Maryland fires contractor that built troubled health insurance exchange

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 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, and Noridian will assist with the transition.

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“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.”

Maryland was one of 14 states that chose to build their own health-insurance marketplaces 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 among the best in the country.

But the site failed within minutes of its Oct. 1 launch, blocking 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.

As of Monday, Maryland had paid Noridian $67.9 million for its work and had unpaid invoices totaling $12.9 million, state health officials said.

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.

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 and by Noridian against the state, the person said.

McGraw said his company met its contractual obligations under “tremendous pressure and constant changes by the state,” which amounted to hundreds of adjustments and fixes.

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.

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.”

Noridian fired EngagePoint after the disastrous launch; the two companies are suing each other in federal court in Baltimore.

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 it 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.

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.

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.

The fiasco has resonated in Maryland’s Democratic gubernatorial primary race, with Attorney General Douglas F. Gansler accusing one of his rivals, Lt. Gov. Anthony G. Brown, of lapsed oversight. Brown was the highest-ranking elected official charged with implementing the new federal health-care law.

“We remain focused on getting as many Marylanders as possible into quality, affordable health care plans by the end of open enrollment,” Brown said in a statement Monday. The enrollment period ends March 31.

In recent months, Maryland has spent millions of extra dollars on additional technical help and call centers to process applications. The exchange has asked permission to access $33 million this year in federal grant money that was supposed to be spent in future years.

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.

 
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