Top Md. health official says contractor ‘misrepresented’ ability to build exchange

A top Maryland health official sharpened criticism of the lead contractor on the state’s troubled health-exchange project Wednesday, saying Noridian Healthcare Solutions “severely misrepresented the maturity” of the system it could build using off-the-shelf software.

The North Dakota company also outsourced “its leading role to an unauthorized subcontractor under an undisclosed profit-sharing agreement,” said Thomas H. Kim, deputy secretary of operations at the Maryland Department of Health and Mental Hygiene. Infighting between Noridian and its subcontractor, he added, resulted “in the stoppage of work during the most critical period.”

Kim’s comments came during a meeting of the Board of Public Works, which includes Maryland Gov. Martin O’Malley (D) and the state’s financial leaders. Although state officials have been lobbing accusations at Noridian for months about the flaws that closed down the state health exchange minutes after it opened, Kim’s comments were more direct and pointed than previous statements.

“Well said, Mr. Kim,” O’Malley offered.

State officials say they are making progress on repairing the exchange, still working with Noridian. But officials also have said they may soon transfer some or all of Maryland’s program to the federal health exchange, or partner with another state.

Maryland hired Noridian in February 2012, and Noridian signed a subcontract with EngagePoint two months later. The companies have a multi-year contract worth $193.4 million. As of Feb. 10, Maryland had paid Noridian nearly $65 million and had unpaid invoices totaling another $13 million, according to state health officials.

Both companies have declined interview requests, citing an ongoing federal court case in which they are suing each other. Noridian chief executive Tom McGraw declined to discuss Kim’s comments on Wednesday. EngagePoint spokeswoman Sonia Lucas said there “seems to be some misunderstanding” about the firm’s role “that we are confident will be cleared up in due time. We strongly disagree with the factual assertions reportedly made today before the Board of Public Works.”

The dispute — and Noridian’s financial exposure — have drawn 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.

In the weeks after Maryland’s disastrous health-care launch, officials focused their explanations on the risks the state took as an early leader in the federal health-care rollout. The state needed to shift its efforts as federal authorities shifted requirements, they said.

However, the state had been warned for a year of technical troubles with the Maryland exchange, both by outside consultants and key personnel, a Post investigation found.

Maryland’s health exchange is an independent state agency and is not required to receive board approval before entering into a contract. That arrangement was intended to avoid politics and allow the exchange to act quickly to meet federal government deadlines. However, exchange officials are required to inform the public works board of some spending decisions, which is what brought Kim to the Wednesday session.

Maryland Comptroller Peter Franchot (D), who sits on the public works board, questioned the health officials for more than 30 minutes and said that the serious problems with the exchange might have been avoided if the board had the opportunity to scrutinize the health-exchange contracts.

“I’m not about to suggest that this board is a magic wand that could have foreseen and rectified all the problems that have plagued this program,” Franchot said. But the board does provide transparency and vetting that’s unmatched, he said. Franchot asked that the exchange seek board approval before signing future contracts, even though it is not legally required to do so.

Kim said that the state faced “extremely aggressive timelines” to get the health exchange operating and said the exchange board’s procurement process was “sound.”

Noridian had “a very strong record,” Kim said, and the state could not have foreseen the problems that now beset the site.

Joshua Sharfstein, Maryland’s secretary of health and mental hygiene, has said that Noridian is contractually required to notify and get approval from the exchange before hiring any subcontractors. A spokesman for Sharfstein was unable to answer questions Wednesday evening about when or how the state learned that EngagePoint had been hired.

Mary Pat Flaherty works on investigative and long-range stories. Her work has won numerous national awards, including the Pulitzer Prize.
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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