By Daniel Weintraub

In less than 30 days, California’s new online health insurance market is scheduled to open for business when Covered California throws the switch on a web site designed to allow consumers to shop for coverage and obtain subsidies in the form of tax credits from the federal government.

Oct. 1 2013 has been circled on the calendar of health insurance reformers since shortly after Congress passed President Obama’s Affordable Care Act more than three years ago.

The state has spent hundreds of millions of dollars building the web site and the back-office connections to allow the system to communicate with a federal database to check the details in a consumer’s application. More than a million Californians who don’t get insurance through their job are expected to use the new marketplace in the first year.

But as of now, state officials will say only that they expect the system to allow consumers to begin their applications online on Oct. 1. What happens then?

“We don’t know,” said Diana Dooley, Gov. Jerry Brown’s secretary for Health and Human Services and chairwoman of the board that built and will run the health insurance exchange.

It is possible, said Dooley and David Panush, another Covered California official, that the system will not allow consumers to complete their application online. They might have to speak by phone with a customer service representative in order to seal the deal.

If so, that will be at least a mild blemish on the new program and will probably lead opponents to suggest that the law – known widely as Obamacare – is to unwieldy to work. If it doesn’t work as planned in California, where support for the program has been strong and the state has been implanting it with gusto, can it work anywhere?

But the truth is that the changes the law is designed to bring about are fundamental and enduring. Even if California’s system can’t handle the workload on day one, when hundreds of thousands of customers might potentially be trying to buy coverage, consumers will still have three months to sign up for a policy before Jan. 1, when most people will be required to have coverage or else pay a penalty on their taxes.

And it is likely that no matter what happens on Oct. 1, the system is going to be fully operational by next March, when the first open enrollment period ends.

In fact, Covered California faces much deeper questions than whether its online enrollment program can work out the bugs associated with any Internet-baed start-up operation.

The biggest is not whether the system will attract too many customers, but too few. The insurance companies that bid to be included in Covered California’s menu of plans offered to consumers based their first-year premiums on estimates of what the pool of applicants will look like. These firms are depending on a broad mix of healthy and sick customers, young and old, so that the premiums they pay will balance out the cost of treating those who need care.

It seems certain that those who are already sick or have reason to believe they will need health care in the near future are most likely to be the first to sign up for coverage. Many have been denied coverage in the past or couldn’t afford it. But changes brought about by the Affordable Care Act will prohibit insurance companies from denying coverage to people based on their health condition or charging sick people more than healthy people are asked to pay.

Far less clear is how many healthy people will enroll.

The penalties for going without coverage start at just $95 in the first year (and rise based on a person’s income), and even after the close of open enrollment, consumers will still be able to buy coverage when the next application period opens eight months later. So the risk of going without coverage will be fairly small.

But if not enough healthy people sign up, the group of consumers in the insurance pool will be skewed too heavily toward those who are sick and already using care. There is a chance that the cost of treating this group will be higher than the premiums collected, or at least higher than the insurance companies counted on. That would prompt them to raise rates in the second year or even drop out of the program altogether, leaving consumers with fewer choices and making healthy people even more likely to stay out of the system.

The worst-case scenario? A “death spiral” in which the costs keep climbing and healthy people keep dropping out until the only ones willing to buy coverage are those who know they’ll need it.

To combat this possibility, Covered California is planning a massive public information campaign featuring television and radio commercials, social media and person-to-person persuasion organized by community-based organizations and funded, in part, by non-profit foundations.

They especially want to get the word out to young, low-income people for whom the federal subsidies will make the cost of coverage affordable and, in some cases, even free.

But in the end, the viability of the system is going to depend on personal decisions of millions of people weighing the risk of going without coverage – to their health and their pocketbook – against the cost of the policies available to them.
And until the program begins, no one really knows how those decisions will come down.

We will soon find out.

Daniel Weintraub has covered public policy in California for 25 years. He is editor of the California Health Report at www.calhealthreport.org