If Obamacare's Healthcare.gov website were a swimmer, it would be in danger of drowning. Now that a life preserver has been thrown into the water, but will the swimmer latch on?
Online health insurance provider eHealth (NASDAQ:EHTH) extended an offer on Wednesday to the federal government to replace Healthcare.gov while all of the site's technical problems are resolved. For free.
In a letter to President Obama, eHealth CEO Gary Lauer wrote: "We are ready to help you get this program on track promptly, with the cooperation of the federal exchange, if you allow us to take over the shopping and enrollment process in all 36 federal exchange states -- without cost to the taxpayer." Should the federal government reach out for eHealth's life preserver?
Things going swimmingly
Users encountered major errors within minutes of the federally operated Obamacare exchanges beginning operation. The application functionality of the website was taken down for "improvements" only four days after the launch. Contractors are working 24 hours a day to get the exchanges working properly for the most part -- two months behind schedule. Compared to that record, things are going swimmingly for eHealth.
The company, founded in 1997, runs eHealthInsurance.com, the first and largest private health insurance exchange in the U.S. EHealth markets health insurance in all 50 states and the District of Columbia, offering health plans from more than 200 insurers. Gary Lauer noted in an interview with CNBC.com that eHealthInsurance.com received more than 20 million visitors last year -- with no major glitches like the exchanges have suffered.
EHealth actually already has a connection with Obamacare. This past summer, the federal government signed agreements with the company and 33 others that allows them to enroll individuals in Obamacare health plans. That deal led to eHealth's stock climbing nearly 60% in just three months.
Will the idea float?
Despite eHealth's successful track record, the odds of the federal government accepting the company's offer of help are low. The official line from the U.S. Department of Health and Human Services is that the Healthcare.gov website will be working just fine by the end of November.
UnitedHealth Group's (NYSE:UNH) Quality Software Services claimed the mantle of leadership in the effort to fix the flailing federally run exchanges, displacing previous lead contractor CGI Group (NYSE:GIB). But the analogy of a life preserver thrown from outside the pool doesn't work well with Quality Software Services since the company had a major role in developing the exchanges in the first place. Yet at this point, the government appears to be looking to the contractor to rescue the Obamacare exchanges.
There's also the not-so-insignificant detail that eHealth and other private health exchanges can't connect to the federal data hub yet. This data hub pulls information from multiple federal agencies, including the IRS and the Social Security Administration. The hub, which was built by Quality Software Services, experienced two significant outages in three days this week. Even if eHealth rapidly built a connection to the data hub, there's no guarantee that the company wouldn't encounter the same types of problems.
EHealth knew that its offer of rescuing the Obamacare exchanges probably wouldn't float in the Washington, D.C., swampland. The idea wasn't a bad one, though. Actually, it probably would work despite the challenges -- because of the motivation factor.
Even though eHealth offered to take over for free, the company's motives weren't completely altruistic. If it succeeded in enrolling millions of members in Obamacare, the company would have still made plenty of money and gotten more free publicity than it could even dream about.
Several private health insurance exchanges have been very successful. Like eHealth, GetInsured.com and GoHealth have done well. Others have scored major contracts with large corporations looking to move employees or retirees to exchanges.
Contractors like CGI Group and Quality Software Services usually get paid millions whether what they develop succeeds or fails, although they could forego bonuses in some cases based on performance measures. Private exchange operators like eHealth only make money if its technology works and customers actually buy insurance. Sink or swim -- that's a real motivator.
Fool contributor Keith Speights has no position in any stocks mentioned. The Motley Fool recommends UnitedHealth Group. 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.