Glitches in the Obamacare rollout last year weren’t limited to the federal government. A number of states whose health care exchanges were riddled with errors now are withholding or trying to claw back more than $100 million from the contractors they blame for the foul-ups.
Oregon, whose exchange was so bad that officials parted with two directors and had to process almost all enrollments manually, was withholding $26 million from Oracle Corp. Vermont officials claimed $5 million in damages from CGI Group Inc., which handled the state’s exchange and also was blamed for the flawed federal HealthCare.gov site.
CGI has waived its rights to the $5 million in a revamped deal with Vermont that also ties upcoming payments to performance deadlines.
“This was a lawyered-up process,” said Lawrence Miller, Vermont’s chief of health care reform, describing the frustrations that led up to the latest deal. “The parties were in their respective corners.”
Health care exchanges are virtual markets where Americans can purchase private health care plans under the Affordable Care Act, often with the help of government subsidies. The federal exchange serves three dozen states, while 14 states and the District of Columbia are running their own.
Contractual wrangling in some of the states is playing out as the White House shakes up its health care team, celebrates 7.5 million enrollments in the first round and settles in for a seven-month lull between Obamacare’s enrollment periods.
“I think these will be handled as is most government contracting: threats of litigation or excluding the contractors, followed by real negotiations and agreements,” said I. Glenn Cohen, a health care policy analyst at Harvard Law School. “The tougher issue, I think, is how much new contractors will be stuck with old models or platforms.”
Rep. Michael C. Burgess, Texas Republican and frequent critic of Obamacare, said states whose contractors botched the rollouts of the health care exchanges should be pursuing action, particularly because these states received federal money to help set up the exchanges.
“The difficulty will be the extent that they can,” he said in an interview.
House Republicans have passed legislation to dial back federal dollars that flow to the exchanges, but the bill awaits action in the Democrat-controlled Senate.
The federal website, HealthCare.gov, was plagued with glitches when it was rolled out in October. The Obama administration dropped top vendor CGI and hired Accenture in its place.
State-run exchanges also are looking for escape hatches from some of their contracts.
Maryland, a Democrat-run state that was enthusiastic about Obamacare from the start, dropped Noridian Healthcare Solutions LLC as a vendor two months ago and said it would adopt Connecticut’s exchange technology from Deloitte.
Maryland officials said they will try to recover most of the $55 million they paid to Noridian and will give back part of that to the federal government.
“We are actively reviewing the issues relating to the health exchange contracts, and all options are on the table,” David Paulson, a spokesman at the Maryland attorney general’s office, said last week.