As Md. rebuilds its health insurance exchange, lots of pressure and little room for missteps

Maryland is sprinting to rebuild its malfunctioning online health insurance system on a time schedule that leaves no room for error, without the endorsement of the federal government or a clear plan for funding the project.

The state has adopted software from Connecticut and hired new consultants. But many of the decision makers who led the first, flawed effort remain in place and — despite criticism — continue to operate largely behind closed doors.

Officials in the administration of Gov. Martin O’Malley (D) say they will find funding to pay for the project and complete it by Nov. 15, the start of the next open enrollment period. But federal authorities appear skeptical. Maryland’s top health official, Joshua M. Sharfstein, said the Obama administration is waiting to see whether the project is viable before it will authorize the use of more federal dollars.

If the project seems to be struggling, federal officials could withhold funding, increasing pressure on Maryland to switch to the federal enrollment system, as Oregon did late last month. A meeting to determine Maryland’s progress is planned for June 30, according to two people with knowledge of the negotiations.

“They need to get this right. They don’t have any margin of error,” said Rick Howard, who specializes in public-sector projects for Gartner, an information-technology research and advisory company. “There’s not going to be any forgiveness this time.”

The White House is relying on states to use the federal site, HealthCare.gov, or have efficient exchanges of their own so residents of every state can sign up online for health insurance under President Obama’s signature Affordable Care Act. That is why the federal government gave grants to those states that wanted to build their own health exchanges and are closely monitoring the results.

During the first national open-enrollment period, which ended March 31, Maryland had one of the worst sign-up rates for private plans in the country. Another botched attempt would be a political embarrassment for O’Malley, who is contemplating a White House bid, and Lt. Gov. Anthony G. Brown (D), who is overseeing the implementation of the health-care law in Maryland and is running for governor.

The exchange board voted April 1 to hire Deloitte Consulting to rebuild its system, finalizing a contract that had been in the works for weeks. Exchange officials wanted to start overhauling the system sooner, according to two people involved in the discussions, but were urged by federal officials to wait until the first enrollment period closed.

When Deloitte was hired, Maryland’s top technology official said it would take seven months to have the basics of a new sign-up system in place. At that point, there were seven months and two weeks before the start of the next enrollment period — leaving scant room for delays.

Robert Laszewski, president of the marketplace consulting firm Health Policy and Strategy Associates, said that a more realistic time frame would be at least a couple of years and that said it might make more sense for Maryland to use the federal sign-up system in the interim.

“It was a two-to-three-year ramp-up to get these going, and they want to redo everything in, what, seven months?” Laszewski said. “That puzzles me. With seven months to go, why take the risk with a project that should take a couple years?”

U.S. Rep. John Delaney (D-Md.) has publicly called for the state to consider a shift to the federal exchange, which he thinks could be completed well before November and would likely not cost anything. “They’re going for an option that’s going to take more time and cost more money,” Delaney said. “I think after you blow $100 million and fail miserably, there should be a robust debate” about other options.

Sharfstein said switching to the federal exchange would have “some serious, major disadvantages,” including that the system cannot easily handle sign-ups for Maryland’s Medicaid program, which provides health coverage to the poor and disabled. Sharfstein estimated that it would cost $43 million to $53 million to build a new Medicaid system that would mesh with the federal exchange — not much different than the cost estimates for launching an entirely new state exchange.

It is unclear where the money for the new exchange will come from. The U.S. Centers for Medicare and Medicaid Services provided $180 million for Maryland when it funded exchanges for 14 states. Maryland has spent nearly $130 million, a small part of which came from state coffers.

Building a new insurance site is estimated to cost $40 million to $50 million, not including software and hardware expenses, exchange officials say. Consultants have said the total could go as high as $60 million. Sharfstein says Maryland will try to recover some funds from the companies that built the first exchange and added that he expects the federal government to eventually allow Maryland to spend the rest of its allocated funds. If not, state officials say, they could try to cobble together funding from other sources.

