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July 25, 2014

Affordable Care Act: Several States Reconsidering State Exchanges – Big Name High Tech Giants Couldn’t Deliver

Even as two Federal Appeals courts spilt on the issue of tax credits for purchasers of exchanges run by the federal government, states are getting out of the business of running exchanges.

We have previously reported on the problems associated with and concerns that similar issues may arise with the CMS Open Payments website, especially given the two site's similarities. We noted that vender CGI Federal's track record should cause stakeholders to buckle up for a potentially bumpy ride, with glitches, and problems accessing information as possible concerns.

Continuing our interest in the health care exchange websites, four states—Massachusetts, Nevada, Oregon, and Maryland—scrapped their malfunctioning websites. As reported by Politico, nearly half a billion dollars in federal money has been spent developing these four state exchanges that are now in shambles, and the final price tag for salvaging them may go sharply higher.

The federal government is caught between writing still more exorbitant checks to give them a second chance at creating viable exchanges of their own or, for a lesser although not inexpensive sum, adding still more states to The federal system is already serving 36 states, far more than originally anticipated.

As for the contractors involved, which have borne most of the blame for the exchange debacles, a few continue to insist that fixes are possible. Others are braced for possible legal action or waiting to hear if now-tainted contracts will be terminated.

The $474 million spent by these four states includes the cost that officials have publicly detailed to date. It climbs further if states like Minnesota and Hawaii, which have suffered similarly dysfunctional exchanges, are added.


Massachusetts is original home of state run health exchanges and have been running a state system for years but meeting the federal mandates became for them problematic. According to The Hill: Massachusetts abandoned its website, a system so problematic that the state was forced to enroll tens of thousands of people in temporary insurance plans through Medicaid.

The plan underscores the depth of technical problems with the Massachusetts Health Connector and echoes a recent decision by Cover Oregon, another glitch-ridden marketplace, to hand federal health officials the reins to its system this month.

Massachusetts officials are pursuing what they described as a "dual-track strategy" for their insurance marketplace, combining new, off-the-shelf enrollment software with a back-up plan to shift the system into if the transition takes too long.


The board of the Nevada health insurance exchange unanimously voted to end the state's contract with Xerox, the vendor responsible for constructing the exchange website, and instead rely on the federal government's site for the 2015 open enrollment period.

The decision comes after a series of billing, enrollment and other technological errors spurred a class-action lawsuit against the state from 200 residents who claim they purchased exchange plans but have yet to receive coverage.

Gov. Brian Sandoval (R) said that Xerox had "failed to perform its contractual duties," adding, "The board made the best decision it could under these difficult circumstances."

Meanwhile, a Xerox spokesperson called the decision "extremely disappointing" and cited the exchange's success in enrolling state residents in Medicaid. According to the company, nearly 190,000 Nevadans were determined to be eligible for Medicaid through the exchange


Oregon became the first state to drop its exchange website and transition into the system managed by the federal government. The decision followed months of severe technical issues that made Oregon's marketplace one of the worst in the country.

About $130 million was spent on Cover Oregon, but it was the only enrollment system that won't let registrants buy coverage and qualify for tax credits in one sitting. It had not enrolled a single person online as of early March, and remained mired in glitches almost seven months after a rocky launch.

Additionally, as reported by Reuters: Oregon's Democratic governor wants the state's attorney general to sue the technology vendor that developed the embattled Cover Oregon website to recover payments, while officials from Oracle said on Friday any claims were unfounded.

The announcement by Governor John Kitzhaber seeking legal action comes as federal prosecutors have subpoenaed documents from Oregon's health exchange agency as part of a grand jury investigation into how the state used federal money to set up the now-failed health insurance exchange.

"The time has come to hold Oracle accountable for its failure to deliver technology that worked on the timelines the company committed to," Kitzhaber said in a statement on Thursday. "Today I have asked Oregon Attorney General Ellen Rosenblum to immediately initiate legal action to recover payments and other damages from Oracle."

"Oracle did not deliver," Kitzhaber said. "The poor quality of its work is obvious in the many bugs that are still not fixed, in missed deadlines (and) in the fundamental flaws in the system's architecture."

Oracle Corp., which the state paid about $134 million, defended its work and called Kitzhaber's move political.

"OHA and Cover Oregon were in charge and badly mismanaged the project by consistently failing to deliver requirements in a timely manner and failing to staff the project with skilled personnel," company officials said in a statement.

"We understand the political nature of the announcement just made and that the governor wants to shift blame from where it belongs. We look forward to an investigation that we are confident will completely exonerate Oracle."


Maryland scrapped its malfunctioning health care exchange for the technology Connecticut developed for its Obamacare website, AccessHealthCT.

"The Health Exchange Board selected a partner with a proven track record to upgrade our website using a platform that has an established record of success," Maryland Gov. Martin O'Malley said. "We're confident that this partner will have the website upgraded by the time the next open enrollment period begins in November."

Connecticut's website was created with the help of private contractors, including Deloitte Consulting and KPMG. It is run by AccessHealthCT CEO Kevin Counihan, who once said his "mission is to make history."

Problems across the country

As signed into law four years ago, the Affordable Care Act encouraged all states to develop their own insurance marketplaces, each one tailored to its local environment. But only 14 states and the District of Columbia have attempted the feat.

In a late-March analysis, CNBC found that the state-run exchanges varied wildly in cost efficiency. Hawaii Health Connector had enrolled just 5,700 people, at a cost of more than $35,000 per enrollee, while Covered California had signed up more than a million people for about $1,000 each. Those costs will diminish over time, as the newly built systems keep enrolling people, but the wide disparities themselves raise an obvious question. Given the difficulty of building one efficient health insurance exchange, why try to build 50 of them?

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