Maryland fires contractor that built troubled health insurance exchange
Maryland fires contractor that built troubled health insurance exchange
(about 2 hours later)
Maryland is firing the prime contractor that built its online health insurance marketplace, which has so many structural defects that the state might soon have to abandon all or parts of the system that cost tens of millions of dollars to build.
Maryland has fired the contractor that built its expensive online health insurance marketplace, which has so many structural defects that officials say the state might have to abandon all or parts of the system.
The vote to jettison Noridian Healthcare Solutions came Sunday at a late night meeting and at the recommendation of Isabel FitzGerald, the cabinet secretary in charge of information technology. She was joined by the board of the Maryland Health Benefit Exchange.
The Maryland Health Benefit Exchange voted late Sunday to terminate its $193 million contract with Noridian Healthcare Solutions. Columbia-based Optum/QSSI, which the state hired in December to help repair the flawed exchange, will become the prime contractor, while Noridian will assist with the transition.
The decision was announced by Joshua M. Sharfstein, the state secretary of health and mental hygiene. Columbia-based Optum/QSSI will take over as the prime contractor. FitzGerald said the changes begin “today.”
“We worked very hard with [Noridian] to find a path forward,” said Isabel FitzGerald, the cabinet secretary in charge of information technology. “And the decision now is that we are just not making the progress that we had hoped.”
The shift expands the role of Optum/QSSI, which the state had hired as a general contractor in December to help repair the flawed exchange. The site crashed within minutes of going live Oct. 1 and has not been fully functional since then.
Maryland was one of 14 states that chose to build its own health-insurance marketplace to implement President Obama’s Affordable Care Act, which politicians and residents in the state strongly support. Gov. Martin O’Malley (D) boasted that the marketplace, and the Web site Marylanders would use to access it, would be one of the best in the country.
As of Feb. 10, Maryland had paid Noridian nearly $65 million and had unpaid invoices totaling another $13 million, according to state health officials.
But the site failed within minutes of its Oct. 1 launch, blocking out residents who were trying to get health insurance. The system has limped along since then. Ultimately, state officials say, they may have to rely at least partially on the federal health-care Web site, or on sites operated by other states.
The exact terms of Noridian’s termination have not been put into writing but Noridian’s role as prime contractor will end, said Dan Graham, an attorney for Noridian.
As of Monday, Maryland had paid Noridian $67.9 million for its work, and had unpaid invoices totaling another $12.9 million, state health officials said.
Tom McGraw, Noridian president and chief executive said the company and the state are negotiating a mutual agreement regarding the transition.
Maryland “is preserving all rights to seek damages against Noridian and its subcontractors for problems with the IT system,” Joshua M. Sharfstein, state secretary of health and mental hygiene, said Monday before a legislative panel that is monitoring the exchange.
In its testimony, the state said its health exchange board “is preserving all rights to seek damages against Noridian and its subcontractors for problems with the IT system.”
Noridian is negotiating a termination agreement with Maryland officials, Tom McGraw, president and chief executive of the North Dakota-based company, said in a statement. A person close to the discussions said the plan is for a “very rapid handover” that will have Noridian cease almost all work by next week. The deal would include a six-month moratorium on legal claims filed by the state against Noridian or by Noridian against the state, the person said.
Open enrollment for the state health insurance marketplace ends March 31. A person close to the transition discussions said the plan is for a “very rapid handover” that will have Noridian exit from most of its work developing and maintaining the system this week, and from the remainder of those set of tasks next week.
McGraw said his company met its contractual obligations under “tremendous pressure and constant changes by the state” that amounted to hundreds of adjustments and fixes.
That person also said a plan now on the table as part of the still unsigned terms would call for a six-month standstill on claims filed by the state against Noridian or by Noridian against the state for unpaid bills.
Maryland is not alone in jettisoning a lead contractor over health-exchange failures. In January, federal officials replaced the IT contractor mainly responsible for building its troubled site.
The state testimony was prepared for a legislative committee monitoring progress on repairing the health exchange.
O’Malley spokeswoman Nina Smith said the governor supported the decision to fire Noridian “because he is focused on getting as many Marylanders as possible enrolled in quality, affordable health coverage.”
McGraw said the North Dakota-based company has met its contract obligations under “tremendous pressure and constant changes by the state” that amounted to hundreds of adjustments and fixes. “Noridian is committed to providing access to affordable care to all Marylanders and will continue to do so by working with the State on ensuring a successful transition of software, licenses and subcontractors,” McGraw said in a written statement.
Key Maryland health officials became increasingly critical of Noridian in recent weeks. Thomas H. Kim, a deputy health secretary, said Noridian “severely misrepresented the maturity” of the system it could build and fought bitterly with its subcontractor, Maryland-based EngagePoint, resulting “in the stoppage of work during the most critical period.”
Maryland officials were some of the earliest and most enthusiastic supporters of President Obama’s Affordable Care Act, which authorized states to start their own health-insurance marketplaces. Maryland was one of 14 states that chose to build its own site, and Gov. Martin O’Malley’s (D) administration boasted that it would be one of the best in the country.
Noridian fired EngagePoint after the disastrous launch; the two companies are suing each other in federal court in Baltimore.
Those aspirations evaporated rapidly.
Maryland hired Noridian two years ago, signing a contract worth $193 million over five years. The company planned to use existing health-care software, rather than designing something new — a proposal that advanced them in bidding because state officials thought that ready made products would make it easier to meet tight deadlines. State officials said they were impressed by the small company’s “successful track record” processing claims and handling administrative services with Medicaid and Medicare programs.
