The Obama administration acknowledged for the first time Thursday that a technological problem is forcing it to delay part of the rollout of the new health-care law, saying insurance exchanges won't be ready to accept online applications from small businesses when the program launches Tuesday.
With less than five days left to debug the sprawling new computer system, there are other signs of trouble: People close to the situation are also skeptical the online marketplaces for individual customers will be fully ready. The administration said it was confident they would open on time.
Maygan Rollins, 22, a field organizer with Enroll America, left, talks withJerry Correa, 27, about his health-care options in Miami on Wednesday.
Two million people are expected to be covered by the small-business plans in the coming year. The bigger concern is the readiness of the individual exchanges, where seven million people are expected to gain coverage through 2014.
The small-business exchanges will be open to businesses with 50 or fewer workers the first year.
The administration said that despite the delay in online applications, small businesses still would have time to sign up for policies before they go into effect Jan. 1.
But the delay nevertheless is a significant concession by the administration, which so far has said it would meet its deadlines.
Last week, The Wall Street Journal reported that the software supporting exchanges for individual consumers that the federal government is running on behalf of 36 states was miscalculating U.S. subsidies for low-income people.
Problems with that software continued Thursday, according to people familiar with the individual marketplaces.
In addition to calculation problems, a portion of the software that determines eligibility for people signing up for coverage was making inaccurate determinations in test cases Thursday, one person familiar with the situation said.
CGI Group Inc., a government-outsourcing company, holds the contract to develop the individual-exchange software. The company declined to comment through a spokesman.
In addition, a Health and Human Services official, Julie Bataille, confirmed Thursday that the Spanish-language version of the federal marketplace's main website, known as CuidadoDeSalud.gov, wouldn't be ready for people to enroll until mid-October rather than Tuesday.
The administration said the English-language individual exchanges will open as scheduled Tuesday.
"We have made significant progress in recent days and weeks and are now completing our final end-to-end testing, which is designed specifically to identify remaining issues before open enrollment and correct them," said Joanne Peters, a spokeswoman for the Department of Health and Human Services.
Another requirement of the Affordable Care Act, that large employers offer workers insurance or pay a fine, was delayed earlier this year, in part due to administrative and technical hurdles.
Problems with the exchanges when the law rolls out could have political implications for an administration that is battling Congress over the budget. Any delay would provide fresh fodder for critics of the law who question the administration's ability to deliver on its promises.
The long-term impact of the problems is far less clear. People will be able to enroll in the individual and small-business exchanges in time for policies to go into effect Jan. 1 when the law's major provisions take effect, administration officials said. Even if the individual exchanges don't initially work as promised, people could enroll through brokers or by using paper applications.
"These technical glitches happen every time there is an implementation of a large-scale benefit," said Dan Mendelson, chief executive of Avalere Health, a health-industry consultancy. "This is just an amped up political environment."
Avalere analysts expect most people will begin enrolling in mid-to-late November and December, by which time glitches will be resolved, Mr. Mendelson said. "People play to the deadlines."
The Obama administration said in April it was scaling back the complexity of the small-business marketplace by delaying by one year a feature to allow employees of such businesses to pick from a range of plans, instead of the company selecting one on workers' behalf.
In the delay announced Thursday, an administration official said small-business owners could "evaluate their coverage options" on the exchange beginning Tuesday, but owners won't be able to shop for or compare plans until Nov. 1.
Business owners will be allowed to submit a paper application using a PDF form starting Tuesday, but they won't be able to complete an electronic application until a few weeks later, the official said. A call center for businesses will open Tuesday for employers who want help completing the paper application.
For entrepreneurs eyeing small-group plans, insurance brokers advise waiting to enroll until early November, when most carriers are expected to release their rates for 2014. "What you want to do is investigate both inside and outside the exchanges," said Susan Shargel, a broker in San Francisco.
Brian Leach of Atlanta said he planned to begin shopping on the exchange late next week for coverage for his firm, Steelray Software LLC.
He doesn't have coverage now for his 11 employees, but planned to nail down his options for 2014 by comparing plans offered through the exchange with what he is seeing on the private market to avoid last-minute scrambling.
Now, the delay has prompted Mr. Leach to bypass the government option and focus on the private insurance marketplace instead.
"I don't think we're going to wait" until the federal exchanges are able to show plan details and prices, he said. "I just have skepticism this is not going to happen in the time frame we want," he said, adding he believes there will be further delays.
Write to Louise Radnofsky at louise.radnofsky@wsj.com and Christopher Weaver at christopher.weaver@wsj.com
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