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Costs rising for state health exchange, which is still 'not functional'

Maryland's poorly performing health exchange will cost taxpayers $33 million more than expected this year, bringing the state's total annual expense to $138 million, officials said Monday.

The money is needed, in part, to pay the company hired to help fix the dysfunctional web site and to triple the work force at the state's call center, which has been overwhelmed by requests for help from customers struggling to buy insurance online.


Even with the extra spending, it isn't certain the exchange can be fixed – or is worth fixing – in time for the next enrollment period in the fall, officials said.

The exchange still has "serious IT defects," state health secretary Dr. Joshua Sharfstein told a panel of lawmakers in Annapolis. The administration plans to use the existing contractors for the rest of the current enrollment period, which ends March 31, Sharfstein said.


But after that, he said, officials must decide whether Maryland should stick with its own health exchange, use it in conjunction with the federal health exchange, or adopt the technology of a website that has been successful in other states.

"The contractors have not delivered what they said they would deliver, there's no question about that," Sharfstein said.

The additional spending this year will bring the overall cost of the online insurance marketplace to $261 million, officials said.

The revelation about the depth of technical troubles with the state's website came as the Obama administration announced Monday it would delay another provision of the Affordable Care Act that called for small businesses to provide health care for their workers by 2015. Now, businesses with 50-99 employees will not have to provide it until 2016.

Maryland's exchange was evisioned as being a one-stop shop for Medicaid, subsidized private health plans and the small business exchange. But the website crashed shortly after it launched Oct. 1 and the state's top IT expert said Monday key pieces were still "not fuctional."

Senate Minority Leader David Brinkley questioned why the state had yet to fire its chief contractor. "A quarter of a billion dollars … and we still don't have something that works?" Brinkley said.

The briefing took place during the first meeting of a bi-partisan oversight panel announced last week by General Assembly leaders to make sure the exchange gets fixed.

When pressed by lawmakers, Sharfstein said at least $21 million of the extra costs this year could be attributed directly to the flubbed rollout of the exchange. That includes about $15 million going to Optum/QSSI, a Columbia-based company that helped fix the federal government's IT website, Another $6 million pays to expand the call center, which receives more than 3,000 phone calls a day.


The federal government is providing most of the money to build and maintain Maryland's exchange, which was supposed to be a national model for accessing the benefits of the Affordable Care Act. The site has been beset by technical problems since it launched.

Two key contractors charged with building it are entangled in a court battle, the exchange's executive director has resigned, and enrollment in subsidized private plans has lagged far behind state projections. The state once expected 150,000 people to enroll in private plans by the end of March, when people face a tax penalty for not having health insurance. So far, 29,059 have signed up.

Sen. Thomas "Mac" Middleton, co-chairman of the oversight panel, questioned whether the federal government would be willing put more money into fixing the exchange.

"I don't think it's the case that the federal government would fund whatever we want," Sharfstein responded, and said Maryland must come up with a "sensible plan."

After two months of troubles with the exchange, Gov. Martin O'Malley put Isabel FitzGerald, secretary of information technology, in charge of technical repairs. FitzGerald said Monday the software that was supposed to be the centerpiece of Maryland's exchange was "not fuctional, and to date, is still not functional."

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The program, by a division of IBM called Curam, has also been blamed for problems with Minnesota's health exchange. In January, she said, a Curam error caused 9,000 people to be told their subsidies were higher than they actually were.


FitzGerald said that her team fixed 560 "defects" to the site already, but more remain. And there are 11,000 applications for health insurance stuck in the system. Roughly half are tied to a single problem that FitzGerald said her team is working on. There are also "ghost applications" that have vanished, she said.

State officials reiterated that while the website has had major problems, it works far better than it did even late last year. FitzGerald said the worst glitches still involve "early adopters" who tried to get through the system last fall. Now, she said, only about 2 percent of new applicants hit significant glitches.

Carolyn Quattrocki, acting executive director of the exchange, said part of their new marketing and outreach strategy explains that progress. "There is an effort to say, 'Come back and try again.'"

As technical troubles persisted, the four insurers who sell policies through the exchange agreed to provide retroactive coverage to people who signed up by late January. State officials said Monday that a total of 444 people got insurance through that program. Lawmakers also rushed to pass emergency legislation that allowed people stuck in the exchange to get retroactive coverage through a state program. So far, no one has applied for it.

Lawmakers plan to invite the four insurance companies to join Sharfstein at the next briefing on exchange fixes in two weeks.