Maryland’s site failed within minutes of its Oct. 1 launch, blocking out residents who had flocked to sign in. The state has been limping along and attempting repairs since then.
But the system Noridian built was one of the worst performing in the country. Enrollment has lagged far behind expectations, with only 33,251 Marylanders having signed up for a private plan through the exchange as of Feb 15. State officials initially said they wanted nearly five times that number.
Brief public bursts of optimism about Maryland’s progress — including a December news conference in which O’Malley said the worst problems had been resolved and the system was functioning for most people — have given way in recent weeks to increasingly sharp public reproaches of Noridian by key state health officials.
A Washington Post investigation found that more than a year before Maryland went live with its site, senior state officials failed to heed warnings that no one was ultimately accountable for the project and that the state lacked a plausible plan for how it would be ready by the Oct. 1 deadline.
In a statement, the governor said he supports FitzGerald’s recommendation and the board’s decision because he is focused on getting as many Marylanders as possible enrolled in quality, affordable health coverage.
The fiasco has resonated in Maryland’s Democratic gubernatorial primary race, with Attorney General Douglas F. Gansler criticizing his rival, Lt. Gov. Anthony G. Brown, for lapsed oversight. Brown was the highest-ranking elected official charged with implementing the new federal health-care law.
In February 2012, health-exchange officials picked Noridian to carry out the project, and signed a contract worth $193 million over five years to build an intricate system. The North Dakota-based company planned to use off-the-shelf health-care software — a proposal that advanced them in bidding because state officials thought that readymade products could be knit together quickly with special features to meet tight deadlines. Although the company was small, state officials were impressed by Noridian’s “successful track record” processing claims and handling administrative services with Medicaid and Medicare health programs.
Maryland officials say they have made hundreds of improvements to the system since its launch, but structural problems remain. In recent months, Maryland has spent millions extra on additional technical help and call centers to process applications. The exchange has asked permission to access an additional $33 million this year in federal grant money that was supposed to be spent in future years.
The system Maryland got proved defect-ridden.
The state also was compelled to enact emergency legislation to help insure those who could not sign up and had to begin the year with no coverage.
Maryland’s exchange has been one of the worst performing in the country. Enrollment has lagged expectations. As of Feb. 15, and with less than two months before enrollment closes, 33,251 Marylanders had enrolled in a private plan through the exchange.
Researchers hired by the state estimate that at least 70,000 uninsured people should sign up for those plans before March 31, when open enrollment is scheduled to close. When Medicaid enrollees are included in the tally, Maryland has signed up nearly 190,000 residents for coverage.
Maryland is not alone in jettisoning a lead contractor over health-exchange failures. In January, federal officials also replaced the IT contractor mainly responsible for building its troubled site.
The drumbeat against Noridian grew louder last week when Thomas H. Kim, a deputy secretary at the Maryland Department of Health and Mental Hygiene, appeared at a public meeting and asserted that Noridian had “severely misrepresented the maturity” of the system it could build and then shifted“its leading role to an unauthorized subcontractor under an undisclosed profit-sharing agreement.
Kim said Noridian bitterly fought with its subcontractor, Maryland-based EngagePoint, which Kim said resulted “in the stoppage of work during the most critical period.”
Noridian fired EngagePoint in the weeks after the disastrous Maryland launch, and the two companies now are suing each other in federal court in Baltimore is disputes over money, employees and the remaining work. Because of the litigation, officials from both firms have declined to give interviews about their work.
Assigning blame for the troubled system has worked its way into the state’s Democratic primary race for O’Malley’s replacement, with Attorney General Douglas F. Gansler criticizing his rival, Lt. Gov. Anthony G. Brown, for lapsed oversight. Brown was the highest-ranking elected official charged with implementing the affordable health-care law.
A Washington Post investigation found that more than a year before Maryland went live with its site, senior state officials failed to heed warnings that no one was ultimately accountable for the $170 million project and that the state lacked a plausible plan for how it would be ready by the Oct. 1 deadline.
The Post found that an independent auditor hired by the state warned that exchange officials were missing early deadlines to begin building the IT backbone for the public Web site. In December 2012, the auditors said in a presentation that Maryland did not appear to be leaving itself with enough time to “complete, verify and test all system components before go-live,” according to a copy of their presentation.
EngagePoint has alleged in court documents that Noridian “concealed its lack of relevant expertise” when it bid on the contract. Noridian’s president and chief executive Tom McGraw responded in a written statement at the time that EngagePoint’s accusations are “false, unsupportable and will be contradicted by evidence that we present in court and arbitration.”
The court dispute and Noridian’s financial exposure drew the attention of regulators in North Dakota, home to Noridian’s parent company, which does business as Blue Cross Blue Shield of North Dakota. The North Dakota Insurance Department is “monitoring this situation,” said commissioner Adam Hamm.
Maryland officials say they have made hundreds of improvements to the system since its launch, but structural problems remain. That has resulted in “substantial manual work,” Kim said, and heavy reliance on call centers with more than 400 employees. In recent months, Maryland has spent millions extra on additional technical help and call centers to process applications. The exchange has asked permission to access an additional $33 million this year in federal grant money that already had been secured for future years.
The state also was compelled to enact emergency legislation to spend millions to help insure those who could not sign up and had to begin the year with no coverage.
State officials have stood by the broken system — and Noridian — for the first enrollment period, which started Oct. 1 and ends March 31.
“The contractors have not delivered what they said they would deliver,” Sharfstein said of Noridian earlier this month. “There’s no question about that.”
John Wagner in Annapolis contributed to this story.
