in the process of confirming that the fixes have been made that will provide a stable and consumer-friendly user experience. Once we have more information, we can provide further comment."

Chini Krishnan, CEO of GetInsured, said, "We are close to completing this lap."

Henry Chao, deputy CIO and deputy director of the Centers for Medicare and Medicaid Services' Office of Information Services, testifies during a hearing before the Oversight and Investigations Subcommittee of the House Energy and Commerce Committee.
Getty Images
Henry Chao, deputy CIO and deputy director of the Centers for Medicare and Medicaid Services' Office of Information Services, testifies during a hearing before the Oversight and Investigations Subcommittee of the House Energy and Commerce Committee.

Payments stalled

But getting insurers paid for people who enroll in their plans via HealthCare.gov is going to take some time, according to CMS.

Bataille, during a conference call after Chao's testimony, did not give an date by which the site's insurer payments tool would be up and running, saying it "will come online over time."

"It's something we do not need online until the middle of January," she said. However, for people's insurance to kick in by Jan. 1, they need to make payments for their Obamacare insurance policies by Dec. 15.

Chao on Tuesday said other areas that need to be built include "the back-office systems, the accounting systems."

He testified that the consumer interface part of that website, which enrolls people in Obamacare insurance plans, is totally built.

(Read more: Obamacare IT Chao warned of 'plane crash' for HealthCare.gov)

"The online application, verification, documentation, plan compare, generating enrollment, that's 100 percent," Chao said.

But the revelation that the insurers' payment tool wasn't yet built startled some observers.

"That's like setting up an online bank without setting up a way to make deposits," an industry source told CNBC.

Joanne Peters, a spokeswoman for CMS's parent, the Health and Human Services Department, said, "The parts of the marketplace that were essential for consumers to be able to apply for eligibility and select a plan were live on Oct. 1."

"The additional functionality that has not been launched has to do with pieces that are not needed until 2014," she added.

HealthCare.gov is comprised of "distinct pieces of functionality that, together, make up the full integrated system—plan management, eligibility and enrollment and financial management," Peters continued.

"As we have said, CMS prioritized essential functionality to be live on Oct. 1 to ensure that consumers would be able to apply for eligibility and select a plan. Other functionality will come online over time. This is a complex project with a short timeline—and as such issues were prioritized to meet the Oct. 1 launch date. As part of this prioritization, back-end tools, including financial management, monthly enrollment reconciliation and risk adjustment, which are not consumer facing and not essential until 2014 will be rolled out in the coming months."

The financial management tool manages the payment processing between marketplaces and issuers. Monthly enrollment reconciliation refers to the tool that makes sure there is agreement between the enrollment numbers maintained by HealthCare.gov and the same numbers maintained by the insurers. And the risk adjustment program gives monetary payments to insurers that disproportionately attract people with chronic conditions, and others whose uses of insurance could end up costing insurers more money than they take in in premiums.

Chao and other Obama administration officials have been lambasted since Oct. 1 for the glitch-laden launch of HealthCare.gov, which with just 27,000 people enrolled in 36 states over one month has grossly underperformed original expectations. The administration had originally estimated that 7 million people would enroll in Obamacare insurance plans by March 31, but that goal remains in peril.

By CNBC's Dan Mangan. Follow him on Twitter @_DanMangan. CNBC's Bertha Coombs contributed to this report.

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