2 Ways Obamacare's Failure So Far Is Actually a Resounding Success

The passing of the Patient Protection and Affordable Care Act in 2010 brought with it plenty of hope -- and a plethora of vitriol from opponents of the law. Low-income people who will soon qualify for the Medicaid expansion in about half of all U.S. states, as well as people with pre-existing conditions who had previously been shut out of any form of medical coverage, have rejoiced in the passing of Obamacare. Conversely, upper-income individuals, who are helping to support the bill through higher taxation, and young adults, who are needed to help counteract the higher costs of the sick and the elderly, haven't been as enthusiastic, as a whole.

Yet, for better or worse, this is the law of the land, and it's here to stay -- and apparently so are the glitches!

As has become a daily occurrence since the opening of state and federally run health exchanges under the PPACA, perhaps best known as Obamacare, software glitches and overloads are making it veritably impossible for millions of Americans to log onto the Healthcare.gov website, the insurance exchange starting point, to obtain health coverage. For much of the past week, the federally run state websites have been unable to handle the deluge of consumer traffic, which has many Wall Street analysts and IT specialists questioning the architecture behind the exchanges themselves.

What went wrong?
It's hard to express in one sentence exactly what's gone wrong, but the short answer would be that there's not enough server capacity to handle the existing interest in browsing for health insurance coverage. More importantly, it appears (based on the opinions of information technology experts who were interviewed by The Wall Street Journal) that the architecture behind the insurance exchanges is flawed.

Improving server capacity isn't too difficult of a fix. Adding servers, as well as boosting capacity to handle the myriad of memory-sucking JavaScript-based applications during the enrollment process, should have this problem solved relatively quickly.

Software, however, isn't an overnight fix. Experian, for example, is a subcontractor that's responsible for identity confirmation in the enrollment process. Consumers can't proceed with getting health insurance if they don't have an account, and many are being stopped dead in their tracks by crashing hardware and software during the identity confirmation process.

Perhaps no heat has fallen harder than on the back of CGI Group (NYSE: GIB  ) , which built the backbone of the Healthcare.gov website. The finge- pointing at CGI comes from the inability, in some cases, for its software to correctly tabulate subsidies should a consumer be due one. As I've mentioned before, those who are most in need of health care and/or who qualify for subsidies are the most likely to sign up first -- thus, many who'd be in this subset are still on the outside looking in.

It's a mess... but there's good news!
But whether you believe me or not, there's actually a light at the end of the tunnel.

Is the current situation a mess? Absolutely! It's about as bad a scenario as President Obama could have fathomed with the Republican and Democratic parties still at an impasse over the budget and, soon, the debt ceiling. With Obamacare and the medical device excise tax remaining the sticking points between both sides, these glitches are putting extra weight on an already full plate for the President.

There are two positives that can be taken away from these failures. The first would be that interest in the exchanges is incredibly high. I've seen varying statistics with regard to overall viewership so far, but all agree that in excess of 8 million unique people have viewed the health exchanges. The end result for major insurers such as CIGNA (NYSE: CI  ) , Aetna (NYSE: AET  ) , and WellPoint (NYSE: ANTM  ) has been less than encouraging, with each reporting sign-ups in the hundreds on federally run exchanges due to the ongoing glitches; but it also speaks strongly to the surge that is inevitably heading their way. The demand for health insurance is clearly there, even if the sickest individuals are likely to be included in the first round of signups.

The other positive is the precedence of success from the jaws of defeat when you look back throughout history. Medicare Part D was a gigantic mess when it debuted in 2006, yet it went on to be a successful prescription drug coverage plan for the elderly. In 2006, we saw everything from flat-out denials at the pharmaceutical counter for enrollees, to the government actually reimbursing people the amount of their payment instead of collecting money each month. (That's certainly a problem I would encourage from the government!) Ultimately, these glitches were worked out over the course of the year, and Medicare Part D became a well-oiled machine.

