Life Science Compliance Update

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?

August 15, 2013

AMA Reports Drop in Incorrect Health Claims for Third Year in a Row

The percentage of incorrectly processed health plan claims fell for the third straight year to 7.1% in 2013, according to the American Medical Association (AMA). The AMA's report can be found here.

In 2011, more than 19% of medical claims were incorrectly processed. Last year, the number dropped to 9.5% of claims.

The survey is based on a random sampling of nearly 2.6 million electronic claims from 450 physician practices submitted between February and March 2013. Payers included Aetna, Anthem Blue Cross Blue Shield, Cigna, Health Care Service Corporation, Humana, Regence, UnitedHealthcare, and Medicare.

If insurers sent a timely and accurate response to every claim received, $43 billion in administrative costs could have been saved, according to the AMA.

The AMA also found great variation in the accuracy of commercial payers. For example, Regence had the lowest claim accuracy rate at 85.03%. Medicare led all insurers with an accuracy rate of 98.10%.

The AMA report also showed that medical claim denials fell by nearly half in 2013, dropping from 3.48% in 2012 to 1.82% this year. The timeliness of medical claims processed also improved by 17% since the first AMA report in 2008.

The AMA also added an "Administrative Burden Index" this year to rank commercial insurers according to their level of unnecessary cost.

The report card found administrative tasks with health plans, such avoidable errors, inefficiency and waste in the medical claims process, cost an average of $2.36 per claim for doctors and payers. Cigna had the best cost per claim at $1.25, which was 47% below the commercial payer average. Health Care Service Corporation had the worst cost at $3.32 per claim, 41% above the commercial average.

According to the AMA, $12 billion a year could be saved if health plans eliminated unnecessary administrative tasks. This amount is equal to 21% of physicians' total administrative costs to ensure accurate payments from insurers.

July 18, 2013

AMA’s National Health Insurer Report Card – $12 Billion Could be Saved Through Increased Claims Automation

Patients are responsible for nearly one-quarter of the medical bill, according to the findings released today from American Medical Association's (AMA) sixth annual check-up of health insurers and their patterns for processing and paying medical claims.

For the first time, the AMA's National Health Insurer Report Card examined the portion of health care expenses that patients are responsible for through copays, deductibles and coinsurance. During Feb. and March of this year, patients paid an average 23.6 percent of the amount that health insurers set for paying physicians.

"Physicians want to provide patients with their individual out-of-pocket costs, but must work through a maze of complex insurer rules to find useful information," said AMA Board Member Barbara L. McAneny, M.D. "The AMA is calling on insurers to provide physicians with better tools that can automatically determine a patient's payment responsibility prior to treatment."

The National Health Insurer Report Card is the cornerstone of the AMA's Heal the Claims Process ™ campaign. Launched in June 2008, the campaign's goal is to lead the charge against administrative waste by improving the health care billing and payment system.

Administrative Burden Index

The AMA also unveiled its new Administrative Burden Index (ABI) to rank commercial health insurers according to the level of unnecessary cost they contribute to the billing and payment of medical claims. The AMA found that administrative tasks associated with avoidable errors, inefficiency and waste in the medical claims process resulted in an average ABI cost per claim of $2.36 for physicians and insurers. Cigna (CI) had the best ABI cost per claim of $1.25, or 47 percent below the commercial insurer average. HCSC had the worst ABI cost per claim of $3.32, or 41 percent above the commercial insurer average.

The AMA estimates that $12 billion a year could be saved if insurers eliminated unnecessary administrative tasks with automated systems for processing and paying medical claims. This savings represents 21 percent of total administrative costs that physicians spend to ensure accurate payments from insurers.

"The high administrative costs associated with the burdens of processing medical claims annually should not be accepted as the price of doing business with health insurers," said Dr. McAneny. "The AMA is a strong advocate of an automated approach for processing medical claims that will save precious health care dollars and free physicians from needless administrative tasks that take time away from patient care."

Other Key Findings

Since 2008, the AMA's National Health Insurer Report Card has examined the claims processing performance of the nation's largest health insurers and provided an objective and reliable gauge of denials, timeliness, accuracy, and transparency. Key findings from six years of data generated by the report card include:

Accuracy:  Error rates for commercial health insurers on paid medical claims have dropped significantly from nearly 20 percent in 2010 to 7.1 percent in 2013. While dramatic improvements have been made in accuracy during the last three years, the AMA estimates that more than $43 billion could have been saved if commercial insurers consistently paid claims correctly since 2010. UnitedHealthcare (UHC) led commercial health insurers with an accuracy rating of 97.52 percent. Regence trailed all insurers with an accuracy rating of 85.03 percent. Medicare led all insurers with an accuracy rating of 98.10 percent.

Denials. Medical claim denials dropped 47 percent in 2013 after a sharp spike in 2012 among most commercial health insurers. The overall denial rate for commercial health insurers went from 3.48 percent in 2012 to 1.82 percent in 2013. Among all insurers this year, Cigna (CI) had the lowest denial rate at .54 percent, while Medicare had the highest denial rate at 4.92 percent.

Timeliness. Health insurers have improved response times to medical claims by 17 percent from 2008 to 2013. Humana (HUM) had the fastest median response time of six days, while Aetna (AET) was the slowest with a median response time of 14 days. Medicare's median response time of 14 days has gone unchanged since 2008.

Transparency. Health insurers have improved the transparency of rules used to edit medical claims by 37 percent from 2008 to 2013. Reducing the use of undisclosed payer-specific edits unlocks the flow of transparent information to physicians and reduces the administrative costs of reconciling medical claims.

To learn more about Heal the Claims Process™ campaign, including the National Health Insurer Report Card and the new Administrative Burden Index, please visit the AMA website at


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