As kids, we're always taught that trying our best is, more often than not, good enough. The troubles of the Obamacare website thus far demonstrate that trying doesn't always cut it.
We're roughly two months into the trial-and-error-filled beginning to Obamacare's health exchanges, and considerably fewer people than expected have completely signed up for health insurance -- at least according to the latest figures from the Department of Health and Human Services which showed that a meager 106,185 people had completed their enrollment in Obamacare between Oct. 1 and Nov. 2, including less than 27,000 from the 36 states operating on the federally run Healthcare.gov platform.
Although I was able to sign up with little issue within the first week, I had the luxury of using one of the few state-run exchanges that's working well (Washington). For the remainder of the country, it's been a logistical nightmare that's culminated in server overloads, power outages, and countless lines of bad IT architecture.
Take a hike!
At some point we knew the ball was going to drop and contractors that had been in charge of various aspects of Healthcare.gov could get the boot. Two days ago, the first Obamacare contractor was "officially" shown the door. I say "officially" because it hasn't been officially announced yet, but according to a Bloomberg report via a spokesperson for the HHS, Verizon (NYSE:VZ) subsidiary Terremark, which is a data center operator for Healthcare.gov, will be replaced when its contract is up in March by Hewlett-Packard (NYSE:HPQ). The Terremark data center actually crashed twice in October and, during one of those crashes, managed to knock another critical system offline.
In the grand scheme of things, Verizon's losing the data center contract to HP isn't that big of a deal. Verizon recently purchased the remaining unowned stake in Verizon Wireless from Vodafone Group and makes a good chunk of its money from wireless and wireline services. Similarly, for HP, winning the data center contract from Healthcare.gov isn't going to generate a significant amount of revenue (Terremark earned just $49 million in contracts according to Bloomberg), but it does give the struggling tech giant a big confidence boost and the ability to use its win to tout its technological expertise to potential customers.
What this really represents, though, is the wake-up call to Obamacare's remaining contractors that "trying their best" isn't going to be tolerated any longer. It very well could turn into a case of "Deliver or we'll find someone else who will!" Let's have a look at two contractors that could be next in line to take a hike if Healthcare.gov isn't functioning like a charm within the next couple of days or weeks.
I believe the most logical choice here would be Canada's CGI Group (NYSE:GIB). Being the lead architect behind Healthcare.gov and really being unable to offer much headway in how to fix its innumerable problems, CGI has been kept around at all probably because of its knowledge of the IT-code that it wrote. Once the so-called "tech surge" has diagnosed and repaired Healthcare.gov and things are working properly, I wouldn't be shocked to see CGI dismissed from its need to oversee any further maintenance of the site. Like Verizon, we're not talking about a catastrophic revenue loss here, but the damage to CGI's reputation throughout this process could reverberate for years to come and keep potential customers on the sidelines.
Another contractor that'd be wise to get its act together, but that I'm also far less confident is in the cauldron relative to CGI Group, is UnitedHealth Group (NYSE:UNH) subsidiary Quality Software Solutions, or QSSI. QSSI is responsible for aspects of personal identification and in linking personal information with the appropriate government agency. Early on, QSSI's systems, like practically everything else, failed to work well, but it managed to resolve a number of its own technical glitches since the launch. Where I feel QSSI could be on the hook is with the Nov. 30 deadline (that's today!) to get Healthcare.gov up and running. QSSI was named the Healthcare.gov "fix" supervisor last month and stands to take the full brunt of the blame should the website not be working for a majority of people come Monday.
This sector will continue to gain momentum
I've often said that one person's trash is another person's treasure, and Obamacare's website woes are proving pure gold for private platform insurers such as eHealth and Aon (NYSE:AON).
For individuals looking to get health insurance before the Dec. 23 deadline to be covered by Jan. 1, when the individual mandate kicks in, they can bypass Healthcare.gov altogether and simply go to eHealth's private platform, which is essentially the same type of open health insurance marketplace as Healthcare.gov. The only difference -- not to make light of Healthcare.gov's shortcomings -- is that eHealth has been in business for years and is working like a charm even with the increase in recent business.
For small businesses, which represent an even bigger opportunity, with the HHS noting that Healthcare.gov won't be able to handle small business enrollments until well into 2014, Aon Hewitt's Corporate Health Exchange may represent the smartest alternative. Aon has already garnered 18 clients with 5,000 or more employees onto its private corporate exchange, including Walgreen, Darden Restaurants, and Sears Holdings. With few options available to small businesses, look for Aon to thrive.
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 Aon. It also owns shares of Darden Restaurants and recommends UnitedHealth Group and Vodafone. 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.