A lot has been said about the Affordable Care Act, commonly known as Obamacare. And much has been said particularly about the health insurance exchanges established by Obamacare. Here are five quotes that pretty much sum up what has happened with those exchanges this year -- and why they matter for investors.
HHS Secretary Kathleen Sebelius. Source: U.S. Department of Health and Human Services on Flickr.
1. "No. We are determined and on track to meet the Oct. 1 deadline." -- Health and Human Services Secretary Kathleen Sebelius, April 12, 2013.
Sebelius made this remark in response to a congressman's question about whether a backup plan was needed in case the Obamacare exchanges couldn't roll out on schedule. The projection of confidence in the ability for the exchanges to be fully operational on Oct. 1 continued in the subsequent months.
2. "... Factors such as the still-evolving scope of CMS's required activities in each state and the many activities yet to be performed -- some close to the start of enrollment -- suggest a potential for challenges going forward." -- Government Accountability Office, June 19, 2013.
The federal watchdog agency pointed out several significant issues found in its review published in June. What seemed like the most troubling issue then was that, as of May, 44% of key activities needing to be done by the end of March were behind schedule. Perhaps the more significant issue, though, really was the GAO's comment about "still-evolving scope" just four months prior to the scheduled launch of the exchanges.
3. "To make further improvements to the system, we will be taking down the application part of the website for scheduled maintenance during off-peak hours over the weekend." -- HHS spokesperson Joanne Peters, Oct. 4, 2013.
Fast-forward the clock to the first week of October. The Obamacare exchanges launched on time, but with major technical problems. Only four days after starting up, the federal government brought the exchanges down for weekend "improvements." Unfortunately, problems persisted into the following week and beyond. President Obama subsequently promised a "tech surge" to work out "the kinks in the system."
4. "The system didn't receive adequate end-to-end testing." -- Optum VP Andrew Slavitt, Oct. 24, 2013.
Andrew Slavitt from UnitedHealth Group (UNH 3.37%) business unit Optum, which owns Quality Software Services, testified before a congressional committee inquiring into Obamacare exchange problems. Quality Software Services was one of the key contractors helping to build the exchange websites. Slavitt's view that a key issue related to insufficient end-to-end testing, which was the responsibility of the Centers for Medicare and Medicaid Services, or CMS, received agreement from others involved in the development.
Cheryl Campbell, a senior vice president with CGI Group (GIB 2.42%), the lead contractor on the exchanges, lamented that "no one ever gets enough time for testing." Sebelius, who had earlier expressed confidence in the exchanges publicly, said after the deluge of problems that "we didn't have enough testing" and that a year of testing was ideally needed.
5. "By the end of November, the vast majority of consumers will be able to successfully and smoothly enroll through Healthcare.gov." -- Office of Management and Budget Deputy Director Jeffrey Zients, Oct. 25, 2013.
Jeffrey Zients was brought in by the White House to oversee the effort to fix the exchange problems. Zients predicted that most problems would be resolved by the end of November and announced that UnitedHealth's Quality Software Services would be the lead contractor. He stated that while a lot of problems existed, those problems would be fixable -- within two months after the original launch date.
The most interesting quotes
While these quotes sum up the history of the troubled Obamacare exchanges thus far, the most interesting quotes in the days ahead could very well be the stock quotes of companies directly connected to how well the exchanges operate. Shares of both CGI Group and UnitedHealth have weathered the technical issues relatively well, but they're really not the most affected by what happens. Hospitals and insurance companies bear the biggest risks if Americans don't sign up for health insurance on the exchanges.
With more problems occurring on the federally operated exchanges than state-run exchanges, companies that operate in states relying on the federal healthcare.gov website could be the most affected if the problems aren't resolved timely. Tenet Healthcare (THC 1.78%), for example, runs hospitals in 10 states. Nine of those states use Healthcare.gov rather than their own exchange. Tenet's stock has nearly doubled over the last year in anticipation of benefits from Obamacare.
WellPoint (WLP 2.75%) stands out as the major health insurer most closely affiliated with the Obamacare exchanges. The company sells insurance in 14 states -- and participates in the exchanges in each of those states. However, half of those states run their own exchange while the other half rely on the federally operated website. That potentially lessons the pain for the insurer in the event the federal website continues to experience problems.
It's quite possible that Zients' November time frame proves accurate and most problems with the exchanges are resolved by late November. Tenet, WellPoint, and others could see their shares move higher. However, if his prediction is as on track as earlier statements from key officials, shares of some hospital chains and health insurers will probably suffer more than the federal contractors. Those stock market quotes might speak the loudest of all.