The same will likely be said of Obamacare. It's going to take time to work out the glitches, figure out the software patch fixes, get the proper hardware in place to handle the surge in website viewership, and get the subsidy calculations correct. Based on precedent, there's a really good chance the hardware and software supporting the backbone of Obamacare will also be a well-oiled machine within six to 12 months.

Still, keep those expectations tempered
While there's plenty of reason to see good news in this otherwise bad situation, I'd also suggest keeping your investing expectations in check.

If you recall, my greatest concern had been the run-up we've witnessed in insurers prior to the opening of the exchanges. CIGNA, Aetna, and WellPoint all soared on the expectation that they would be signing up hundreds of thousands of new members. While this very well should be the case, the glitches, as I warned, could put the bulk of those signups well into the following quarter, thwarting investors who were hoping for a blistering opening quarter. If you're holding these companies with a five-year outlook in mind, I wouldn't bat an eye, but short-term traders expecting a 10% surge may be in for a rude awakening.

Similarly, guilt by association could also be a potential problem for IT specialists like Xerox (NYSE: XRX  ) , which I've earmarked a few times as a clear winner under Obamacare. In addition to Xerox processing all of California's Medicaid claims and numerous states' electronic-health record subsidy payments from the government, Xerox also took part in designing Nevada's health insurance exchange. The glitches on the government's end could take the air out of companies like Xerox, which have a big stake in how many new people enroll for health insurance in the states it provides IT services in. The head-scratcher, though, is that Nevada is one of the few states that chose to set up its own exchange, and its site has been working almost flawlessly.

Just remember that new technology rollouts are much like the fabled race between the tortoise and the hare. The hare will always be faster, but slow and steady wins the race. Inevitably, these glitches will be resolved, and enrollment will surge, which bodes well for these companies over the long run. Unfortunately, for insurers and IT specialists involved in the health-exchange process, it also could portend a bumpy start for the next one or two quarters.

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Comments from our Foolish Readers

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  • Report this Comment On October 09, 2013, at 3:38 PM, andiconda wrote:

    the republicans know very well it will be a success.

  • Report this Comment On October 09, 2013, at 4:13 PM, SAMonroe wrote:

    Of course there is interest. The federal govt. is forcing us to have an interest.

  • Report this Comment On October 09, 2013, at 4:13 PM, jpf578 wrote:

    ObamaCare will be successful if you consider the continued bankrupt of this country successful. Even the government themself are now stating it will cost far more than ever imagined. People are finding out they have to pay far more than expected. That's why on a few hundred have signed up. Stupid propaganda pushing media. I can actually see a government revolt over this unlawful legislation.

  • Report this Comment On October 09, 2013, at 4:15 PM, blackplague wrote:

    Only in this age of the Obama loving media can you write an article like this.....although Obamacare is a failure, it's actually a success. You cannot make this sh@t up!!!

  • Report this Comment On October 09, 2013, at 4:18 PM, dkl888 wrote:

    Anybody willing to call the ACA either a success or failure at this point is a complete fool. This article is a complete joke. It will be years down the line before we can really see the positives and negatives of the ACA. What's really pathetic about this article are the two ways the author uses to support a "resounding success". 1) Interest in the website is incredibly high. Who cares if a lot of people visited the website. In no way should this be a measure of the ACA's success. All the people in the world might visit the site. But that doesn't mean we have people signing up, or most important, young people signing up. What if the only people that sign up are only the people that qualify for "free" plans through subsidies or the people who don't qualify right now due to pre-exisiting conditions. ...i.e. the people who will really drive up the costs to the point of failure if we don't have enough of the young, low healthcare users, to balance out the costs. Of course these people are interested and going to sign up, I'm not concerned about this group. People may have health insurance, but end up without the healthcare if the system is broke or overloaded. and 2) The Medicare Part D started with a lot of problems, but is now working fine. Really? You're using that as proof of a resounding success. Pretty sad argument. Lots of things fail at first and can turn around, but that doesn't mean you can say something is successful because it starts off as a failure. What a joke of an argument, I guess whatever it takes for you to put a headline saying Obamacare is a Resounding Success.

