The missing million: Obamacare's direct-enrollment flop


Perhaps a million people who might have bought Obamacare insurance may end up not signing up because of persistent problems in getting a major alternative enrollment avenue working as designed, industry insiders said.

Already, with a major Obamacare sign-up deadline looming, enrollment directly by health insurers and online brokers in Affordable Care Act plans is dramatically below what it might have been because of those technical problems, experts say.

Those problems are so bad that no web broker who was supposed to be able to connect to the federal Obamacare marketplace HealthCare.gov is enrolling people in health plans sold there in a seamless online process as planned, industry sources told CNBC.com.

"Just complete frustration, to be honest with you," said John DiVito, president of Illinois-based web broker Flexible Benefit, describing his experience since the Oct. 1 launch of the federal site. "You go online, they're telling you you can do it. It doesn't work."

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What doesn't work, DeVito and others say, is known as "direct enrollment." That is the term for people signing up in Obamacare plans, particularly ones that include subsidies, directly through individual insurance companies and web brokers—without the consumer having to go online themselves at HealthCare.gov to apply, shop for plans, and sign up there.

Obama administration officials have said that direct enrollment is available as an option and that it's up to insurers and brokers to decide when to "go live" with it. But industry sources say the reality falls far short of the administration's promise.

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Asked how many people will end up not enrolled for the 2014 plan year because insurers and brokers have been stymied by direct enrollment issues, DiVito said, "It's got to be over a million people, easily, at this point."

That was echoed by another broker executive, who said, "A million people being left on the table? For sure."

"It's just been too much of a mess," said that executive, referring to the continued delays in getting an effective direct enrollment link set up.

One million people equals 14 percent of the 7 million individuals federal officials originally estimated would enroll in Obamacare insurance nationally by the end of open enrollment on March 31, 2014. Total enrollments to date have fallen far short of the pace needed to hit that target.

Flexibile Benefit, like other brokers such as GoHealth and GetInsured, has developed an enrollment workaround for HealthCare.gov. That has lead to some enrollments, but nowhere near the volume that was expected for direct enrollment as designed.

DiVito's company essentially piggy-backs on Illinois Blue Cross' website to get customers to HealthCare.gov, and then bring them back to complete the sign-up and get a commission for the sale. But the process is time-consuming, as are the other workarounds, and it restricts Flexible Benefit customers' choices to just Illinois Blue Cross plans.

"It's tedious, it's a lot of work," DiVito said. But he added that "we are seeing a success rate significantly better than we saw three weeks ago."

"You know, it's unfortunate that there aren't more avenues for people to get in," said Larry Levitt, senior vice president of the Kaiser Family Foundation and former White House senior health policy advisor. "Opening up direct enrollment would likely increase enrollment."

'Big mistake'

Levitt said that if HealthCare.gov—which has undergone dramatic repairs—"operates smoothly over the next couple of days and is able to handle the volume" of people trying to buy insurance before Monday's deadline for coverage beginning Jan. 1, "then I don't think enrollment [overall] will be significantly depressed."

But, Levitt added, "I think it could have been quite significant in October and November," when direct enrollment was essentially impossible via HealthCare.gov, and the federal site's tech troubles were extreme.

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Robert Laszewski, president of the consulting firm Health Policy and Strategy Associates, said that federal officials missed a significant opportunity to boost sign-ups by enlisting web brokers earlier as major avenue for enrollment.

"I think it would have been a big help. While direct enrollment for a single carrier would be helpful, people would not have gotten to shop," Laszewski said. "But if they had done the web brokers like eHealth it would have been about the same as what HealthCare.gov would have offered for a shopping experience. I think it was a big mistake for the feds to not have this in place as a Plan B workaround on October 1—would have saved a lot of grief!"

Centers for Medicare and Medicaid Services spokesman Aaron Albright said, "Consumers can and are signing up for a quality, affordable health plans via direct enrollment today. So far, we have entered into agreements with more than 30 web brokers toprovide this important service for consumers."

"While we continue to be in active discussions with insurers and web brokers on ways to improve the process,direct enrollment through an insurance company or web broker remains a viable option for consumers right now," Albright said.

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Albright's claim of direct enrollment being a viable option echoes ones made repeatedly by Obama administration officials in recent weeks, but are being increasingly discounted by brokers.

Gary Lauer, CEO of eHealth, operator of leading web broker ehealthinsurance.com, said, "Since early December, we've helped a limited number of customers use their subsidies to enroll in a health insurance plan through our web-broker entity."

"However, the consumer experience is not yet a stable, easy-to-use and scalable solution for the general public," said Lauer, who has been outspoken on the importance of direct enrollment to the success of Obamacare.

Direct enrollment, as conceived, is supposed to significantly augment the administration's push to get as many people as possible signed up in individual health plans by next year as part of the ACA's mandate that nearly all Americans have some kind of health insurance.

Under the ACA, the federal government set up HealthCare.gov to sell Obamacare insurance in what turned out to be 36 states. Fifteen other Obamacare exchanges were set up by individual states and the District of Columbia. By law, people whose incomes are low or modest enough for them to qualify for government subsidies to offset the cost of their insurance premiums and co-payments can only get those subsidies if they buy a plan sold on one of the Obamacare exchanges.

However, people who buy an exchange-offered plan directly from the insurer who issued it are supposed to be able to get the same subsidy available from one of the Obamacare exchanges. And HealthCare.gov over the summer signed deals with several dozen web insurance brokers to allow them to sell the same subsidized Obamacare plans that were going to start being sold on that federal site beginning Oct. 1—none of the other 15 ACA exchanges are allowing those brokers to sell subsidized coverage.

But direct enrollment was stymied right from launch, as technical problems on HealthCare.gov effectively prevented the insurers and the brokers from interfacing with the federal data hub, which verifies subsidy eligibility.

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Lauer and other brokers gripe that the federal government requires them to electronically transfer customers during the application process over to the federal data hub so their subsidy eligibility can be determined. That so-called "double redirect" system opens the possibility that the customer will never click back to the broker, which would lose credit for the sale as a result.

Web brokers have asked for true direct enrollment, which, like the state-run exchanges, would allow them to keep their customers electronically on their own sites while getting subsidy verification from the federal data hub.

Problems with the double redirect system and other technical issues have not only discouraged or prevented brokers from using it, but have also limited the participation of individual insurers in direct enrollment, industry executives said.

"No web-based entity in their right mind or [insurance] carrier would want to use it," said Brandon Cruz, president of web broker GoHealth. "Technologically, it did not work."

Several weeks ago, GoHealth launched its own direct enrollment workaround, which requires customers applying for coverage online to get on the phone with a GoHealth rep at the point they need to verify their subsidy eligibility, a process than can take 30 to 60 minutes.

"It's a time-consuming process, but I'm glad we're doing something," Cruz said.

Last week, GoHealth was enrolling about 1,000 people per day, but that had doubled this week, Cruz said, "and I think it's going to be even above that in the next several days" with Monday's deadline approaching.

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GetInsured's workaround, which launched without fanfare two weeks ago, involves a customer service representative "co-browsing" with clients: walking them through the enrollment process on HealthCare.gov online, according to company spokeswoman Andrea Riggs.

"The current redirect experience is substantially more reliable than a month ago, and getting better," Riggs said. "But there's still work to do—for example, there are times when it takes us about two hours to get a user from start to finish, although the average is much lower. We're working hard to improve the experience both by ourselves and with our government partners."

Riggs said the "holy grail" is to "enroll customers all the way online" through GetInsured's own site.

By CNBC's Dan Mangan. Follow him on Twitter @_DanMangan.