- Associated Press - Tuesday, May 20, 2014

CARSON CITY, Nev. (AP) - Nevada cut ties Tuesday with the operator of the state’s problem-plagued health insurance exchange and will partner with the federal government for enrollments in the upcoming year.

Members of the Silver State Health Insurance Exchange Board said they have lost confidence in Xerox Corp.’s ability to fix myriad problems with Nevada’s online web portal, Nevada Health Link, in time for the next open enrollment period that begins Nov. 15. They are unwilling to give it another year to work out the bugs, board members said.

Oregon in April became the first to scrap its state-run website and join the federal exchange. Earlier this month, Massachusetts agreed to purchase software from other states’ programs while laying the groundwork to switch to the federal health care marketplace if necessary.

Nevada’s board voted unanimously to become a “state supported” exchange for 2015. Nevada will retain its status as a state-based exchange, but it will allow the federal government to determine eligibility and enrollment functions.

Remaining a state-based exchange means the exchange can keep monthly fees charged to policies to fund operating expenses. In April the board agreed to increase the monthly fee for a medical policy purchased through the exchange to $13, up from the current rate of $4.95. The board may consider whether it can reduce the increase because the federal government will assume some responsibilities.

Consumers will still access the exchange through Nevada Health Link, officials said.

In the meantime, the state will research and solicit bids to consider adopting a program successfully working in another state, an option that could prove costly, with estimates ranging from $40 million to $70 million.

Xerox has come under mounting criticism for ongoing computer errors, as well as billing and enrollment problems, since the system went live Oct. 1. Consumers, carriers and state officials have grown increasingly frustrated by complaints.

A class-action lawsuit was filed in Las Vegas on behalf of hundreds of consumers who claim they paid for coverage they did not receive and have since been hit with big medical bills.

“There are a lot of things that are imperfect, but the current system is intolerable,” Lynn Etkins, vice chairwoman of the seven-member board, said minutes before Tuesday’s vote.

Board member Marie Kerr agreed. “We’ve seen so many broken promises from Xerox that they are not credible,” she said.

State officials rejected other alternatives, such as allowing the federal government to take over all operations or hiring an outside project manager to oversee Xerox’s work to fix the current system.

A spokesman for Gov. Brian Sandoval said the board “was placed in the unfortunate position because Xerox has failed to perform its contractual duties.”

“The board made the best decision it could under these difficult circumstances,” spokesman Tyler Klimas said in an email.

The stop-gap measure to partner with the federal government, at least temporarily, came to light after interim exchange Director Steve Fisher, board Chairwoman Barbara Smith Campbell, and others met with officials from the U.S. Centers for Medicare and Medicaid Services last week in Washington, D.C.

Xerox, which was awarded a $75 million contract to build and operate Nevada’s web portal, has only been paid $12.3 million to date. Because of ongoing problems, Nevada lowered its projected enrollment targets from 118,000 to 50,000. As of mid-May, 35,000 consumers have paid for coverage over the exchange. A special enrollment period ends May 30 for people who tried to sign up before the March 31 deadline but were thwarted by computer errors.

Rep. Steven Horsford, D-Nev., said the state should try to recuperate any losses from Xerox, and Sen. Harry Reid, D-Nev., supported the board’s action.

“There is no reason Nevada’s exchange couldn’t have been as successful as other state-based exchanges, like Kentucky or Connecticut, if not for Xerox,” Reid said.

Xerox said it was disappointed by the board’s action.

“Xerox has been unwavering in its commitment to Nevada Health Link and to getting all aspects of the exchange right,” Xerox spokeswoman Jennifer Wasmer in a statement, adding the system has been instrumental in supporting Medicaid expansion. About 190,000 Nevadans have been deemed eligible for Medicaid through Nevada Health Link and more than 10,000 have signed up for private health coverage during the special enrollment period.

“These successes have been supported by more than 99 percent availability of the Xerox system,” she said.

Wasmer said the company would work with the board “on the next steps.”

An independent auditor last month recommended penalties against Xerox for missing critical performance standards and gave the exchange a rating of “fail.”

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