ObamaCare's Black Box

Why the exchanges are worse than even the critics imagined.

The Wall Street Journal

Updated Oct. 17, 2013 8:59 p.m. ET

The White House set low expectations for the Affordable Care Act's October 1 debut, so anything remotely competent should have seemed like a success. But three weeks on, the catastrophe that is Healthcare.gov and the 36 insurance exchanges run by the federal government is an insult to the "glitches" President Obama said were inevitable.

This isn't some coding error, or even the Health and Human Service Department's usual incompetence. The failures that have all but disabled ObamaCare are the result of deliberate political choices, which HHS and the White House are compounding with secrecy and stonewalling.

The health industry and low-level Administration officials warned that the exchanges were badly off schedule and not stress-tested despite three years to prepare and more than a half-billion dollars in funding. HHS Secretary Kathleen Sebelius and her planners swore they'd be ready while impugning critics and even withholding documents from the HHS inspector general for a routine performance audit this summer.

Yet the launch has been worse even than critics predicted. The rare users who weren't locked out experienced crashes, delays and error messages. Mrs. Sebelius initially claimed this was merely servers crashing under unexpectedly high demand. She called it "a great problem to have."

Health and Human Services Secretary Kathleen Sebelius Associated Press

Now that traffic has abated, HHS concedes there were built-in information technology and structural defects. Some of Healthcare.gov's automatic operations mimic hacker denial-of-service attacks meant to disable a site. These can be fixed, though press reports suggest they're due to a programming rush because HHS delayed key regulations and IT specifications until after the election to avoid Republican criticism.

Then instead of rolling out the program in stages or delaying it as HHS has so many other parts of the law, the department simply dumped a bad product on the public to meet a self-created deadline.

Other failures have the same political character. Consumers must set up a complex account with sensitive personal information like Social Security numbers before they are allowed to browse health plans. The government wants to show consumers only their net out-of-pocket premiums minus subsidies, not the true underlying cost of insurance. That's because those all-in quotes are so much higher than what's available on the individual market.

HHS continues to claim that the exchanges are all about competition—they're even trying to rebrand them as "marketplaces." But real marketplaces are transparent and let consumers know what they get for what price. ObamaCare's exchanges are intended to obscure price and service options.

HHS still refuses to disclose how much taxpayers shelled out for this exchange lemon. The money came from several ObamaCare, general HHS and Medicare accounts and flowed to more than 50 outside vendors, with several no-bid contracts awarded outside the normal procurement process.

Mrs. Sebelius also refuses to reveal basic data about ObamaCare enrollment even as she brags about the millions of people who have supposedly visited Healthcare.gov. Information that would allow outsiders to evaluate the exchanges includes how many people have applied and qualified for coverage so far, what types of health plans they're selecting and what their health risks are.

Mrs. Sebelius claims she doesn't know the answers and that the government will pull such information together in November. Given the farce so far, it makes sense that the CEO of ObamaCare can't or isn't monitoring its day-to-day operations. But this claim is almost certainly false.

The states running their own exchanges report enrollment more regularly, which ranges from the low thousands in big states like California to a single person so far in Delaware. Literally, one. And the HHS-run exchanges are designed to make daily reports, seven days a week.

These reports are known in industry jargon as 834 transactions and they may represent the most serious ObamaCare breakdown. Insurers and the exchanges are supposed to swap electronic files every 24 hours that track the policies consumers select and their subsidies and check their lists against each other. The problem is that the exchanges rarely generate accurate 834s.

Our sources in the insurance industry explain that the 834s so far are often corrupted or in the wrong syntax, and therefore unusable unless processed by hand. In other cases the exchanges spit out multiple 834s enrolling and unenrolling the same user and don't come with time stamps that would allow the insurer to identify the most recent version.

The upshot is that the exchanges, the insurers and the consumers will often have different records on file. These mismatches are an architectural flaw that could persist for years. The administrative-bureaucratic tangle will only become more complex as more people enroll, providers start billing insurers, patients show up in doctors offices thinking they have coverage they don't, and the IRS starts fining Americans for not having insurance.

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Before the rollout, Mr. Obama and Mrs. Sebelius likened the exchanges to a new Apple product and asked for forbearance as problems were fixed. But Apple doesn't ship products that don't work and then force everyone to buy them, and a private business executive who supervised a fiasco like this would already have been fired.

The crowd in charge of the country that includes Silicon Valley ought to be ashamed that they can't produce a serviceable website in 2013. A useful act of contrition would be to resign, or, failing that, to beg Congress for a year delay to clean up their wreckage.