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Could Obamacare Actually Fall Apart?

By Sean Williams – Nov 17, 2013 at 12:37PM

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With problems mounting for Healthcare.gov, could Obamacare unravel before it has a chance to really get off the ground?

The past seven weeks have been about as challenging of a start to Obamacare enrollments as states and the Obama administration could have imagined. Between a number of technical problems with the federally run health exchange, Healthcare.gov, coupled with a still large number of uninsured people with little to no knowledge of the Patient Protection and Affordable Care Act, the cries of the opposition are growing.

Last week's official enrollment figures only fueled the calls for repeal as the final enrollment tally of 106,185 for the first 33 days was well below most already lowered expectations -- especially given that there are 50.25 million uninsured people in this country. This miserable start and recent data forces us to ask: Could Obamacare actually fall apart?

The case against Obamacare is mounting
Before I attempt to answer this question, let me impart a few events that even lead to the presumption of the idea that Obamacare could unravel.

First, there have been a number of delays not only with the technology governing the health exchanges themselves, but also in the regulations behind the PPACA. For instance, in early July the Obama administration announced that it was pushing back the enforcement of the employer mandate -- which requires businesses of 50 or more full-time employees to offer those employees health insurance or potentially face a penalty ranging from $2,000 to $3,000 per employee -- a full year to Jan. 1, 2015.

More recently, President Obama suggested a change that would need to be enacted on a state level whereby people could keep their current insurance plan, even if it didn't meet the more stringent requirements under the PPACA for another 12 months (i.e., through 2014). These delays demonstrate inconsistencies with the original timeline of the law and impart an inability to stay on schedule, which threatens the enforceability of the law itself.

Second, we have the technical problems themselves. The lack of a quick fix for Healthcare.gov has created a situation where even if the exchange is brought back online, we have to wonder if there will be enough time before the coverage cutoff date for individuals to sign up for health insurance. If there isn't enough time, we're then talking about a delay to at least some aspects of the individual mandate, which brings us back to the first point of not staying on schedule.

The third troublesome point is just how little research seems to have gone into critical aspects of this launch from the perspective of the government. While the onus of blame for the poorly written source code on Healthcare.gov does lie with its architect, CGI Group, practically every contractor that has testified before a Congressional panel has stated that the government didn't allot enough time for system testing before launch.

Likewise, Obama's apology to the American people who are having their insurance plans cancelled because they don't meet PPACA requirements is another clue that strategists failed to account for the reaction of insurers and individuals who sought out cheaper insurance plans.

Finally, there are concerns that people will simply not sign up, especially young adults, who are critical to the success of Obamacare. As I mentioned, knowledge of the law is still pretty dismal, and the penalty for going the year without insurance is so inordinately small relative to the cost of purchasing health insurance each month that many young adults are likely to opt for the penalty -- at least for the first year or two.

Source: Chris, Flickr.

Could Obamacare actually fall apart?
Now back to our original question: Could Obamacare fall apart?

Putting the party rhetoric on the back burner and getting down to the bare-bones facts of what's happened under this transformative health law, it appears that Obamacare is still on solid ground to move forward. However, what I will say is that Obamacare has gone from having practically no chance of falling apart just weeks ago to a figure that is clearly not zero any longer.

Yet regardless of our personal opinions about Obamacare, the health-care industry appears far too invested in this health reform for the government and supporters to simply give up on it now -- and that's what really matters.

As a reminder, let's not forget that some of our nation's largest insurers made gigantic purchases -- WellPoint (ELV 3.48%) buying Amerigroup for $4.5 billion, CIGNA (CI) gobbling up Healthspring for $3.8 billion, and Aetna (AET) acquiring Coventry Health Care for $5.6 billion -- specifically with Obamacare's Medicaid expansion in mind. Without that expansion, the lofty premiums paid here for these Medicaid-based insurers could hamper growth for years. In other words, insurers are just as invested in Obamacare's success now as supporters of the law are.

The same goes for hospital operators such as HCA Holdings (HCA 5.15%) and Tenet Healthcare (THC 4.01%), which have been instituting cost-saving cloud-based applications and shifting to an all-electronic records platform in anticipation of an influx of newly insured patients and in an effort to improve operating efficiency. These hospitals are counting on a reduction in the number of uninsured people that need treatment so that their percentage of doubtful revenue compared to total revenue drops, thus boosting profits.

With the bulk of the health-care industry preparing for years in advance of the implementation of Obamacare, there doesn't seem to be any reason insurers or hospital operators would prefer to see it repealed now. Clearly, things are going to need to start going right for Obamacare if it's to be successful, starting with a fix of Healthcare.gov, but what's not failing is the idea that a more universal health plan is needed for the people of this country, which, at the moment, Obamacare does offer a promise to take care of.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool owns shares of, and recommends WellPoint. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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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Stocks Mentioned

Aetna Inc. Stock Quote
Aetna Inc.
AET
Elevance Health Inc. Stock Quote
Elevance Health Inc.
ELV
$470.06 (3.48%) $15.82
Cigna Corporation Stock Quote
Cigna Corporation
CI
Tenet Healthcare Corp. Stock Quote
Tenet Healthcare Corp.
THC
$53.65 (4.01%) $2.07
HCA Healthcare, Inc. Stock Quote
HCA Healthcare, Inc.
HCA
$193.26 (5.15%) $9.47

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