Court papers escalate fight between key contractors on Md. health insurance exhange

One of the two companies that built Maryland’s troubled online health insurance exchange charged in court papers Friday that the lead contractor “concealed its lack of relevant expertise” when it bid on the contract.

Escalating a bitter feud, EngagePoint alleged that Noridian Healthcare Solutions had no experience in developing the type of software the exchange would need. EngagePoint also said Noridian “lacked the expertise, resources and commitment actually required” to develop and operate the Web site through which Marylanders were supposed to sign up for insurance under the federal Affordable Care Act.

Noridian fired EngagePoint in October, and the two companies — which are suing each other in federal court in Baltimore — are fighting over employees, money and work that remains to be completed.

Noridian’s president and chief executive, Tom McGraw, said in a written statement Friday afternoon that the firm had reviewed EngagePoint’s new filings and believes “the statements are false, unsupportable and will be contradicted by evidence that we present in court and arbitration.” He also wrote that the pending case precluded Noridian from discussing details about the relationship between the two companies.

Timothy J. Long, an attorney for EngagePoint, declined to comment because of the ongoing litigation.

The new filings are evidence of the deepening rancor between the two contractors. But Dori Henry, a spokeswoman for the insurance exchange, maintained Friday that the system continues to improve and that the litigation “is not having an impact” on its progress.

Maryland was one of 14 states that chose to launch their own online health insurance exchanges, authorized by the Affordable Care Act, instead of relying on the federal marketplace.

Maryland hired Noridian, a North Dakota-based health-care services company, to build the exchange. Unbeknown to Maryland officials, Noridian hired EngagePoint, a Maryland-based company, to “provide all of the technical services” and agreed to share the project’s profits, according to the court documents. EngagePoint then hired “a substantial number of subcontractors” because, the company says, it didn’t have enough staff of its own to get the work done.

Within months of joining forces, the two firms were fighting over costs. Soon, they were blowing important deadlines, and an outside auditor had flagged potential problems, according to internal documents obtained by The Washington Post. After the site’s failed launch on Oct. 1, Noridian fired EngagePoint.

Maryland Lt. Gov. Anthony G. Brown (D), who was tasked with implementing health-care reform in Maryland, said top state officials became aware of potential problems in September but did not realize their gravity. Maryland’s exchange crashed Oct. 1, its first day, and has been plagued with problems that have made it difficult for Marylanders to sign up for health insurance.

Maryland Gov. Martin O’Malley (D) has said the exchange has been greatly improved in the meantime and is now functioning for most applicants. But enrollment numbers continue to lag behind expectations. As of Friday, officials say, 29,059 Marylanders had enrolled in private plans, a pace far short of what is needed to meet the goal of at least 150,000 by March 31. Brown once touted an even higher goal — 180,000. So far the state has paid Noridian nearly $65 million and has unpaid invoices totaling an additional $13 million.

The exchange is largely functioning through work-arounds, state health officials have said. Rather than signing up for insurance through the Web site, many Marylanders have contacted call centers and spent hours on the phone. Some applications are being processed on paper.

The exchange’s chief information officer said last week that “multiple defects remain” and that there are “a number of architectural and infrastructure issues” that need to be corrected.

On Monday, a newly formed oversight group of lawmakers will gather in Annapolis to examine the current state of the exchange and begin to determine what should be done when the first enrollment period ends March 31. There has been talk of abandoning all or part of the site.

In the court records, EngagePoint accused Noridian of not disclosing its lack of expertise, mismanaging the project and not hiring qualified staff — and then threatening EngagePoint when problems appeared. At one point, Noridian threatened that it “would bankrupt” EngagePoint if it did not give in to demands for more work, according to the court documents. EngagePoint is also seeking $7.4 million from Noridian for what it says are overdue bills.

Noridian chose to use a “waterfall method” of development, finishing one part of the project before starting another, and EngagePoint says the complex project should have had a number of parts being worked on simultaneously.

After EngagePoint was fired, Noridian tried to hire some of its employees. Noridian acknowledged its reliance on EngagePoint in earlier court filings as it tried to hire the employees and gain access to information it said EngagePoint controlled.

If Noridian could not offer jobs to EngagePoint employees there was “a significant risk” it would not be able to deliver Maryland’s health exchange with all of the functions promised by Jan. 1, Noridian said in an earlier filing. Unless crucial EngagePoint employees helped it, Noridian said in earlier filings, the company would be left to “reverse engineer” the site to determine how the work had been done.

Noridian has been able to hire some of EngagePoint’s staff, Friday’s filings indicate. EngagePoint also continues to work on the site, the court files show, without making clear what that work entails and who is paying for it.

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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