HealthCare.govcase

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UVA-QA-0833Apr. 10, 2015

This public-sourced case was prepared by Brian Ward (MBA 15) and Yael Grushka-Cockayne, Assistant Professor of Business Administration. It waswritten as a basis for class discussion rather than to illustrate effective or ineffective handling of an administrative situation. Copyright 2015 by theUniversity of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order copies, send an e-mail [email protected] part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or byany meanselectronic, mechanical, photocopying, recording, or otherwisewithout the permission of the Darden School Foundation.

This copyrighted document is intended for use in Yael Grushka-Cockaynes Fundamentals of Project Planning andManagement. Any other use is prohibited.

Yael Grushka-Cockaynes Fundamentals of Project Planning and Management, Spring 2015

The Healthcare.gov Exchange

The Affordable Care Act

On March 23, 2010, President Barack Obama signed into law the Patient Protection and Affordable CareAct (PPACA), commonly referred to as the Affordable Care Act (ACA) or simply Obamacare.1The mostcomprehensive piece of legislation passed in the United States in nearly half a century, the ACA established awide-ranging set of laws, including ending insurance discrimination for patients with preexisting conditions,providing further coverage for young adults and women, and making health insurance more affordable and

accessible for all Americans. Despite being passed into law, the bills far-reaching impact was intenselychallenged. Ultimately, on June 28, 2012, the Supreme Court upheld the majority of the key provisions of thelaw and put to rest many of the legal challenges threatening Obamacares survival.2

A major tenant of the bill, the individual mandate, required that by January 1, 2014, most individualsthose without specific exemptionsobtain a minimum level of health insurance coverage or pay a penalty feefor noncompliance with the law.3 As such, the ACA included the establishment of affordable insuranceexchanges, or marketplaces, to allow consumers to compare and select from different qualified health plans.

Serving as a single access point for consumers, online exchanges allowed for easy comparisons acrossdifferent plans, increased competition among insurance issuers, and improved affordability of health insurancecoverage. Under the ACA, states were allowed to construct their own state-based exchanges or choose to

partner with the federal government and participate in the federally facilitated exchange (FFE).4

HealthCare.gov

The Department of Health and Human Services (HHS) was tasked with establishing and operating theFFE for all states that chose not to establish their own exchange. The federal marketplace, known asHealthCare.gov, would be a fully functional website that allowed consumers to compare plans and purchase

1 U.S. Department of Health and Human Services, Key Features of the Affordable Care Act, HHS.gov,http://www.hhs.gov/healthcare/facts/timeline(accessed Mar. 27, 2015).

2http://www.hhs.gov/healthcare/facts/timeline.3Annie Mach, Individual Mandate Under ACA, Congressional Research Service, August 12, 2014.4Center for Consumer Information and Insurance Oversight/Centers for Medicare and Medicaid Services, General Guidance on Federally-facilitated

Exchanges, May 16, 2012, https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/ffe-guidance-05-16-2012.pdf(accessed Apr.1, 2015).


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health insurance online. In addition to the online interface, the website would need to be supported by afederally facilitated marketplace (FFM) system to accept and process data, as well as a federal data services hubthat could route and verify consumer information with other sources. In March 2012, the HHS issued a final

ruling that the initial enrollment period for health plans on HealthCare.gov would begin on October 1, 2013.5

Consequently, the site and supporting systems needed to be completed and fully operational by this date.

Within the HHS, the Centers for Medicaid and Medicare Services (CMS) was the lead agency responsiblefor overseeing and implementing the federal marketplace. Specifically, the newly created Center for ConsumerInformation and Insurance Oversight (CCIIO) focused on defining policies and regulations for the federalmarketplace. The technical development of the project was tasked to CMSs Office of Information Services,which worked alongside hired IT contractors to construct the information systems and technology.6 CMSwould hire numerous outside contractors for various applications; it awarded initial contracts on September 31,2011, that obligated approximately $55.7 million in funds for the FFM system and nearly $30 million for thedata services hub.7

Project Execution

Delays in establishing regulatory guidelines as well as extensions for states to declare partnerships with thefederal exchange compressed the window for website construction and testing. Consequently, the FFMsystems final design review was pushed out from September 2012 to March 2013. At the time, contractorsestimated that only 65% of the FFM and 75% of the data hub would be ready by September of that year.8InMarch 2013, McKinsey & Company presented a report that found there was insufficient time for testingbecause the window was continually shrinking, increasing the likelihood that there would be multiple defectsafter launch.9

HHS and CMS publicly remained confident about the websites on-time completion. On August 7, 2013,CMS spokesman Brian Cook said, We are on schedule and will be ready for the marketplaces to open onOctober 1.10Senior contract personnel were equally confident about delivering a fully functional site prior tothe enrollment period.