  • Report this Comment On October 09, 2013, at 4:25 PM, lionleoboxer wrote:

    Obama care is good. But many people misunderstand this good Obamacare. Republicans are only thinking money and saving. But Obama is the President doing something where most of the Americans appreciate. It benefits rich, poor and middleclass. It will help the poor and pre-existing conditions. Republicans need to growp up and me more matured. Obama is not doing this for himself or his family. He does not need affordable health care. But OBAMA has a good heart and cares for the poor and middleclass people. He is doing it in good faith. God will bless him and he has won 2 elections. beating Republican Mitt Romney too. OBAMA CARE IS THE Law of the land and passed by the supreme court. Why should the Republicans object and try to defund this good plan. According to the stats 90% of Republicans in Texas and other states are very happy to get Obama Care as many of them have pre-existing conditions and not approved. With this obama care everyone will benefit regardles of age/race and will help.A gift from God. Republicans shut the govt. because of obama care. Ted Cruz will be cursed by all the American innocent poor people if he tries to take it out. Cruz should be sent to Cuba. Obama is doing a good job.

  • Report this Comment On October 09, 2013, at 4:26 PM, lionleoboxer wrote:

    John Boehner. must agree and open this govt. He does not have the guts to have a fair vote. AND then blames democrats and the President. He. is very good at pointing the finger

  • Report this Comment On October 09, 2013, at 4:27 PM, moncia wrote:

    What a bunch of crap!

  • Report this Comment On October 09, 2013, at 4:28 PM, speculawyer wrote:

    The USA will Go BANKRUPT under Obamacare! JUST LIKE MASSACHUSETTS DID UNDER ROMNEYCARE!

    Oh . . .wait a minute . . .

  • Report this Comment On October 09, 2013, at 4:29 PM, JTBL wrote:

    It's a failure but it's a success - huh? How much were you paid to write this ridiculous article? Please stopping bulling us and give us hard true facts.

  • Report this Comment On October 09, 2013, at 4:32 PM, JoeSchmoe71 wrote:

    It's a success? The projected cost of the website at conception was $93M. By launch day 10/1/13 the final cost was $634M and it still isn't working properly 9 days later!! They had 3 1/2 years o get this up and running. If they can't get a website done right for $634M in 3 1/2 years, then what makes you think they're going to get your healthcare, and the healthcare of 320 million others, right?? The website not working is the least of our worries. Have you seen the rising costs of premiums lately?

  • Report this Comment On October 09, 2013, at 4:39 PM, Dadw5boys wrote:

    Millions of Americans WANT Medical Insurance !!!!

    They hate running up big bills and being forced into Bankruptcy !!

  • Report this Comment On October 09, 2013, at 4:42 PM, NoMoeMoney wrote:

    Hahahaa, yea, it such a great success they can't even get the programs to work to sign people up and they had 3 years advance to write it? Sean Williams do you seriouly believe that your readers are so stupid that they will believe this drabble? I thought this was suppose to be the Motley Fool and not the National Enquire? One thing can not be spun and thats the fact that alot of people are paying a seep price through job Insurance restructuring or loss as a direct result of Obamacare. This will wreck the country, watch and see it unfold before your very eyes .

  • Report this Comment On October 09, 2013, at 4:42 PM, PaulPhoenix wrote:

    The ACA is so great the President, White House Staff, IRS, and Congress are either exempt or will get a 75% contribution. The ACA is so great that "the first person to sign up" actually only viewed the rates, and didn't. He also would have his premiums go up 400% and was a volunteer for OFA aka Obama's SS.

    The people visiting the site are not signing up because 1.) they notice their rates will be too high, can't keep their doctor, or perhaps they do not wish their information being used by the IRS and police for "investigations" per the Maryland page.

    This "law" will collapse, Obama will go down as the biggest failure in US Presidential history and hopefully we can undo this damage.

