Obamacare Website Disaster Deja Vu?

Major functionality changes to Healthcare.gov have some worried. Amazon.com to the rescue?

Jun 15, 2014 at 10:00AM

Could the Obamacare website be headed for a repeat of the chaotic launch last October? Some in the federal government have concerns that problems could emerge when open enrollment resumes in less than four months. Big changes are under way to to hopefully prevent a disaster déjà vu. 

Healthcaregov June

Source. Healthcare.gov

Rebooting Healthcare.gov
Although the federal Healthcare.gov website bombed during the first few months of operation, most serious problems appeared to be resolved by the end of 2013. Why mess with the site with its functionality seemingly stabilized? 

For one thing, some of the work remains incomplete. Development of back-end functionality, including the system to automatically pay insurers, still isn't finished and is running behind schedule, according to presentations given by federal officials to health insurers.

There's also a major effort under way to simplify Healthcare.gov. One part of this relates to the application process itself. A team is working on trying to make applying for insurance easier, particularly on mobile devices. An initiative is also moving forward to revamp the website's plan comparison tool.

Perhaps the scariest change of all, though, is a complete overhaul of the software that enables individuals to create accounts and log in to Healthcare.gov. This part of the system received heavy criticism last year after widespread problems. 

Fruit basket turnover
It's not just the systems that are changing. Vendors are being swapped out also.

Originally, Verizon Communications (NYSE:VZ) provided web hosting services for Healthcare.gov. Verizon's Terremark data center supporting the Obamacare website suffered a couple of highly visible outages in October. Even before these problems, though, the feds chose to not renew the contract with Verizon and picked Hewlett-Packard (NYSE:HPQ) as the new vendor. 


Source: FoolEditorial on Flickr 

The HP contract only took effect a few months ago, but now the government is making yet another change. The Wall Street Journal reported recently that Amazon.com (NASDAQ:AMZN) is being brought in to host the Healthcare.gov home page, online application, and plan comparison tool using its Amazon Web Services cloud. The company's cloud services are also planned for back-end systems used by insurers.

Many prominent commercial websites use Amazon's cloud services, positioning the online retailer and technology giant as a key industry leader. Cloud hosting enables rapid scaling up to handle spikes in usage -- just like those that occurred last October. Selection of Amazon could be a turning point in the effort to position Healthcare.gov as a dependable site for customers.

Déjà vu dollars
When the announcement was made that HP was picked to replace Verizon, HP's stock jumped 9% in a single day. It then proceeded to march upward another 21%. Meanwhile, Verizon shares sank as much as 8% over the following months. With the latest vendor switcheroo, could Amazon now get momentum going while HP takes its turn at languishing? Maybe.

Since the day before The Wall Street Journal broke the story about the selection of Amazon.com as the new hosting service for Healthcare.gov, shares of the company are up over 9% -- similar to HP's stock movement when it scored the Obamacare website contract. After losing the contract, though, HP's stock hasn't budged much at all.

That's not surprising. It would be myopic to attribute all of the stock swings for HP and Verizon to one federal contract. These are huge corporations with plenty of variables impacting their share prices. By the same token, it's probably not wise to assume that Amazon's shares will inevitably continue rising because the company landed the Healthcare.gov hosting deal.

However, the Obamacare website deal does underscore Amazon's prowess and potential in the cloud computing market. And sometimes highly visible wins can be the spark that rekindles the fire beneath a stock. Amazon.com's shares have been stuck in the doldrums most of this year after soaring 57% in 2013.

The federal government hopes that selecting Amazon.com can help it avoid a repeat of last October. Amazon, meanwhile, might be looking for a little déjà vu from its experience last year.

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Keith Speights has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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