"We're going to do a challenge. I'm going to try and download every movie ever made, and you are going to try and sign up for Obamacare, and we'll see which happens first."
Those were the words spoken by The Daily Show host Jon Stewart to Health and Human Services Secretary Kathleen Sebelius. It was meant as a joke -- but the humor underscores the underlying reality that the launch of the Obamacare health insurance exchanges has gone very poorly so far.
While the first two weeks of the exchanges have been disastrous, time still remains for the federal government to recover. The clock is ticking, though. Here are three things that must happen before 2014 for Obamacare to avoid becoming the "train wreck" feared by Senator Max Baucus (D-Montana) several months ago.
1. The exchanges must work.
A few glitches wouldn't have been too problematic. Major technical issues resulting in the federally operated website having to be shut down for the weekend after only four days of operation is a different matter altogether.
Teams from major contractors including CGI Group (GIB -0.37%) are reportedly working 24 hours per day to resolve the malfunctions. Some insiders suggest that the problems could be fixed as quickly as two weeks from now, but they also say the effort could take another couple of months. Outside experts, though, say the issues could require six months to two years to resolve.
Although individuals can enroll over the phone and using paper applications, it's unlikely that the goals for Obamacare can be achieved without functional online exchanges. Speedy resolution of the exchange issues is an absolute must.
2. Missing information must be obtained.
It's certainly not good for website visitors to receive an error message that prevents them from accessing the Obamacare exchanges. An even worse problem, though, could be with individuals who were able to get into the exchanges but system problems prevented all necessary information from being obtained.
CNBC reported that as few as one in 100 applications received on the federally operated exchanges contained sufficient information to be processed. The persons submitting those applications must be contacted by federal staff to be enrolled. Perhaps the most significant risk is that these individuals could think they will have insurance effective in January but really won't.
Obtaining all this missing information should be a doable task. One possible challenge, however, could be the sheer level of manual effort required. It's doubtful that Health and Human Services officials planned for the amount of work that will be required for this scenario.
3. Americans must be persuaded to come back.
Even if the serious problems with the exchanges are corrected, the feds could have a tough time convincing millions of frustrated Americans to give them a second chance. Some observers have already expressed concerns that young individuals, in particular, could find it cheaper to forego health insurance anyway -- especially now that insurers can't deny coverage for pre-existing conditions.
However, a well-executed public relations campaign might save the day. If the exchanges work like they should, the "carrot" message of subsidized health care and the "stick" message of financial penalties for not purchasing insurance could sway Americans to enroll online.
Paying the price of failure
You might think that the contractors that developed the federal exchanges would pay a big price for technical problems. That hasn't been the case, so far.
CGI Group shares are actually up 4% since the exchanges launched, despite the enormous problems. Some have pointed the finger at Oracle (ORCL 0.22%) for some of the technical issues, since the company's identity management system is a critical link on the federally run website. Oracle responded that its "software is running properly" and is identical to software used in many of the world's most complex systems. Shares of the big technology firm haven't budged much since the exchanges started up on Oct. 1.
It would probably be unfair if the market blamed these vendors, anyway. Even though CGI was awarded a major contract for its role in building the exchanges back in 2011, the federal government didn't give needed specifications until much later. The New York Times reported that the company didn't actually begin development until last spring as a result of this delay.
If the Obamacare exchanges ultimately fail, I see another company paying a price. WellPoint (ELV 0.15%) stands out as the major health insurance company betting the most on the success of the Obamacare exchanges. Unlike most of its peers, the insurer opted to participate in exchanges in every state where it operates.
Ultimately, though, WellPoint could emerge as a loser even if all problems with the exchanges are resolved quickly. Health insurance companies only make money if more healthier individuals obtain coverage than do sicker individuals. If the initial wave of Obamacare enrollees have pent-up demand for health care services, WellPoint could lose money.
The price for failure thus far has mainly been paid by American citizens hoping to obtain health coverage. The good news is that challenges facing the exchanges can still be overcome. But the powers-that-be have less than two months to set things right. If they fail, there could be lots of more jokes from TV comedians -- but most Americans won't be laughing.
