Today’s must-read comes from Yuval Levin, who spoke to five managers at the HHS department that’s running Healthcare.gov and three health-insurance industry managers. Their reactions to two weeks of total chaos on the site: “Restrained panic” from the former and more or less pants-wetting panic from the latter. I don’t think this qualifies as the news story we’re all waiting for because Levin has no sources up the chain in the decision-making parts of the executive branch, but if people in the industry are whispering about “unthinkable options” now, rest assured that people in the White House are too.

I can’t excerpt all the parts that are noteworthy, although if you’ve been following news about the Healthcare.gov apocalypse you already know some of what Levin reports — the login fiasco is a result of HHS demanding that people create an account before seeing what plans cost, the system still can’t calculate subsidies correctly (which means some people are getting the wrong price when they buy coverage), the “back end” communications between the federal data hub and private insurers are a shambles, and the chaos will only increase if HHS solves the login problems without solving the back end problems. (Imagine insurers having to sift through 5,000 garbled enrollments per day instead of 50.) What about the timeline, though? Per Levin’s sources, D-Day will come sometime in mid-November.

If the problems now plaguing the system are not resolved by mid-November and the flow of enrollments at that point looks like it does now, the prospects for the first year of the exchanges will be in very grave jeopardy. Some large advertising and outreach campaigns are also geared to that crucial six-week period around Thanksgiving and Christmas, so if the sites are not functional, all of that might not happen—or else might be wasted. If that’s what the late fall looks like, the administration might need to consider what one of the people I spoke with described as “unthinkable options” regarding the first year of the exchanges… One key worry is based on the fact that what they’re facing is not a situation where it is impossible to buy coverage but one where it is possible but very difficult to buy coverage. That’s much worse from their point of view, because it means that only highly motivated consumers are getting coverage. People who are highly motivated to get coverage in a community-rated insurance system are very likely to be in bad health. The healthy young man who sees an ad for his state exchange during a baseball game and loads up the site to get coverage—the dream consumer so essential to the design of the exchange system—will not keep trying 25 times over a week if the site is not working. The person with high health costs and no insurance will. The exchange system is designed to enable that sick person to get coverage, of course, but it can only do that if the healthy person does too. The insurers don’t yet have a clear overall sense of the risk profile of the people who are signing up, but the circumstantial evidence they have is very distressing to them. The danger of a rapid adverse selection spiral is much more serious than they believed possible this summer. They would love it if the administration could shut down the exchange system, at least the federal one, until the interface problems can be addressed. But they know this is impossible.

Sick people with preexisting conditions whose coverage will be very expensive for insurers will spend all day on the site trying to sign up. Young, healthy people, whose money insurers desperately need to help pay for that very expensive coverage for sick people, might try once or twice and then give up. Result: A giant bill for insurance companies with no way to pay it except by jacking up premiums on everyone who currently has insurance, and even that might not be enough. That’s the death spiral, and that’s why “unthinkable” options are suddenly, but inevitably, on the table.

Levin suspects that, at the barest minimum, the White House will have to extend the deadline for the uninsured to enroll past March 31st of next year, but that’s just a fig leaf given that D-Day will have come months earlier and that, per USA Today, it’ll take six months of retooling to get the site in shape. (Levin’s sources told him bluntly that they don’t know how long it’ll take to fix it, which I assume is industry-speak for “not soon enough.”) One thing they might be able to do, I would think, is turn Healthcare.gov from a data hub designed to make comparison shopping for plans and enrollment nice and easy into a site that simply points users to the webpages of individual insurance companies and encourages them to enroll there. That’ll make comparing plans much more difficult — see yesterday’s post about trying to sort through the fine print of the gold, silver, and bronze plans for insurers X, Y, Z across nine different web pages — but it’s an alternative to suspending ObamaCare for a year. Or is it?

Many health insurance products currently on the market don’t meet Obamacare’s benefit standards and consumer protections so they are being discontinued. Consumers with these plans are the most likely to see rate increases next year, especially if they earn too much to get tax credits. “They’ve got to convert to a new policy — no ifs, ands or buts about it,” Laszewski said. And while people who currently pay for their own health insurance are likely to do whatever they can to remain covered, buying a plan directly from an insurance carrier or using a private online broker isn’t what Obamacare promised, and tax-credit subsidies aren’t available without the federal system. Moreover, these private companies aren’t prepared to deal with millions of customers who were supposed to be using the government marketplace, Laszewski said… If these problems persist longer — weeks, months, a whole year — the entire Obamacare project falls apart, Laszewski said: “It’s a holy shit moment.”

Insurance company webpages may be slightly out of date, they may not be prepared for a crush of traffic (although they’ll certainly be more prepared than Healthcare.gov was), and, most importantly, they won’t be able to reduce “rate shock” among lower- and middle-class customers by telling them up front how much taxpayer money they’ll get to help pay for their new plan. Maybe you could manage that for now by telling people something vague, like “If you make between $X and $Y, you’re likely to receive a subsidy roughly equivalent to $Z” and then try to deal with the precise calculations later, but when will those calculations be made? Will it be before January, when these lower-income people need the money to offset the cost of their expensive new plan? Could even private companies pull together a stopgap tech project like this with just a month’s lead time? See now why people in the industry are wetting themselves?

One last reason to read Levin’s piece: Desperate for a silver lining about the rollout, lefties are touting the fact that the state exchanges are running comparatively smoothly. That’s true, say Levin’s sources, but that’s a low bar. Quote: “Back-end data issues seem to be a problem everywhere, and some of the early enrollment figures being released by the states are not matching up with insurance company data about enrollments in those states, which suggests a breakdown in communication that is only beginning to be understood.” The states may be doing better, but “doing better” doesn’t necessarily mean enrolling enough people via a glitchy system to avert a death spiral. Exit quotation via HuffPo: “[F]ailure of this magnitude would discredit a core premise of this presidency, that government can do big things to improve Americans’ lives.”