Oregon’s Obamacare Disaster

Published February 19, 2014

Consumer Power Report #407

The state of Oregon has for more than two decades been at the forefront of government-driven top-down health care reforms. How has it turned out? Not so great. Mark Hemingway reports:

That Oregon ended up with the most disastrous of all the Obamacare exchanges–an impressive achievement, considering how bad the law’s rollout has been–has stunned America’s growing herd of health care wonks. Twenty-five years ago–long before Massachusetts created the template for Obamacare–Oregon began trying to implement universal health care coverage. The state should know more about its uninsured population and how to reach them than any other. But no one who’s watched developments over that quarter-century should be surprised that, once again, Oregon’s attempt to provide health care coverage to everyone in the state has culminated in a nationally embarrassing failure …

The apotheosis of Oregon’s dubious obsession with policy experiments is the Oregon Health Plan. Nearly two decades before the word “Obamacare” crossed anyone’s lips, Oregon legislators were trying to realize their own progressive vision of universal health care by expanding Medicaid and mandating that employers provide health insurance. Though the program has defenders, it is difficult to credibly argue that the Oregon Health Plan has been anything other than a policy disaster. And unsurprisingly, it has a great many similarities to Obamacare. Even though the plans differ, the Oregon Health Plan suggests an alarming future for Obamacare’s cost control measures. Finally, the history and long-term political consequences of the Oregon Health Plan provide some instructive lessons for those looking at the fate of Obamacare.

Read on to learn what happened under Gov. John Kitzhaber’s attempted reforms. Now what does the shape of Oregon health care look like under Obamacare? Just as much disruption, with twice as much fraud:

Last February, the power players behind Cover Oregon held an emotional meeting. The job of building the complicated website was spinning out of control, and infighting was rampant. The issues discussed were both deep and wide-ranging: Everything from transparency to quality assessment to a lack of trust among coworkers was on the agenda.

In attendance were Oregon Health Authority CIO Carolyn Lawson; Lawson’s deputy Steven Powell; interim state CIO Julie Pearson; Pearson’s deputy Sean McS [sic]; Cover Oregon director Rocky King; principal legislative analyst Bob Cummings; Cover Oregon CIO Aaron Karjala; Department of Administration Services CIO Ying Kwong; and a representative from quality-assurance contractor Maximus.

The meeting was so intense that once source said Lawson – the woman in charge of building the website – cried through most of it.

When the meeting was over, the group created a report of everything that had been hashed out – 19 issues in all. Tucked away on page four of that list is a brief item labeled “Oracle Contract Issues.” It touches on contracts and accounting the state used with Oracle – the vendor hired to provide much of the website’s software and technical support – that were “inconsistent with generally acceptably industry best practice procedures.”

Here’s where things get interesting. The report goes on to say the issue was resolved, citing an audit by the Secretary of State’s office that “found everything in order.” But the KATU On Your Side Investigators have learned that that audit – the only piece of evidence used to dismiss major accountability problems surrounding a contract that eventually grew to $119 million – doesn’t exist.

This missing audit is one reason why a Congressional probe of Cover Oregon is imminent, and calls for a GAO audit are only likely to increase.

What the Oregon experience reveals is the problems inherent in health care and health insurance reform even with the political winds entirely in your favor. Even with bipartisan buy-in and top-down knowledgeable leadership, they were unable to sustain their reforms once the people actually started to experience the ramifications of their policy. What does this mean for Obamacare? It’s a reminder that no matter the numbers cited or the top-down view of the law, the experience of the American people within this new health care regime will be what determines its permanence or failure.

— Benjamin Domenech



Legislation to continue Arkansas’ compromise Medicaid expansion has failed in the state House.

The plan would have reauthorized funding for the “private option” that was approved last year as an alternative to expanding Medicaid’s enrollment under the federal health law. The measure fell five votes shy of the 75 needed for passage in the 100-member House.

Under the private option, Arkansas is using federal Medicaid funds to purchase private insurance for thousands of low-income residents.

Supporters of the measure are expected to try again. House Speaker Davy Carter has said he would try multiple times if the funding measure failed.

SOURCE: Associated Press


One in five people who signed up for health insurance under the new health care law failed to pay their premiums on time and therefore did not receive coverage in January, insurance companies and industry experts say.

Paying the first month’s premium is the final step in completing an enrollment. Under federal rules, people must pay the initial premium to have coverage take effect. In view of the chaotic debut of the federal marketplace and many state exchanges, the White House urged insurers to give people more time, and many agreed to do so. But, insurers said, some people missed even the extended deadlines.

Lindy Wagner, a spokeswoman for Blue Shield of California, said that 80 percent of those who signed up for its plans had paid by the due date, Jan. 15. Blue Shield has about 30 percent of the exchange market in the state.

