Kathleen Sebelius resigns as Health secretary: what it means for Obamacare

President Obama will tap budget director Sylvia Mathews Burwell to replace Kathleen Sebelius. But Obamacare remains a political lightning rod ahead of midterm elections.

The resignation of Kathleen Sebelius, secretary of Health and Human Services (HHS), marks the end of a turbulent chapter in the launch of President Obama’s signature program, the Affordable Care Act.

News of Secretary Sebelius’s resignation broke Thursday evening, as did reports that President Obama would nominate his budget director, Sylvia Mathews Burwell, to replace her. The Sebelius news comes days after the first open enrollment period for health insurance under Obamacare had closed.

Sebelius faced harsh criticism for the disastrous rollout – one in which the Obama administration reportedly came close to scrapping HHS’s poorly constructed website, Healthcare.gov, and starting over. She appeared blindsided by the problems that were evident upon the site’s launch Oct. 1, and accepted responsibility for her department's failures.

But, in fact, in congressional testimony Thursday, Sebelius announced that total enrollment now exceeds 7.5 million, a half million people beyond the administration’s goal for 2014. And that number continues to rise, as enrollments that were started before the March 31 cutoff date are completed. The website’s initial dysfunction was corrected last fall in a frantic effort by outside tech experts and an emergency manager brought in to solve the problem.

Still, beyond the website issues, Obamacare remains a controversial policy. And while Sebelius’s departure removes one political lightning rod from the scene ahead of the November midterms, the program itself remains a lightning rod. The Republican campaign mantra is “Obamacare, Obamacare, Obamacare,” as Democrats fight to hold onto their majority in the Senate.

Sebelius’s resignation, which Republicans have been demanding for months, is “just going to embolden Republicans,” David Yepsen, director of the Paul Simon Public Policy Institute at Southern Illinois University, told Reuters.

The resignation also sets in motion a succession process that includes Senate confirmation hearings for Ms. Burwell, which will put not only her but also the entire ACA in the hot seat. Burwell has been budget director only since April 2013 and went through Senate confirmation to take that post.

White House officials praised Burwell’s management skill in acknowledging that she is Mr. Obama’s choice for HHS.

“The president wants to make sure we have a proven manager and relentless implementer in the job over there, which is why he is going to nominate Sylvia,” White House chief of staff Denis McDonough told The New York Times.

Burwell is a graduate of Harvard University and Oxford, where she was a Rhodes scholar.

If confirmed, Burwell will have her work cut out for her at HHS. While Healthcare.gov is now functioning, more or less, the site will go through extensive upgrades and retooling in preparation for the next open enrollment period, which begins Nov. 15.  In addition, insurers will soon be setting rates for next year, as they see who has enrolled for 2014.

So far, firm data are not publicly available on the demographic makeup and health status of new enrollees. Most critical is the percentage of young, healthy enrollees, whose premiums are needed to offset the cost of covering older, less healthy people. Early indications show the enrollees may be less healthy than those insured outside the government-run exchanges.

If the risk pools for those insured on individual plans lean heavily toward older, less healthy people, insurance rates may spike, analysts say. Each state’s individual health insurance market constitutes its own risk pool and consists of people who have bought plans both inside and outside the exchanges.

The ACA contains risk mitigation measures, designed to smooth out any imbalances experienced by insurers in the early years of implementation. But these measures are controversial; Republicans call them a bailout for the insurance industry.

Burwell will have to muster her political skills in dealing with Republicans on Capitol Hill, who remain eager to defund and dismantle Obamacare. Democrats could also pose a challenge, particularly those who face a reelection fight.

Burwell’s confirmation vote will be her first test. Last year, the Senate confirmed her on a vote of 96 to 0 as director of the Office of Management and Budget. But HHS confirmation is likely not to be so easy. Even if senators have nothing specific against Burwell, the vote will be seen as a test of opposition to Obamacare. Democrats control the Senate 55-45 and, last year, changed Senate rules to end a filibuster on presidential nominees. That means five Democrats can vote against Burwell and still see her confirmed, with Vice President Joe Biden breaking the tie.

Republicans were quick Thursday evening to portray Obamacare itself as the problem, not Sebelius.

"Secretary Sebelius oversaw a disastrous rollout of ObamaCare, but anyone can see that there are more problems on the way,” Republican National Committee chairman Reince Priebus said in a statement. “The next HHS secretary will inherit a mess – Americans facing rising costs, families losing their doctors, and an economy weighed down by intrusive regulations.”

But some Republicans wished Sebelius well.

“While we haven’t always agreed, Secretary Sebelius did the best she could during the tumultuous and volatile rollout of the law,” Sen. Orrin Hatch (R) of Utah, ranking member of the Senate Finance Committee, said in a statement.

And one Republican senator, John McCain of Arizona, sent out words of encouragement to Obama’s pick as Sebelius’s successor.

“Sylvia Burwell is an excellent choice to be the next HHS Secretary,” Senator McCain tweeted.