Md. spent $90 million on health exchange technology, according to cost breakdown


Maryland Gov. Martin O’Malley (D) holds up a phone number for people to call to get help enrolling in health insurance in the state’s health care exchange on March 28, 2014. (Brian Witte/AP)

Of the nearly $130 million that Maryland has spent on its troubled health insurance exchange, more than $90 million went toward technology expenses, according to a breakdown of costs released Friday.

Maryland’s highly anticipated insurance marketplace crashed on its first day and struggled through the first enrollment period, which ran Oct. 1 to March 31. State officials have said the exchange is so structurally flawed that it would be cheaper to replace the system than continue to fix it.

Maryland hired Deloitte Consulting this month to oversee that replacement, which is expected to cost at least $40 million to $50 million, plus software and hardware costs. Maryland is using code from Connecticut’s exchange, which has had one of the highest enrollment rates in the country.

As Maryland Gov. Martin O’Malley (D) explained the “upgrade” of the system to reporters this month, he stressed that the Web site is one small part of the state’s health insurance exchange and praised a network of trained staffers, volunteers, brokers and others who helped enroll residents stymied by the Web site.

That message was repeated by Lt. Gov. Anthony G. Brown (D), who is in charge of implementing health-care reform in Maryland and is running for governor. And it was repeated by Joshua M. Sharfstein, Maryland’s secretary of health and mental hygiene, as he testified before a congressional committee and state lawmakers in early April.

But the money tells a slightly different story. Maryland had spent $129.8 million to build and run its exchange as of March 26, according to a breakdown provided by Sharfstein on Friday. The biggest expense was technology, which cost $91.7 million.

Most of that money went to Noridian Healthcare Solutions, which Sharfstein said has been paid $72.1 million. Of that, $49.9 million was spent on the development of the exchange and $8.1 million was spent on developing a marketplace for small businesses, which has yet to launch. Maryland also paid Noridian $11 million for Web site hosting and $3 million for maintenance, expenses Sharfstein said the state would have made regardless of what sort of site they launched.

For that reason, Sharfstein and other officials have pegged the cost of the Web site at $55 million — which is roughly 40 percent of the overall cost of the exchange and less than two-thirds of the total technology costs.

Aside from technology costs, the state also spent $9.3 million on trained navigators and assisters who helped residents sign up for health insurance, a service that became especially vital as the Web site did not work as expected. Call centers, which were swamped for weeks, cost nearly $4 million.

As of April 14, 66,203 Marylanders had enrolled in a private health plan through the exchange. Researchers estimated that at least 75,000 to 100,000 people would sign up, and state officials originally had aimed to get more than 140,000.

New Medicaid enrollments, both through the exchange and automatically through expansion of the program, reached 262,619 on April 15. That has exceeded state officials’ expectations, but has not surprised some analysts hired by the state.

Other expenses included salaries ($6.4 million), advertising ($6.2 million), additional consultants ($3.2 million) and training ($3.3 million.) The state also spent $5.8 million on other costs, including communications, rent and office supplies.

More than 90 percent of the total cost of the exchange has been paid for with grants from the federal government, and state officials have said they hope the money will continue as they attempt to rebuild the exchange.

But state leaders have yet to detail how they will pay for the replacement. Maryland plans to legally recover money from companies that built the first exchange, Sharfstein has said, but Maryland could also ask the federal government for more money or repurpose funds.

Jenna Johnson writes about Maryland politics, including the General Assembly, the administration of Gov. Martin O'Malley and the 2014 election.
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