Presented by

Md. has yet to recover millions spent on failed exchange site

Officials from the Maryland health exchange and their prime contractor have agreed to delay potential litigation over the troubled website that frustrated thousands in their attempts to buy health insurance promised under the Affordable Care Act.

State officials cut ties with Noridian Healthcare Solutions in April and said they'd see contractors in court to recover the $55 million spent developing the faulty online marketplace.


But they delayed action to focus on signing up consumers for coverage; another round of open enrollment is set to begin next month. A spokeswoman for Gov. Martin O'Malley said officials are still "evaluating claims that we may pursue in litigation."

Legal and political analysts say they don't expect a trial. Instead they expect a settlement after next month's elections.


"It was good to talk tough early on and say, 'We'll get to the bottom of this and recoup state funds,' '' said Todd Eberly, chairman of the department of political science at St. Mary's College of Maryland. "But for O'Malley and [Lt. Gov. Anthony G.] Brown, the last thing they want now is this story back in the headlines."

Brown, the state's point man on health care reform, is the Democratic candidate for governor. O'Malley, an early supporter of President Barack Obama's health insurance overhaul, is considering a run for president in 2016.

In the first year of the health exchanges under the Affordable Care Act, Maryland was one of a small number of states that abandoned its exchange website for new technology or for the federal exchange website. The state and its contractor have blamed each other, as well as subcontractors, for the problems.

O'Malley, exchange officials and others blamed subcontractor IBM for the worst problems before the exchange board voted in April to cut ties with Noridian and adopt the technology used by Connecticut. Retrofitting the software for use during open enrollment in November is expected to cost $43 million.

Both Noridian and IBM declined to comment.

An investigation by the Office of Inspector General at the U.S. Department of Health and Human Services, the agency overseeing implementation of the Affordable Care Act and the federal dollars that largely funded the exchanges, could complicate any litigation.

Rep. Andy Harris, a Baltimore County Republican, requested the federal review in February.

"Millions of dollars were wasted because of a lack of oversight by Lieutenant Governor Brown, and now the state must try to recoup some of the money he allowed to be sent to companies who couldn't deliver," Harris said. "The federal investigation should provide critical information about how taxpayer dollars were wasted and whether fraud occurred."


There is no deadline for the investigation. A spokesman for the inspector general did not respond to a request for comment.

"It's disappointing that Congressman Harris would mislead the people of Maryland and play political games with a federal investigation," said Justin Schall, Brown's campaign manager.

The Morning Sun

The Morning Sun


Get your morning news in your e-mail inbox. Get all the top news and sports from the

Depending on the findings, federal officials could seek repayment from the state, said David A. Friedman, who teaches contracts, business law and dispute resolution at Willamette University in Oregon. That could influence how much the state would seek from Noridian.

"Ideally, the parties would reach an agreement in Maryland about how to share responsibility for the failure, eliminating the need for expensive, lengthy trials," Friedman said.

"If they can agree how to resolve this mess — with the [inspector general] at the table to bring finality to everything, then the matter can be closed. The parties can all quibble about whether they would get a better result through litigation, but they can't quibble with the notion that avoiding the legal quagmire would be less draining in terms of fees or public employee time and energy."

The exchange has accused Noridian of breaching its contract by hiring a subcontractor to do work without its permission. Noridian and that subcontractor, EngagePoint, squabbled early on and are in arbitration to settle their dispute.


Frank Pasquale, a professor of health care policy and law at the University of Maryland, said these issues complicate the legal case and could consume thousands of hours of discovery and argument at trial.

"Pity the jury that had to get through this complex case and get to the bottom of who breached what on either side," he said. "They just have to take a step back and say: What is a number that allows the company to go away and feel they have been compensated for their labor and allows the state to say they didn't waste as much as they thought?"