Matthew N. Wiggin, a spokesman for Aetna, said that about 70 percent of people who signed up for its health plans paid their premiums. For Aetna policies taking effect on Jan. 1, the deadline for payment was Jan. 14, and for products sold by Coventry Health Care, which is now part of Aetna, the deadline was Jan. 17.

Mark T. Bertolini, the chief executive of Aetna, said last week that the company had 135,000 “paid members,” out of 200,000 who began to enroll through the exchanges. “I think people are enrolling in multiple places,” he said in a conference call. “They are shopping. And what happens is that they never really get back on HealthCare.gov to disenroll from plans they prior enrolled in.”

Kristin E. Binns, a vice president of WellPoint, said that 76 percent of people selecting its health plans on an exchange had paid their share of the first month’s premium by the due date of Jan. 31. The company had received more than 500,000 applications for individual coverage through the exchanges in 14 states, she said.

SOURCE: New York Times


According to HHS, enrollment in the Health Insurance Marketplace shot up by 53 percent in January over the previous three months and 27 percent of last month’s enrollees were the highly desirable young adults ages 18–34, who are vital to making the system financially viable. HHS Secretary Kathleen Sebelius issued a press release stating that signups among young adults, nicknamed “young invincibles” in insurance industry jargon, was up 3 percentage points from October through December and outpaced all other age groups combined …

But the rosy portrait shatters under an alternate interpretation by insurance industry representative Robert Laszewski of Health Policy and Strategy Associates.

“They made a big deal about the age results,” said Laszewski after reviewing the HHS numbers. “But the greater challenge for them is the low number of people enrolling. There is no way you can get a good spread of risk with such a small percentage of the total eligible signing up.”

CBS News also received a guarded analysis from a source involved in implementation of the Affordable Care Act who supports Obamacare.

The source said the bump of young invincibles to 27 percent of January enrollees was “progress,” but added “they neglect to point out that they need roughly 40 percent to help achieve a balanced risk pool” necessary under a successful business model.

“3.3 million people is still a relatively small proportion of the population that ‘should be’ interested,” added the source, who is not authorized to speak on behalf of the administration and does not wish to be identified.

Laszewski has a strikingly similar analysis and says HHS’s reported number of 3.3 million enrollees exaggerates the true picture. He says that to calculate a more accurate number, one must subtract about 20 percent of the enrollees because they haven’t paid (and so aren’t technically insured); as well as about two-thirds of the enrollees because they were already insured prior to signing up for Obamacare.

“Looking at the total of 3.3 million, netting out the non-pays, and listening to the anecdotal carrier reports, it doesn’t look like we have more than a fraction – certainly something less than 10% – of the previously uninsured,” said Laszewski.



The Obama Administration may extend beyond 2016 a federal reimbursement program for health insurance companies that lose money by participating in the newly created health care exchanges.

Industry insiders told the Washington Examiner a plan to extend the Affordable Care Act’s “risk corridors” [is] under discussion, but that administration officials have not made a final decision.

The risk corridor program was written into the 2,700-page health care bill to help the insurance companies offset losses if they enroll too few healthy customers and sign up too many people with high health care costs.

Risk corridors are aimed at keeping premiums from skyrocketing by requiring the government to “share in the risk associated with the new marketplace,” according to the health care lobbying group America’s Health Insurance Plans (AHIP).

Insurance companies pay into a pool to cover losses for companies that fare poorly but the federal government must step in if there is widespread loss, which some say could happen due to the lack of participation on the health care exchanges from young and healthy individuals.

The program, however is only meant to be short term, AHIP said, to “ease the transition between the old and new marketplace.”

But the disastrous rollout of the law resulted in millions of people on the individual market losing health care policies that did not include the “essential benefits” required under the new health care law, including maternity care and pediatric dentistry. The resulting public outcry prompted President Obama on Nov. 14 to announce that health insurance companies could allow customers to keep their old plans for an extra year.

The Obama Administration is now weighing a plan to grant an additional three-year extension for non-complaint plans on the individual market. Such a move would prevent millions of people from losing their policies in the critical weeks and months before the 2014 election.

But it would also allow people on the individual market to keep non-compliant plans beyond the risk corridor’s 2016 expiration date, leaving health insurance companies serving the exchange vulnerable to financial losses as the more healthy customers continue to stay out of the exchanges.

Health insurance companies are looking for something in exchange for the three-year extension, which will make it much harder for them to sign up healthier and younger customers. Extending the risk corridor program is part of that conversation with the White House, industry sources said.

SOURCE: Washington Examiner


[Christa Ann] McClure, 51, pleaded not guilty Feb. 6 in federal District Court in Montana to eight counts of theft and fraud from a nonprofit housing agency in Billings.

