Washington’s Healthplanfinder website was touted as a bright shining example of Obamacare done right. Alas, the numbers were wrong.

OLYMPIA, Oct. 25.—Washington state’s health-exchange website, touted nationwide as an example of Obamacare done right, turns out to have had a massive problem during its first 23 days of operation – the tax-credit calculations were all wrong.

Some customers were told their monthly health-insurance payments would be as much as $200 a month less than they actually will be charged once the new health-insurance policies take effect on Jan. 1. The mistake in calculations, revealed formally by the state health exchange Friday, had been a topic of big speculation in the state’s capital city since the problem was mentioned obliquely at a board meeting Wednesday. But the size and scope of the goof was not known until red-faced officials released a statement Friday afternoon.

Everyone who signed up to purchase a health-insurance policy during the first three weeks of operation got a wrong number when it came time to calculate the federal tax subsidy that would be applied to their premiums. That affects 4,600 people who have already signed up for subsidized health coverage. It also affects anyone else who did any window-shopping at the Washington Healthplanfinder website and who qualifies for a tax credit – some 8,000 applicants in all. The news from Olympia means anyone who thought they were getting a great deal on health insurance better take another look.

“The exchange is very disappointed to have discovered this issue, and we find the situation unacceptable,” Healthplanfinder CEO Richard Onizuka said in the statement released Friday. “Our staff will not stop working until we have notified all those affected and helped each and every one of our customers to ensure they have entered the correct tax-credit amount and can choose the best plan to meet their needs and budget.”

A Failure to Communicate

Health exchange director Richard Onizuka hails technological achievement at media event in Seattle Sept. 30.

The glitch is particularly embarrassing because the Washington health exchange website has been described in national news coverage as one of the best examples of a system that has suffered devastating problems virtually everywhere else. The Affordable Care Act, nicknamed Obamacare, aimed to establish state-by-state marketplaces where standardized insurance policies might be sold. Most states left the work to the feds, and the federal website has been plagued with technical problems – inadequate capacity, long lagtimes and timeouts. For many of the uninsured millions, it has been impossible to sign up for the health coverage that will soon be required by law.

But Washington was among the states to go it alone – and aside from an opening-day system shutdown to prevent a computer crash, the Evergreen-state website seemed to be operating smoothly. As recently as Friday morning, the Washington Post’s health-reform blog singled out this state and three others as “worth looking at to get a sense of how HealthCare.gov could work – and what the states did right to get there.”

So much for that. State officials aren’t crowing anymore – they’re eating crow. What happened was simple. Everything on this end worked right. But when this state’s computers were hooked up with the federal data hub to compute eligibility for tax credits, Washington submitted monthly income information. The feds were expecting annual income information. So everything was thrown out of whack.

Took a While

It took three weeks for the agency to discover its calculations were way, way off.  Its statement indicates that the problem was recognized Tuesday and fixed by Wednesday. But now it has some ‘splainin’ to do.

“It is disappointing,” said spokeswoman Bethany Frey. “Nobody wanted this to happen, and we have been monitoring the system very closely, and we caught it as soon as we could. With any big build of this kind, we expected some bugs. This isn’t one that we hoped to find.”

The size of the error depends on a customer’s income. The tax credits are granted on a sliding scale based on income. Those making between 138 percent and 400 percent of the federal poverty level are eligible for a government subsidy – the upper limit is $44,000 a year for an individual. Those making less than the income guideline are eligible for government-paid Medicaid coverage. Frey said exact figures for the size of the miscalculation were not immediately available, but the glitch could range anywhere from $5 or $10 a month to about $200 a month. The higher the income, the bigger the mistake.

The error is especially troublesome because the state website calculates the amount of a customer’s tax credit and immediately deducts it from the monthly payment. Applicants could assume the numbers they saw were the amounts they had to pay. So anyone who signed up for a subsidized health-insurance policy through Oct. 22 is in for a surprise.

It’s not that the state will have to go back and ask customers to make retroactive payments – the first payment, for policies that begin Jan. 1, will be automatically deducted from credit or debit cards on Dec. 23. Frey said the agency will notify all those who are affected and give them a chance to sign up for different policies, if they choose.

A Big Mistake

It is the kind of problem that couldn’t have been detected beforehand, said health exchange board member Don Conant, general manager of Valley Nut and Bolt in Olympia. The state system was tested and retested before the Oct. 1 launch, but the IRS computers weren’t up and running. So when the state system linked with the IRS system for the all-important tax-credit calculation, the only response was a computer script.

“There was no time for any testing from end to end until the morning we loaded up and started going,” Conant said. “So what we are trying to do is to be responsive as these issues arise. And in any business – I am a business guy – everyone makes mistakes.

“Granted, this is a big mistake. So the issue is not are we ever going to make a mistake, the issue is what we are going to do when we make one.”

At least the problem was fixed quickly, he said.

But Conant admitted, “it is really disconcerting.”

A Bright Shining Metaphor

Given all the hoopla at the launch of the health exchange and the national publicity attending the Washington-state success story, one might see the situation as a classic tale of hubris. Patrick Connor, director of the Washington chapter of the National Federal of Independent Business and a faithful Obamacare skeptic, notes that a $200-a-month miscalculation is a biggie, and one that might make people think twice about health insurance. “This is the risk with being a ‘pace-car’ state when somebody else hasn’t finished building the track,” he said. “There is always the chance you will go into the ditch.”

And state Sen. Michael Baumgartner, R-Spokane, called it the sort of unexpected blunder everyone was expecting. “It is not surprising to folks like me who are strongly opposed to Obamacare. We knew it wouldn’t work well with government bureaucracy in charge. Here out of the gate you have folks who can’t even build simple websites, and you have an example here of an inability to do basic math.”

One little ray of sunshine, though. Not everyone who signed up for health coverage is affected. Those who qualify for Medicaid and those who do not qualify for tax credits will see no changes. About 30,000 of the 35,000 who have signed up for policies so far are Medicaid recipients. All told, about 89,000 people have signed up for accounts, the first step in the enrollment process.

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