On October 1, 2013, HealthCare.gov officially launched, allowing millions of Americans to compare andpurchase health insurance coverage online. Day one was marred by technical glitchesvisitors to the sitereceived error messages such as Be patient and The system is busy right now and webpages didnt load.HealthCare.gov was built to support 50,000 to 60,000 simultaneous users, but instead it was seeing traffic fromas many as 250,000 users at once.11An Internet analytics company estimated that, of the 2 million users thatattempted to register in the first week, only about 125,000 made it to the end of the registration process.12The

5Government Accountability Office, Ineffective Planning and Oversight Practices Underscore the Need for Improved Contract Management, July2014.

6HHS Office of Inspector General, Federal Marketplace: Inadequacies in Contract Planning and Procurement, January 2015.7Government Accountability Office.8Government Accountability Office.9Senate Finance Committee and Senate Judiciary Committee, Red Flags: How Poor Management Led to the Meltdown of HealthCare.gov, June

2014.10Senate Finance Committee.11Tim Mullaney, Obama Adviser: Demand Overwhelmed HealthCare.gov, USA Today, October 6, 2013.12Christopher Weaver and Louise Radnofsky, Healthcare.Govs Flaws Found, Fixes Eyed, Wall Street Journal, October 10, 2013.


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high traffic volumes initially took the primary blame for the sites poor functionality, but soon the failed launchexposed the problem to be more than simply glitches and instead larger technical flaws to the sites design.

In a hearing before the House Energy and Commerce Committee, IT contractors testified that they hadhad only two weeks to test the system before the launch date as opposed to the weeks or months usuallynecessary for such a large project. A week later, HHS Secretary Kathleen Sebelius sat before the samecommittee, ultimately taking responsibility for the failed launch and vowing to ensure the sites successfulcompletion.13

Despite increasing costs and necessary adjustments, the sites functionality was steadily improving by lateDecember 2013. In January 2014, CMS replaced its original contractor for the FFM system with Accenture.Due to changes in design and scope in addition to the underlying modifications, the FFMs costs increased to$209 million. Similarly, costs for the data hub were revised upward, to approximately $85 million.14

In its initial enrollment report, released on November 13, 2013, HHS announced that 106,185 individualshad selected a marketplace plan, 26,794 of whom had enrolled through the FFM. Total enrollment figures were

merely 1.5% of the Congressional Budget Office estimates for 2014 health-care plan marketplace enrollments.15Despite the disappointing initial figures, by the May 2014 reports release, HealthCare.gov had showed asignificant uptick in enrollments, largely attributed to the sites improved functionality and awareness of theservice. Between the sites launch on October 1, 2013, and the end of the open-enrollment period on April 19,2014, approximately 8 million people selected a marketplace plan, 5.4 million of whom enrolled through theFFM. Notably, only 13% of those who enrolled through the FFM indicated that they had health insurancecoverage at the time of their application.16HHSs March 2015 report showed that since open enrollment beganon October 1, 2013, 14.1 million adults had gained health insurance coverage. Over that time period, theuninsured rate in the United States dropped from 20.3% to 13.2%.17

Forum Questions

1.

How would you define the HealthCare.gov project? What was the scope? The timing? The budget?

2. What was the organization of the project? Who were the main parties involved?

3. Was the project a success? Why or why not?

13David Morgan and Caroline Humer, Timeline: U.S. Healthcare Laws Technology Breakdown, Reuters, October 30, 2013.14Government Accountability Office.15HHS, Health Insurance Marketplace: November Enrollment Report, November 13, 2013.16HHS, Health Insurance Marketplace: Summary Enrollment Report for the Initial Open Enrollment Period, May 1, 2014.17HHS, Health Insurance Coverage and the Affordable Care Act, March 16, 2015.


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Exhibit 1


Timeline

2010

May 23PPACA officially signed into law, mandating minimum health insurancecoverage and the construction of an FFE

2011

September 30 CMS awards initial contracts for construction of FFM and data hub

2012

March 27HHS issues final ruling announcing October 1 as the beginning of the open-enrollment period and the deadline for HealthCare.govs completion

June 28 Supreme Court ruling upholds major provisions of the ACA

November 6Barack Obama reelected as president of the United States, defeatingRepublican candidate Mitt Romney

2013

MarchMcKinsey & Company issues report warning CMS of potential barriers toproject completion

August 7CMS spokesman publicly announces expectation for on-time projectcompletion

October 1 HealthCare.gov launchesOctober 24 IT contractors testify before House Energy and Commerce Committee

October 30HHS Secretary Kathleen Sebelius testifies before House Energy andCommerce Committee, taking responsibility for failed launch

November 13 Initial enrollment report released2014

January Accenture hired to replace contractor for FFM project

May Enrollment report shows 5.4 million people insured through HealthCare.gov

2015

March 25Enrollment report shows 14.1 million adults have gained health inisurancesince HealthCare.govs launch

Data source: Compiled by case writer.


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Exhibit 2


Key Terms and Abbreviations

Abbrevation Full Name

ACA Affordable Care Act

CCIIO Center for Consumer Information and Insurance Oversight

CMS Centers for Medicare and Medicaid Services

FFE federally facilitated exchange

FFM federally facilitated marketplace

HHS Department of Health and Human Services

PPACA Patient Protection and Affordable Care Act

Data source: Compiled by case writer.

HealthCare.govcase

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