The federal data hub intended to connect state health exchanges with federal agencies appears to be the most significant hurdle for a timely launch of the insurance marketplaces, according to a new Government Accountability Office (GAO) report.

Seven surveyed states identified the hub as “the major operational challenge” that they face, according to the GAO. Whether that challenge is resolved could determine whether the exchanges are ready to open on Oct. 1, 2013, the date set for their launch by the Affordable Care Act.

“States said, by and large: We’re doing the best we can. We’ve been doing this a while. We think we’re going to be ready, but it’s anybody’s guess because it’s so evolving, especially with the data services hub,” says Stan Czerwinski, who headed the group that authored the GAO report. “State systems have to connect with federal systems, which are still being developed. The challenge is hooking into these systems without knowing what they will look like.”

Want more health news? Click here.

The data hub -- in laymen's terms, a huge digital warehouse capable of sending information to other online servers -- plays a crucial role in the exchanges, which are websites that will allow the uninsured to shop for health coverage and access federal tax subsidies to help them purchase it. The tax subsidies, for example, are supposed to be based on a person’s income; the lower your income, the higher your subsidy.

The exchange is supposed to transmit the income information entered by an applicant to the hub, which will then verify the information with the Internal Revenue Service. That verification is then transmitted back to the exchange, so the person can access their subsidy. The hub will also relay information between the exchanges and other federal agencies, such as the U.S. Citizenship and Immigration Service and the U.S. Department of Homeland Security.

It sounds simple, but it’s a significant headache for the 17 states that, so far, are building their own exchanges. For starters, the hub hasn’t been completely built yet, nor have the rules that will govern its use been finalized. Because tax information will be exchanged through the hub, there is a laundry list of privacy and security standards that must be met. In addition, the IRS is accustomed to receiving and then processing this kind of information over long periods of time, up to a month, while the exchange is supposed to provide verification in almost real-time. Nobody is sure if and how the hub will be equipped to handle that workload.

All the while, states are already building the technical infrastructure for their exchanges, which includes a website and an eligibility system, without knowing exactly how their exchange is supposed to connect with the hub. It’s a major problem with four months left until the exchanges are supposed to be operational, and Czerwinski believes “this is going to go way up until the very last day.”

One state was so pessimistic that officials told the GAO they expected to be still modifying their exchange’s IT infrastructure to connect with the hub into 2014. For its part, the Obama administration told the GAO that it had provided states with information on how to connect with the hub through webinars and conferences, though that apparently has not assuaged states’ concerns.

“Until they're able to do this testing to make sure that all these points connect, it's still unknown,” Czerwinski says. “I think they agree that it's the biggest challenge area and will need adjusting from day one.”

Caroline Pearson, who tracks state ACA implementation at Avalere Health, a consulting firm, said the GAO report underlines an overarching problem with health exchange IT development: it's hard to know how states are doing. Some steps, such as accepting applications for health plans to be sold on the exchanges, are public, but the GAO's findings are one of the few public disclosures of progress on the IT side.

"This does feel like an area where there could be pitfalls in rollout. There are a million ways it could go poorly," Pearson says. "We have touch points and checkpoints on so many other things. All of that is a little more public, but it is really hard for me to assess whether a state's exchange is going to crash on Oct. 1."

Officials at the U.S. Department of Health and Human Services did not immediately respond to requests for comment. GAO interviewed officials from the District of Columbia, Iowa, Minnesota, Nevada, New York, Oregon and Rhode Island for the report.

NOTE: Please zoom out to view Alaska and Hawaii. Source: GAO, CMS

Type of Health Exchange
Federal exchange
State-based exchange