Health Law Consulting Blog

Thursday, November 7, 2013

The Federal & State Health Insurance Exchange Debacle

The highly anticipated launch of the state and federal health insurance “exchange” - sometimes used interchangeably with “marketplace” - was met with dismal reviews. Several concerns were raised by consumers regarding the technical problems associated with both state and federal exchanges in addition to a much needed clarification regarding the tax penalty provisions effective January 1, 2014. Lawmakers are now scrambling to address the public’s concern regarding the exchanges and the tax penalty provisions.

Read on to learn more about the health insurance exchanges and what state and federal agencies are doing to help the general public easily access health insurance information in order to obtain health care coverage before the tax penalty deadline.

What is the Health Insurance Exchange?

A health insurance exchange is an online marketplace where individuals without health insurance (and small businesses) can shop and compare health insurance coverage. The exchanges allow individuals to compare health insurance coverage options in order to find a plan that meets their particular needs. 

Federal & State Health Insurance Exchange Technical Problems

Once the federal and state exchanges went live (October 1) to the public, several technical problems occurred. For instance, numerous people experienced site wide system performance issues such as slow response times and questionable privacy safeguards on the federal government’s online exchange (

The technical issues stemming from the website have been attributed, in part, to the scope of difficulty with integrating other federal agencies and multiple-state eligibility databases in comparison to smaller size state run online marketplaces. Because other federal agencies and each state have different computer and software equipment, system integration has been an incredibly complex task.

The technical issues have resulted in thousands of people being unable to access the marketplaces for information pertaining to the various health plans and insurance coverage options in order to make purchase decisions. 

Some states, such as Kentucky, have experienced mild technical problems regarding the launch of their marketplace and the state has been touted as one of the more successful marketplaces. A big part of Kentucky’s success has been attributed to the following:

  1. Employing substantial oversight during the development of the marketplace;
  2. Permitting users to check health insurance coverage options without creating an account; and
  3. Using a proven state computer program for limited website functions.

Health Insurance Marketplace Enrollment Extension

Due to several misconceptions people had about the enrollment deadline, such as whether or not they needed to have insurance by January 1, 2014, to avoid a penalty, lawmakers have now extended the enrollment deadline. Under the new extension, Americans who buy health insurance coverage through an online marketplace will receive an extra six weeks to obtain health care coverage before being subject to a tax penalty.  However, you will need to sign up and pay your first premium by December 15, 2013, if you want to be covered when the mandate to carry health insurance kicks in on January 1, 2014.  Otherwise, if you sign up and pay your premium between:

Premium Paid

Coverage Begins

December 16 through January 15

February 1

January 16 through February 15

March 1

February 16 through March 15

April 1

March 16 through March 31

May 1


Impact of the Enrollment Extension on the Individual Mandate

The individual mandate requires that most Americans obtain health insurance by 2014 or pay a tax penalty.  The mandate goes into effect January 1, 2014.  The penalty will be applied to an individual’s annual taxable income for each month that such individual does not have health insurance.  However, individuals have a 3 month grace period due to the marketplaces being open until March 31, 2014, and now will not be penalized for coverage that does not become effective until either April 1, 2014, or May 1, 2014, as a result of signing up for coverage between March 16, 2014, and March 31, 2014, consistent with the enrollment period established under PPACA.  The Obama administration has expressly stated that penalties will not result to those who sign up as late as March 31, 2014.

As previously discussed in my November 1, 2013, blog posting entitled “The Impact of the Healthcare Reform Law on Health Insurance Companies & Individuals, the six week extension corrects the apparent oversight by the Obama administration in failing to reconcile the enrollment period with the individual mandate since it was impossible to enroll by the March 31 deadline and also have coverage by that same date to avoid a penalty.  As a result of this adjustment, individuals at risk of being penalized due to the unusually long open enrollment period are protected from incurring the IRS penalty due to coverage becoming effective after the 3 month grace period (January, February, March) although some would have preferred that the individual mandate be postponed one year until 2015.  The one year extension is still been touting and lawmakers are introducing bills to that effect.  We will keep you posted.

Thereafter, individuals will be able to enroll in or change plans once a year during an annual open enrollment period.  This first year’s enrollment period is unusually long in anticipation that individuals would need more time to familiarize themselves with the marketplace and various coverage options available.  In subsequent years, the enrollment period will be the typical six weeks running from October 15 through December 7.


What is the Health Insurance Marketplace?

All About Health Insurance Exchanges And How To Shop For Coverage

Why State-Run Health Exchanges are Faring Better

Deadline to sign up for Affordable Care Act insurance extended enrollment deadline extended data center fails, hobbling state and federal insurance exchanges

Creating a New Competitive Health Insurance Marketplace

Hot seat for health care exchange website builders

Kentucky health insurance exchange

Uninsured Find More Success via Health Exchanges Run by States

Kentucky insurance exchange website avoids federal pitfalls, despite same IT contractors

Why states didn’t have problems that hit federal health-care exchange

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