With the deadline just days away for states to declare whether they will institute their own health insurance exchanges as outlined in the Patient Protection and Affordable Care Act (PPACA), many states in the U.S. have yet to formally declare their intentions. Their delay is only one factor threatening to slow down progress on an already rough-hewn path to implementation of health exchanges, which are scheduled to be fully operational with policies taking effect in January 2014.

The state exchanges are a marketplace for health insurance products where, in theory, consumers and small businesses can shop for insurance at competitive rates, enroll in plans and find transparent information on premiums, coverage, and benefits. Exchanges are familiar to any consumer who has experienced the ease of buying airline tickets online using aggregator services, such as Expedia. However, buying health insurance is not the same as buying an airline ticket from Chicago to New York. The stakes are much higher; the issues, more complex. It is not a matter of two double clicks and you’re done.

The complications associated with health insurance exchanges stem from the stakeholders involved, the variation from state to state in the form exchanges will take and readiness of the IT infrastructure build-out that must conform to government standards and deadlines.
With regard to technology demands, several key unknowns impact not only how consumers will interface with exchanges slated to start selling insurance by January 1, 2014, but also how federal government, state government and insurers will reconcile subsidized insurance payments. Among the outstanding issues are:

• The System of Electronic Rate and Form Filing (SERFF), which enables electronic filing of applications for new policies and premiums, has yet to be updated to be able to support requirements of the new healthcare law. The system, developed by the National Association of Insurance Commissioners (NAIC), will help state and federal regulators determine which products can be sold on exchanges.
• The federal hub tool that state exchanges will use to verify an insurance applicant’s income, citizenship, Social Security number and other information is still in the developmental stage. State exchanges must be able to integrate with the tool but because interfaces are not ready, states are making assumptions about how their infrastructure will align with the tool.
• Cost-sharing and financial reconciliation procedures for subsidized insurance await clarification. A robust system must be in place for insurers, the Center for Medicare & Medicaid Services (CMS) and the federal government to verify subsidy amounts owed by which entity and account for new developments such as the Medicaid threshold being raised to cover adults up to 133 percent of the poverty line as a result of the law.

The outstanding issues are less a technology issue than a bureaucratic one made more daunting by the magnitude of establishing a new and untested healthcare marketplace. Technology vendors involved in building the exchange infrastructure confront changing requirements, variations in customization that differ by state and, as delays continue, compressed timelines for developing, configuring and testing systems.

Exacerbating this situation further is the fact that most states delayed decisions on whether to set up exchanges. Many gambled that the Supreme Court would overturn the health reform law – it upheld the law in June 2012 – and then held out hope for a change in the Administration after the November elections. Only 17 states so far are moving forward with state exchanges, eight remain undecided on plans and four are planning to establish a partnership with the federal government to operate exchanges, according to the Kaiser Family Foundation. Another 21 states, many of them staunchly opposed to the law, are set to default to a federally facilitated exchange.

The final deadline (extended) for states to present their exchange plans is December 14. Stay tuned.

Sanjay Singh is Chief Executive Officer and co-founder of hCentive, the first organization to build an exchange solution from the ground-up post the Patient Protection and Affordable Care Act of 2010 (PPACA).