A Red State health care exchange that works

December 5, 2013, 12:01 PM UTC

Building a health insurance exchange in time for Obamacare’s Oct. 1 deadline was daunting, especially in Kentucky, the only Romney-voting state to take on the challenge. While others relied on the federal government and were left with a glitch-ridden Healthcare.gov, Carrie Banahan, director of the Office of the Kentucky Health Benefit Exchange, oversaw the task herself — and got the site up and running a day early. Edited excerpts of her conversation with Fortune follow:

Fortune: Why has Kynect succeeded while the federal exchange has floundered?

Banahan: We’ve been having weekly meetings since Sept. 2010. We did a lot of planning before the Supreme Court upheld the law, and we made a key early decision to build a single system to determine eligibility for both exchange insurance subsidies and Medicaid. We believe the vision of the Affordable Care Act was to have a one-stop shop, so the consumer wouldn’t be bounced back and forth between the Medicaid office and the health exchange. Another big difference from the federal exchange is that people don’t need to create an account or enter personal information to shop. It’s less overwhelming — they put in some anonymous information to check if they might be eligible for subsidies. We knew that individuals might not want to waste their time if they found out they weren’t eligible for anything at all.

How did you avoid tech glitches?

When the ACA passed, we were using a 30-year-old legacy computer system written in COBOL, a programming language invented in the 1950s, long before JavaScript existed. It just wasn’t worth salvaging. We stole some more state IT staff to develop a new system and hired Deloitte to build the site. Deloitte was amazing: We signed its contract Oct. 7, 2012, and less than a year later the system was ready. We actually turned our system on at 6 p.m. the day before, but didn’t tell anybody. We had our first application by 12:01 a.m. Oct. 1. Later that morning, demand overloaded our servers, so for six hours folks weren’t able to log on. We added some additional servers that day and haven’t had any problems since.

Has Obamacare hatred made your job any harder?

People hear “I don’t like Obamacare” or “repeal Obamacare,” and they don’t even know what it is and how it can help them. Thousands of people came to Kynect’s booth at the Kentucky State Fair, and they had no idea it was part of Obamacare. We call it Kynect — it’s a new type of health insurance. Certainly if they ask us we tell them yes, under the ACA we can do this, but they do not realize it’s the same thing as Obamacare.

What has helped get people to enroll?

We hired Xerox (XRX) to run our call center from its Lexington, Ky. facility. It’s Kentuckians talking to Kentuckians. They’ve taken 15,000 applications.

Is Obamacare a good thing?

There’s a lot of misinformation and confusion out there about the ACA and its benefits. A lot of people didn’t realize that they might only have to pay $20 for insurance. A lot of people are surprised that they’re eligible for Medicaid under the expansion. Many haven’t had health insurance in 10 or 15 years; they have such sad stories spending their life savings on medical care or filing for bankruptcy. Some folks are apprehensive or reluctant about the ACA. But when they find out that they’re eligible for coverage, they’re just ecstatic — they cry, they hug you. People say this isn’t such a bad thing at all, and it only took 30 minutes.

Did you feel prepared to run the health exchange?

Believe it or not, I asked for this job. I’ve worked in state government my whole career, starting in 1982 as a food stamp and Medicaid eligibility worker out in the field. I’ve seen a lot of folks that don’t have health insurance coverage, and it has been very rewarding to provide affordable coverage to them, to allow folks to have access to coverage who don’t have access today. It was kind of like I’d been training all my life for this job. Kentucky’s health statistics are awful: Among the 50 states, we rank 50th in cancer deaths and 49th in cardiovascular disease. It’s a very, very unhealthy population. With the health exchange and the Medicaid expansion, individuals can now have health care coverage and it will improve the quality of life here in Kentucky. I’ve worked all my life to see this happen.

What has been the biggest surprise since opening Kynect?

The interest from small businesses in buying coverage on the exchange was a big surprise. We thought that the first year would probably be very slow and the numbers would be low; we had anticipated that a lot of those groups would probably renew their old plans early and wouldn’t be looking for a new plan till 2014. In fact, Kentucky was one of only a few states that was ready to let small businesses apply for coverage on Oct. 1; other states delayed that function of their exchanges for months.[The Obama administration has since announced that the federal exchange, Healthcare.gov, won’t be open to small businesses for another year.] We were just focused on Kentucky being up and ready to take applications by the deadline. We’re very excited about the success: We’ve had more than 1,000 small businesses start an application to buy coverage through Kynect, and 400 companies have completed their applications — meaning that they are now in the process of selecting plans to offer their employees. Then, their employees will have 30 days to enroll in coverage.

Reader questions

Camron A. Tarassoly: Could you spot obvious problems with Healthcare.gov?

I went on the federal website, too, and tried to apply for coverage on the individual market, and I haven’t been able to get past the first screen myself. I’m curious, how they set it up.

Tarassoly: How do you feel President Obama can fix this health exchange fiasco?

I certainly would not call it a fiasco. It’s a huge undertaking: They have to coordinate and collaborate and develop a system for 36 states. It was certainly much easier for Kentucky — we have fewer residents who will be using the site, and a limited number of insurers. I think in time, the federal system will be fully operational. I would recommend that they allow folks to browse for plans without creating an account like Kynect does, because a lot of folks just want to see what’s available and not necessarily file a application.

Greg Chang: How do you transcend politics with Kynect?

We tell folks it really doesn’t matter what you think about the President or the governor [a Democrat]. What we think is important to you is health insurance for you and you family.

Username Mmmmm propaganda: How many of Kynect’s enrollees have actually paid for their coverage, vs. just dropping insurance products in their shopping carts and leaving

How it works in Kentucky, when you select a plan and check out, we take an electronic signature saying you agree to enroll. Then you hit enter, and it says pay now or pay later. If you choose to pay now, you are taken to the insurer’s website where you can pay with a credit card or electronic check. But if you check “pay later,” the insurance company will send you a bill — later that night we actually send the insurers an electronic file with the confirmed enrollment lists. At that point in time we consider you to be enrolled. Right now about 11,000 people have enrolled in a health insurance plan, but there’s an additional 12,000 who have determined they are eligible for a subsidy on Kynect but haven’t enrolled in a plan. We’re thinking they’re waiting till December to pay that premium.

A shorter version of this story appeared in the December 23, 2013 issue of Fortune.