The main contractor responsible for building Maryland’s flawed online health exchange has agreed to pay $45 million to avoid any legal action over poor performance, state officials announced Tuesday.
The state’s website, which was created under the Affordable Care Act to provide health insurance to residents not covered through their employers, crashed the day it went live.
Under the settlement, Noridian Healthcare Solutions LLC will pay $20 million upfront and $5 million annually over five years. The company was originally paid $73 million to develop the failed website, meaning it will still walk away having pocketed $28 million, according to the Office of Maryland’s Attorney General.
But Attorney General Brian Frosh called the agreement a “fair deal for taxpayers” noting that the company’s own financial constraints may have limited the state’s ability to recoup all losses through litigation.
“This company never delivered on what it promised, and, as a result, tens of millions of taxpayer dollars were wasted, and thousands of Marylanders suffered delays and frustration,” Mr. Frosh said in a statement announcing the settlement.
Spokesman David Nitkin said in the event a judgment in the state’s favor would have required Noridian to pay back a higher amount, the company could have potentially gone bankrupt making it difficult to collect any payments.
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Maryland was among 14 states that chose to build their own health-insurance marketplace. While its failed rollout was hardly the most disastrous, Maryland appears to be ahead of the curve in reaching a final agreement with the company that botched its exchange.
Investigations of other failed exchanges are still underway in Massachusetts and Nevada. The Associated Press previously reported that federal authorities have subpoenaed records related to the exchanges in both states.
Meanwhile the state of Oregon and Oracle, the company that designed its failed exchange, are embroiled in dueling lawsuits accusing the other party of botching the exchange.
Governor Larry Hogan, who was critical of the handling of the Maryland exchange during his campaign, said the state would continue to seek to recover damages.
“The roll-out of Maryland’s Health Exchange was a debacle that could have been avoided,” Mr. Hogan said. “This settlement represents only the first step in the process and we’ll continue to aggressively pursue other avenues to recover damages.”
The stipulations of the settlement also free Maryland from contractual obligations with the company.
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“States across the country that implemented their own exchanges encountered significant challenges,” said Noridian President Tom McGraw. “This settlement allows us to move forward and focus on our core business of processing health care claims and providing related administrative services.”
The state originally signed a five year, $193 million contract with the Fargo, North Dakota-based company to build and maintain the online exchange. However the Maryland Health Benefit Exchange voted in 2014 to sever the contract following the botched rollout and hired Columbia-based Optum/QSSI to help run the flawed exchange. Deloitte Consulting was later brought on for $45 million to put in place the off-the-shelf technology that had already been used in Connecticut.
In the aftermath of the fallout, state Republicans in Minnesota and Vermont have called on their states to ditch their faulty websites and use the federal portal, citing a Supreme Court decision last month that said qualified customers can get income-based exchange subsidies no matter where they live.
Their calls to action reflect a broad shift toward use of HealthCare.gov, which stumbled out of the gate but recovered after a team of technical gurus salvaged the site in late 2013, setting up a relatively successful finish to Obamacare’s first enrollment period and a calm second round.
Some states weren’t so lucky. Exchanges in Oregon and Nevada couldn’t recover from early glitches, so they turned to the federal government for their web enrollment needs in the second year.
Earlier this year, Hawaii announced that it will transfer its enrollment to HealthCare.gov before sign-ups begin anew this fall.
Massachusetts and Maryland, meanwhile, fared better in Obamacare’s second year after they ditched their vendors and used off-the-shelf technology that had worked in other states.
⦁ Tom Howell Jr. contributed to this report.
• Andrea Noble can be reached at anoble@washingtontimes.com.
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