UnitedHealth's 'moonshot gamble' with Obamacare site risks company's digital reputation

WASHINGTON – As a Nov. 30 deadline approaches on a White House promise to fix its floundering health insurance website, UnitedHealth Group Inc. faces a test that some experts believe could make or break its reputation as the premier player in digital health care delivery.

Success for the subsidiary that is the general contractor managing fixes to the troubled computer operation could establish Minnetonka-based UnitedHealth as a model of 21st century technology and digital know-how. Failure could blemish its carefully nurtured cutting-edge image.

"To do this is really a kind of high-stakes, moonshot gamble," said Steve Parente, a professor at the University of Minnesota's Carlson School of Management. "If they can pull it off, they will be seen as a nimble, smart firm that goes beyond old, dowdy health insurance.

"If the system is not there to handle the demand that's going to come after Thanksgiving, they've got an absolute mess."

United advertises its Optum division as providing the technical expertise to make the health care system run more efficiently. It points to things like a $14 million Medicaid fraud and abuse prevention contract that saved Iowa $86 million over three years.

But the association of Optum subsidiary Quality Software Systems, Inc. with the federal health care website poses financial and political risks, experts say. The website is for people in states that, unlike Minnesota, did not build their own insurance sites.

UnitedHealth spokesman Donald Nathan said the decision to expand its role with the embattled website was a matter of "delivering quality work" for the Centers for Medicare and Medicaid Services and the Department of Health and Human Services.

Those who know the company best believe its officers took the potential for fallout into account before agreeing to oversee the website's fix.

"They didn't create this mess," said David Heupel, an analyst who studies United for Minneapolis-based Thrivent Financial. "They were asked to fix it. … I'm not sure people will point fingers at United if they can't."

Sheryl Skolnick of CRT Capital Group, who has followed the company for years, is not so sure.

"United is very cautious in that it will evaluate all the risks as well as the opportunity associated with any business decision and look at the return vs. the investment very very carefully," Skolnick said.

Still, she added, when Quality Software Services agreed to become the general contractor in charge of fixing the struggling, much-publicized HealthCare.gov site, United chose to put itself in a political "hot seat" that might ultimately impact its image, if not its business.

United acquired Quality Software Services — better known as QSSI — in 2012 for an undisclosed amount. QSSI already had a contract to help build the insurance exchange website that was to play a major role in implementing the Affordable Care Act.

From the moment the purchase became known, some members of Congress questioned giving the country's largest health insurer influence in rolling out the nation's most comprehensive health care reform.

Overseeing the website repair has led to what seems unprecedented political pressure on a company that has handled billions of dollars in government contracts for decades.

Most of it comes from House Republican opponents of the Affordable Care Act who have voted dozens of times to repeal the law and still hope to kill it. Some House members have publicly stated that the website should be scrapped, not fixed.

United faces a subpoena and possible investigation by the House Oversight Committee. Conservative blogs allege crony capitalism because one of United's vice presidents, Anthony Welters, bundled hundreds of thousands of dollars for President Obama's 2012 re-election.

Nathan said Welters' efforts for Obama played no role in securing the HealthCare.gov work, noting that QSSI got the website development contract before the Optum acquisition.

"Yes, we do encourage people to participate in communities and to be active in the political process however they see fit," Nathan said. "But we've grown to be a Fortune 20 company by successfully delivering quality products and services for our customers."

United has gotten through tricky situations with the government before.

Just this year, computer glitches caused complaints and bad publicity as United took over a $20 billion Tricare contract to manage health care for military members, veterans and their families in 21 states.

United fixed most of those problems in a few months. But the varied interests of public agencies, private contractors and health care reform foes make the HealthCare.gov situation a lot harder to manage, experts say.

"I felt like I was watching the current version of the Salem witch trials," Skolnick said. "I don't think the target is any of the vendors. But when the target is as high-profile an entity as the White House and HHS, you have to go at the flank, approach it from the side."

QSSI has not been mentioned in many news reports so far, but that could change after Nov. 30, when the website is supposed to be fixed.

"I think this gamble represents a risk to their shareholders," Parente explained. "The firm has done very well by saying that it is better than average and pathbreaking in the things that they're doing. That's the whole point of the Optum division. This is the ultimate test of that model."