- Associated Press - Thursday, April 24, 2014

PORTLAND, Ore. (AP) - Oregon, once expected to be a national leader in the federal health care overhaul, on Thursday moved to become the first state to dump its troubled online health exchange and use the federal marketplace instead.

A top Cover Oregon official, Alex Pettit, said fixing the existing system would be too costly at an estimated $78 million, would take too long to implement, and would be too risky. The state’s site still isn’t fully functional seven months after a failed launch.

Pettit said switching to the federal system would cost $4 million to $6 million.

An advisory committee made the recommendation to drop the glitch-filled site for private policies, but suggested that Oregon continue using its current technology for Medicaid enrollments.

The Cover Oregon board will vote on the recommendation Friday.

Oregon’s exchange is seen as the worst of the more than a dozen states that developed their own online health insurance marketplaces. The state is the only one where the general public still can’t use the website to sign up for coverage in one sitting - despite an early start building the site and millions of dollars from the federal government.

Several other states experienced major problems with their exchanges, but so far only one has chosen to replace its site. Maryland recently decided to spend $40 million to $50 million to adopt the technology used on Connecticut’s successful exchange.

Oregon has received a total of $305 million in federal grants to fund its operations from 2011 through the end of this year. As of March, the state has spent nearly $248 million of that money, Cover Oregon interim executive director Clyde Hamstreet said.

Most of that money went toward the botched portal: $134 million in federal funding was paid to Oracle Corp. for building the exchange, and an additional $7 million was spent on paper processing efforts. Currently, Oregonians must use a time-consuming, hybrid paper-online process to sign up for insurance.

Oregon received a monthlong enrollment extension because of the technology problems.

Under the health care law, Washington must step in if a state is unable or unwilling to run its own insurance market. Federal officials said the federal exchange is able to add more states, and they are helping Oregon with the transition.

“We are working with Oregon to ensure that all Oregonians have access to quality, affordable health coverage in 2015,” administration spokesman Aaron Albright said.

In March, the federal Government Accountability Office announced an investigation of Oregon’s exchange, including looking at whether the federal government can reclaim grant money given to Cover Oregon if taxpayer funds were mismanaged.

“It is the worst financial failure in information technology in state history - and it was completely avoidable,” said Rep. Greg Walden, who asked for the GAO probe. “Today’s admission of failure underscores the need to stop the waste and get the truth.”

Separately, former Health and Human Services Secretary Kathleen Sebelius asked for an inspector general’s probe into problems with the rollout of the health care law.

Story Continues →