She was indicted Jan. 16 and notified her current Denver employer, the state-sponsored health exchange, on Monday, a few days after the story broke in Montana media, Connect for Health spokesman Ben Davis said in a telephone interview.

Connect for Health performed a criminal background check and checked references before hiring McClure in March, Davis said.

“She was completely clean,” he said. Her position as executive director of Housing Montana of Billings, he said, made her well-qualified for her post as Connect for Health’s director of partner engagement – she was liaison with state and federal partners, such as Medicaid officials. The job pays $130,000 a year. …

The 12-page indictment alleges that, while serving as executive director of the federally funded Housing Montana, McClure, between 2008 and 2010, paid herself “significant sums” for consulting services, although she was already on the payroll as a full-time employee.

SOURCE: Denver Post


The head of the state’s beleaguered health insurance marketplace, which was once a national model, broke down in tears Thursday, as she described how demoralizing it has been for her staff to struggle with a broken website that has left an unknown number of people without coverage.

Jean Yang, the executive director of the Massachusetts Health Connector, wept at a board meeting, where it was disclosed that 50,000 applications for health insurance are sitting in a pile, and have yet to be entered into a computer system.

Each one of those applications requires two hours to process, adding to a mountain of work facing Connector staff as they scramble to prevent people from losing insurance, officials said.

“These people came here to lead and innovate, and instead they’re doing manual workarounds, and they are embarrassed to tell friends and family that they work for the Health Connector,” Yang said at the board meeting.

Yang made clear she was not looking for sympathy.

“We have to work harder,” she said. “That means I need [to] tell the staff members they’re not doing a good enough job and I’m telling them that, even though they have been doing this tirelessly for months, and they’re exhausted.”

The state’s health insurance website was working smoothly until October, when it was revamped to comply with the more complicated requirements of the federal health care law. Since then, it has been bedeviled by error messages and is often very sluggish or crashes entirely, officials said. That prompted the state to resort to old-fashioned paper applications, and to put many people in to temporary health plans. But an unknown number of others may be uninsured because of the paperwork backlog.

Sarah Iselin, a health insurance executive charged with fixing the state’s broken website, said the first order of business is winnowing that pile of 50,000 applications. She said the state may bring as many as 300 people from an outside company hired by the state. The state is also working on developing a faster data-entry system, though that task alone could take three weeks, she said..

SOURCE: Boston Globe


The new proposed regulations, entitled Medicare Program: Contract Year 2015 Policy and Technical Changes to Medicare Advantage and Medicare Part D, alter the current structure of the program and thus jeopardize its success and quality. The proposed rule could result in increased premium and copayment costs, decreased continuity of care for beneficiaries as well as fewer participating pharmacies.

The proposed rules will:

(1) Drive up cost by interfering with plans’ abilities to negotiate prices

Interpreting the statutory non-interference clause. For the first time, CMS has interpreted statutory non-interference in the Part D program[10]. Through this proposed regulation, CMS’ interpretation allows for federal interference in negotiations between Part D plans and provider pharmacies. Interfering in plan negotiations places the issuers at decreased risk, reducing their incentive to control plan costs[11] and limits plan innovation in cost sharing and benefit packages.

Limiting the number of bids per PDP Issuer. The regulation adds requirements limiting the number of plans that can be offered in one of the given 34 regions[12]. All issuers are limited to offering one plan that only contains the standard benefits and another plan that offers enhanced benefits. Limiting the number of plans per firm to two restricts beneficiary options which will inevitably increase the costs in all regions.

Creating uncertainty for 2015. Finally, the new Part D regulation impacts insurance plan markets by creating uncertainty and instability in the 2015 plan year. In order to protect their organizations, issuers will provide fewer options for beneficiaries at higher rates due to the plans’ inabilities to predict costs in the 2015 market.

(2) Decreases Access to Services

Any willing provider. The proposed “any willing provider” provision means plans would be required to accept any provider into their network that is willing to meet the terms and conditions of the plan’s contract. The addition of the any willing provider requirement could cause over fourteen million seniors to lose their current plan within a preferred provider network, disrupting the continuity, quality of coverage, and increasing costs through the removal of discounted membership rates[13].

Preferred provider networks have proven to be a mechanism through which Part D has been able to achieve great cost savings. As reported in a study by Milliman, the continuation of preferred provider networks would save the federal government an estimated $9.3 billion over the next ten years[14].

Crowd out of employer insurance. The regulation creates incentives for employers to get rid of their employer sponsored retiree pharmaceutical benefit, in exchange for sending their retirees to the Medicare Part D program for coverage, increasing costs for the program.

SOURCE: American Action Forum