“I’m not concerned,” Sharfstein said. “Since we have the right plan, they’ll understand, and we’ll work together.”

Maryland’s decision to replace its health exchange was hammered out in closed-door meetings. The Democratic lawmakers who co-chair an exchange oversight committee said they did not know of the decision until it was nearly a done deal.

That secrecy infuriates Maryland Comptroller Peter Franchot (D), who has been asking exchange officials for more than three years to bring major contracts before a state board for vetting and approval. They refuse, saying such a review would slow and politicize the process. Franchot said he considers the problems with the first exchange “a procurement failure” and still does not know how much money has been spent.

“It appears we are going to learn nothing from our mistakes and we’re going to go down this path once again,” Franchot said. “Let’s bite the bullet and stand in front of the class and say who it is we’re hiring, what they will do and how much we will pay them.”

Most of the 10 exchange-board meetings this year have been closed to the public or included lengthy private sessions. Several major board votes have been private, with no roll call publicly released.

“Without an adequate and robust public record, the public can have no true idea of how the [Maryland Health Benefit Exchange] created a failed Web site, nor what they are doing to fix it,” Craig O’Donnell, a journalist and open-government watchdog, wrote in a complaint against the board in March.

In response to the complaint, which was filed with the state’s Open Meetings Compliance Board, Sharfstein and a board member took an online course about Maryland’s open-meetings law. The board now posts documents, including summaries of closed-door meetings, on its Web site.

But state officials continue to brush off much of the criticism of the health exchange, saying Democrats are seeking political gain and Republicans are motivated by the national GOP antipathy to the Affordable Care Act. When state Attorney General Douglas F. Gansler, one of Brown’s two opponents in the June 24 Democratic primary, challenges the exchange system, Brown’s campaign staff calls Gansler a “Republican.”

Among other things, Gansler has blasted Brown for not offering a detailed accounting of what went wrong with the exchange, which crashed minutes after its debut in October and limped along after that. A state audit will not be done until next year.

“If you don’t know what went wrong here,” Gansler said, “how do you guarantee success” the second time?

Deloitte built the successful health exchange operating in Connecticut. Maryland also is adopting the Connecticut software, which is federally funded and therefore available to other states at no charge. But Maryland surprised Connecticut officials by declining to hire any of the managers who led development of the Connecticut site.

“Maryland already had all of that,” Sharfstein said. “It just needed the IT.”

Peter Van Loon, the chief operations officer at Access Health CT, disagreed. “If you don’t know how to use it, it’s just a bunch of code,” Van Loon said. “You need the right people. You need the right process.”

The Deloitte team that is working on Maryland’s rebuild includes some staff members with Connecticut experience, according to Sharfstein. And Connecticut officials have been assisting Maryland on a pro bono basis.

O’Malley and other leaders blame their exchange’s problems on the state’s now-fired prime contractor, Noridian Healthcare Solutions, and IBM, which sells the health-care software Maryland used for the first exchange.

“Somebody said to me, ‘In retrospect, what have you learned?’ ” O’Malley told reporters on April 1. “I said, ‘I learned that we should have hired Deloitte instead of IBM.’ ”

But officials in Connecticut said officials who run state exchanges must ultimately take responsibility when things go wrong.

“That’s not a problem with the vendors; that’s a lack of leadership,” said James Wadleigh, top technology officer with the Connecticut exchange and a former official with Hartford-based Cigna Health and Life Insurance. “At Cigna, if I said, ‘It’s the vendor’s fault,’ at the end of the day someone would have asked for my badge and said, ‘Here’s a severance package.’ ”

Lena H. Sun contributed to this report.

Jenna Johnson writes about Maryland politics, including the General Assembly, the administration of Gov. Martin O'Malley and the 2014 election.
Mary Pat Flaherty works on investigative and long-range stories. Her work has won numerous national awards, including the Pulitzer Prize.
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