Obamacare's phony success story: after year one, the health care overhaul is riddled with problems.

• Author: Suderman, Peter
• Position: Patient Protection and Affordable Care Act

IT COULD HAVE been worse.

In the first weeks after Obamacare's health insurance exchanges launched on October 1, 2013, almost nothing worked. The main federal exchange, which served as an insurance hub for 36 states, was down more often than it was up, and when it was online, it didn't work. Many exchanges run by state governments were in disarray as well. Millions of people with individual health insurance policies received letters indicating that their existing coverage would be canceled. The law's mandated small business exchange had been delayed, as had its Spanish language website. Thousands of applications were stranded inside the glitchy exchange systems. It seemed entirely plausible that between the cancellations and the website failures, Obamacare's expansion of insurance coverage--the main selling point of a $2 trillion overhaul of the health care system--might end up making no meaningful dent in the uninsured rate at all.

The rollout was bad enough that the Obama administration was gritting its teeth in full crisis-P.R. mode, assuring Americans that, despite a few bumps in the road, all was okay. "This system is not failing," embattled White House Press Secretary Jay Carney told CNN in October. "Hundreds of thousands of Americans are submitting their applications successfully to get into the system and enroll in Obamacare, and they are doing it through a variety of means, through state exchanges and through the call-in centers and that's going to continue."

Behind the scenes, however, the White House was terrified. Reporting would later come out that top officials were actively considering scrapping the health exchange system they had spent three years building, and starting over from scratch. More than a few Republicans in Congress confidently predicted that the law would soon collapse under its own weight. Obamacare looked doomed.

But in December, following a series of frantic all-hands-on-deck repair efforts by the administration's tech team, the federal exchange began to function normally. An end of year sign-up surge showed not only that the system could handle increased traffic volume, but that there might be real demand for the insurance being sold. Exchanges run by densely populated states such as California and New York were reporting brisk traffic and hundreds of thousands of sign-ups. In January, the administration fired the technology contractor that had built the federal exchange. Progress was being made.

At the end of March, Obamacare's first open enrollment period--the timeframe during which anyone is allowed to sign for coverage each year--came to a close, providing an opportunity to benchmark the controversial new system's performance. That final week brought a surge in people applying for coverage, taking the total number of sign-ups to just over 8 million--better than the 7 million enrollments that the Congressional Budget Office (CBO) had predicted when the law passed, and far better than the revised estimate of 6 million the CBO predicted after the website crashed. Relying on a daily tracking poll, Gallup reported that the nation's uninsurance rate had dropped to its lowest point since 2008.

The administration's spin quickly went from cautiously optimistic to cocky. "I think it is fair to say we surpassed everybody's expectations," Carney said in April.

Critics who wanted to overturn the law had been definitively proven wrong. "The point is the repeal debate is and should be over," President Obama said in a press conference a few days later. "The Affordable Care Act is working." White House senior adviser Dan Pfeiffer tweeted that the health care law was an "amazing comeback story."

The administration's belated claims of success rested heavily on two pillars: the 8 million sign-up figure and the exceedingly low expectations established by the exchanges' disastrous launch. The White House was selling an unlikely underdog story in which the plucky little health care law, backed only by the entire executive branch of the federal government, came from behind to score an unexpected victory.

But judged by other metrics, such as rising health spending, state-by-state sign-ups, demographic balance, and public opinion, the law looks less like a success story and more like an enormous national experiment still struggling out of the gate. Yes, it could have been worse. But it also could have been a lot better. And beyond the headline successes, more than a few potential problems remain.

Sign-ups vs. Enrollments

The administration's single most prominent piece of evidence that Obamacare is a success is that it surpassed expectations by signing up 8 million people for coverage. That statistic, however, leaves out an important detail: how many of those 8 million have actually enrolled.

For now, what the administration knows for sure is that 8 million people "selected a plan"--they successfully logged on to a website, looked at the insurance choices that were available to them, and clicked a box indicating which plan they'd like to buy. What's less clear is how many of those people followed up by paying their first month's premium, a requirement for coverage.

When pressed, federal officials have responded that only insurers have complete information about payment rates. For their part, insurers say they don't know with absolute precision, either. But it's possible to arrive at a rough estimate.

At the end of April, Karen Ignagni, the CEO of the health insurance trade group America's Health Insurance Plans, told a Politico briefing that about 8y percent of sign-ups had paid. In testimony before Congress in May 2014, several insurance company executives put their payment rates at between 80 and 90 percent. Officials in California, which has more sign-ups than any other state and is widely regarded as producing the most successful implementation of Obamacare, have also estimated an 85 percent payment rate.

Prior to the launch of the exchanges, the administration had targeted 7 million enrollments by the end of open enrollment. In June 2013, Health and Human Services (HHS) Secretary Kathleen Sebelius told reporters, "We're hopeful that 7 million is a realistic target." A September 2013 memo from the Centers for Medicare and Medicaid Services projected 7.066 million enrollments by the end of March. Right before the exchanges opened for business, Sebelius told NBC that "success looks like at least 7 million people having signed up by the end of March 2014."

If 85 percent of the 8 million sign-ups end up paying, then the true exchange-enrollment total is more like 6.8 million. Even a 10 percent reduction would still knock 800,000 off the administration's sign-up total--far better than prospects looked in the law's darkest days, but still substantially less than the headline figure the administration advertised.

Getting the Right Demographic Mix

It's not enough to have millions of people signed up for insurance though...