  • Report this Comment On October 09, 2013, at 4:43 PM, supergaffo wrote:

    Wasn't prohibition also the law of the land? Or the fact that slavery was law of the land and slaves were only 3/5 of a person? Or the fact that only white property owners could vote? So just because ACA is law of the land does not mean it cannot be reworked or removed. Besides this has nothing to do with healthcare but with insurance. Maybe we should look into the fact that I can buy a bottle of ibuprofen with 500 pills for $7 but get charged $7 in the hospital for 2,

  • Report this Comment On October 09, 2013, at 4:48 PM, GSteinert21 wrote:

    I have built computer systems similar to this one my entire 30+ years in informations systems. I am a little disappointed in the capactiy issues, however, the complexity of this program is incredible. In fact, I don't think in my 30+ years have I seen anything so complex! One cannot make any sort of judgement based on only one week of processing. And I have seen improvements already. In my view and experience, this is pretty standard stuff for my business. If it requires 3 years to get these problems resolved, I would consider it a pretty good effort. Regards to my long suffering IS collegues. Get some sleep.

  • Report this Comment On October 09, 2013, at 4:49 PM, WScott84 wrote:

    Thank you Baghdad Bob for that information.

  • Report this Comment On October 09, 2013, at 4:52 PM, fatboy46 wrote:

    This is NOT about Health Care. It is ALL about governmental control. Health care in America was NOT in a crisis- the Democrats CREATED an imaginary crisis. Typical of them- find a solution that grows the government spreads the power, redistributes the wealth, then create a problem that their solution appears to fix.

    The media can put all the icing they want on this pig- but it is still a pig. and a VERY expensive pig.. this will set us back over $3 Trillion, slow the economic recovery, create thousands of job in the GOVERNMENT that we will have taxes on for many years to come.

    Wake up people.The Dem do NOT care about your health care, you wealth or lack of it even whether or not you get an education on the taxpayers $$.. they just want your vote and to make you dependent upon MORE government help.

    Note that they want to GIVE school kids FREE meals #x a day now. That will be generation of kids that think "they" will feed us- not Mom and Dad- THEY (the school people- aka taxpayer).

  • Report this Comment On October 09, 2013, at 4:53 PM, CincyFool65 wrote:

    Please, enough with this "Law of the Land" nonsense. Prohibition was the law of the land. The Defense of Marriage Act was the law of the land. Obamacare is simply a law that is on the books -- for now.

  • Report this Comment On October 09, 2013, at 5:02 PM, violet7489 wrote:

    OBAMACARE should be called OBAMA DOES NOT CARE

  • Report this Comment On October 09, 2013, at 5:09 PM, clloyd53 wrote:

    Enrolling millions of illegals in Medicaid. And driving up state taxes is considered a success? Modern economics and math is a mystery to me.

  • Report this Comment On October 09, 2013, at 5:11 PM, Fridaypm2002 wrote:

    More left wing dribble. Obamacare is a trainwreck. I checked it out. My rates would go up $700/mo. And I won't be able to keep my DOCTOR! Who writes this stuff anyway.......

  • Report this Comment On October 09, 2013, at 5:11 PM, NoMoeMoney wrote:

    Sorry GSteniert21 but people don't have 3 years to see this work. They are forced to purchase it now and its suppose to be paying out for healthcare next year. I don't think the check will be in the mail to the doctor or hospitals anytime soon.

  • Report this Comment On October 09, 2013, at 5:17 PM, ScamuelJones wrote:

    One way it is a rousing success is that President Obumma bin Lyhing, the Kenyan, has enriched all his health insurance buddies! Our family premium went up 62%! We got a royal Kenyan screw job from Obumma and didn't even get a moment's pleasure from it!

  • Report this Comment On October 09, 2013, at 5:23 PM, vet212 wrote:

    Failure is in no way success and vice versa it is a completem mess a hodgepodge of crap slapped together in haste and as such an abject total and if persisted with ruinously exspensive for the nation and destructive of the AVAILABILITY of health care services in the country

  • Report this Comment On October 09, 2013, at 5:38 PM, Obviator wrote:

    "It will be years down the line before we can really see the positives and negatives of the ACA. " - dkl888

    The United States can't afford one year of this rolling disaster let alone "years". It is a disaster insofar as we Citizens have no idea of what new regulation(s) (lawyer speak for law) are contained within the ACA.

