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State terminates contract with health exchange firm

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Maryland has terminated its contracts with the company hired to build and operate the state’s online health exchange, which has been riddled with problems since its launch in October.

The board overseeing the exchange voted Sunday night to sever ties with Noridian Healthcare Solutions, and the state reserves the right to take the company to court for damages, officials said Monday.

Critics of the botched rollout said Noridian should have been replaced long before now, and they renewed calls for an investigation into why Maryland stumbled with implementation of the Affordable Care Act. The website is so flawed that state officials are considering abandoning it after open enrollment ends next month.

The decision ends a $193 million deal for North Dakota-based Noridian to build and host the online insurance marketplace for the next five years. For now, the state will rely on Optum/QSSI, a Columbia-based company hired in December to help fix Maryland’s exchange.

Officials said the move would help more people sign up for health insurance before the March 31 deadline.

“By moving now, we improve the quality of work,” said Isabel FitzGerald, secretary of the state’s Department of Information Technology who stepped in to help fix the exchange.

FitzGerald said she recommended the nine-member Maryland Health Benefit Exchange Board cut ties with Noridian after it missed a series of goals to fix the website.

Noridian officials said in a statement the company is “negotiating a mutual agreement regarding the transition of Noridian’s role as prime contractor” with the state and will continue to offer technical support until the end of March.

“Throughout the past four months, Noridian has complied with its contractual obligations under tremendous pressure and constant changes by the state,” said Tom McGraw, Noridian’s president and CEO, in the statement.

The state Senate’s Republican leader likened the site’s continuing problems to “an iceberg.”

“The further down they go, the more and more problems they discover,” said Senate Minority Leader David R. Brinkley, who serves on the legislative panel overseeing repairs to the exchange.

U.S. Rep. John Delaney, a Democrat who has been critical of the implementation of Obamacare in Maryland, said “the real question is why it took months to make this move.”

Noridian oversaw development of the website, which crashed the day it went live and has technical problems that persist. Only five weeks remain for people without health insurance to buy it or face a tax penalty, and state officials said that Optum can better repair the site to handle a rush of last-minute buyers.

“The progress was simply not satisfactory,” FitzGerald said in an interview, adding that Optum has “got a deep bench” of experts to help.

At a hearing Monday before the General Assembly's joint oversight committee on the exchange, FitzGerald said there are “major architectural” problems with the exchange, aside from the 1,538 “defects” that have been discovered since the exchange went live. So far, 1,072 have been resolved, she said.

Most of the repairs have been done by subcontractors hired by Noridian; those companies will now report to Optum instead, FitzGerald said.

Noridian is embroiled in a legal fight with another exchange contractor, EngagePoint, over who bears responsibility for the flawed website.

The switch from Noridian “gives the exchange the best chance of being fairly productive,” said Dr. Peter Beilenson, CEO of Evergreen Health Co-op, which sells policies through the exchange.

The technical problems have left the state far behind its goal to sign up 260,000 people for insurance, either through private policies or through Medicaid. Health Secretary Dr. Joshua M. Sharfstein said Monday the state would retain that goal, even though it recently learned it was mistakenly based on a projection for two years, not one.

The state also has abandoned work on another piece of implementing the Affordable Care Act: a health exchange for small businesses. Noridian’s contract included the small-business exchange.

As of Feb. 10, the state had paid Noridian $65 million, roughly a third of the long-term contract negotiated with the company. Noridian has billed the state $78 million.

Sharfstein also told the legislative panel reviewing the exchange that within weeks, officials will decide whether to keep trying to fix it or try to put something else in place before the next open enrollment period begins in November. Options include adopting all or part of a website made by one of the 14 other states that built their own exchanges or relying on the federal system.

Optum helped repair the federal site last fall when it also encountered technical problems that thwarted people’s ability to sign up for health care coverage. Maryland has signed a $14 million deal with Optum, although Sharfstein told lawmakers it is unclear whether the state will end up paying more or less than if it stayed with Noridian.

Already, the state has budgeted more than $260 million — much of it federal money — to build the health care exchange. This year, problems with the launch will cost the state at least $33 million more than officials originally planned to spend.

The joint oversight committee voted to ask legislative auditors to do a “performance review” of the exchange, an inquiry that would not be complete until July 2015. Auditors were already scheduled to begin a more narrow inquiry into the finances of the exchange this summer.

Senate Republicans, who have been calling for an immediate investigation by a committee with subpoena powers, sent a letter to Attorney General Douglas F. Gansler on Monday asking his office to probe now what went wrong with the exchange.

In his campaign for governor, Gansler has used the troubled exchange as ground to question the leadership of his chief rival for the Democratic nomination, Lt. Gov. Anthony G. Brown, who was the administration’s point person on implementing the health reform.

In the letter, the Republicans said they wrote Gansler “out of a shared concern that those in power in Annapolis will never truly conduct a full and impartial investigation into the botched implementation of the Maryland Health Benefit Exchange and the disastrous rollout of the occupying website.” The letter concluded by asking Gansler if he “had the resolve” to pursue such an inquiry.

Through a spokesman, Gansler said his office received the letter and was reviewing it.

Brown said in a statement that severing ties with Noridian was “one of many steps that we've taken to improve accountability and build a better performing, more effective exchange for Marylanders.”

A spokeswoman for Gov. Martin O’Malley said he also supported ending the contract with Noridian.

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Baltimore Sun reporter Meredith Cohn contributed to this story.

Copyright © 2014, The Baltimore Sun
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