    Like Pelosi stuttered, "we have to pass it to know what's in it"...

  • Report this Comment On October 09, 2013, at 5:40 PM, jprizoli wrote:

    I am a programmer. No one should even be thinking about criticizing this system until at least a month. Does anyone realize the undertaking this was to even work at all. They release a new interface for the unemployment system in MASS in July,. It is still screwed up. that is only 1 1/100 the size of the healthcare sit.

  • Report this Comment On October 09, 2013, at 6:26 PM, lq295 wrote:

    There is NO success - insurance is extremely high considering deductible are RIDICULOUS!!!

    For $180/month someone should have a $500 deductible and LOW co-pay and lots included. This is NOT the case.

  • Report this Comment On October 09, 2013, at 6:27 PM, lq295 wrote:

    Excuse me???? They get to look at my credit report that Experian has wrong???

  • Report this Comment On October 09, 2013, at 6:31 PM, kdreamdancer wrote:

    There wouldn't be a need for this obamacare if people would get off their lazy butts and work for it instead of expecting the world and the government to take care of them. Then there wouldn't be any glitches of any sort. This would be a richer nation if we made poverty more uncomfortable than comfortable.

  • Report this Comment On October 09, 2013, at 7:09 PM, SeniorGator wrote:

    "The operation was a success but the patient died." But in this case even the "operation" wasn't a success.

  • Report this Comment On October 09, 2013, at 7:14 PM, SammyDBBQ wrote:

    "the law of the land, and it's here to stay "

    May I remind you that the current Immigration and Border Sovereignty Laws are "the law of the land" but they are wholly ignored by immigrants and Federal law enforcement.

    One other thing to note, Laws can be repealed.

  • Report this Comment On October 09, 2013, at 7:17 PM, dornfeld86 wrote:

    "Actually a Resounding Success," in less than two weeks! WOW! We should have put this into effect six months ago! I wonder how you Clowns can validate this in such a short time?

    Maybe you all could reach for the Dictionary and could look up the definition of "Resounding, and Success," and ferret out the meaning of these two words.

    Is this the work of a Fool? Hummm...

    "Fool" is part of your company name, and is also a synonym of "Clown." So I don't see where I've disrespected Rule 7.

  • Report this Comment On October 09, 2013, at 7:17 PM, upside222 wrote:

    I would *not* be in the health insurance sector for the long term.

    The Marxist Democrats are now creating a bankruptcy bubble similar to their housing bubble that nearly collapsed the financial sector.

    The $12,700 deductible and 40% co-pay for hospital billing is going to bankrupt many, many poor families. And with Obamacare insurance these families are going to be hardpressed to claim charity status so their bills get written off.

    This is going to have a tremendously negative impact on health insurance company profits.

  • Report this Comment On October 09, 2013, at 7:27 PM, stzo63 wrote:

    Law of the land ...and it is here to stay.?

    so was the law about slavery....And THAT ISN'T AROUND!!!!!!!!!!

    Have you heard about repealing laws.

  • Report this Comment On October 09, 2013, at 9:01 PM, Dayo2 wrote:

    Now under Obamacare if the middle class and above have private medical insurance they are most likely get a two to three times higher billings. Now eleven million illegals getting citizenship more and along with millions already given citizenship are going to have a lot more free medical money. Those fifteen percent of Americans looking for jobs are in a lot of trouble.

  • Report this Comment On October 09, 2013, at 9:27 PM, skypilot2005 wrote:

    Yup. The Motley Fool getting right in line behind the White House, again. How pathetic.

  • Report this Comment On October 10, 2013, at 9:07 AM, True411 wrote:

    The Motley Fool has jumped the shark.

  • Report this Comment On October 10, 2013, at 1:40 PM, distressUS wrote:

    Washington is full of Oxy-Morons! This article came from the same type of idiots that are suppose to represent the people, but don't.

    This is a true oxy-moron: Federal Gov't & Succuss

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