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Martin O'Malley-Joshua Sharfstein-Carolyn Quattrocki
Gov. Martin O’Malley holds up a phone number for people to call to get help enrolling in health insurance in the state’s health care exchange on Friday, March 28, 2014 in Annapolis, Md. (AP Photo/Brian Witte)

5 takeaways from decision to scrap Maryland Health Connection

If you haven’t heard by now, Maryland’s health exchange is toast. Kaput. It may have been the governor’s baby, but it’s been thrown out with the bathwater.

State officials decided Tuesday night to abandon the current system and replace it with technology used successfully in Connecticut.

That decision had been expected even before the Maryland Health Benefit Exchange board’s vote. But more details were revealed at the board meeting that shine a little light into some pretty dark corners.

Here are a few standouts from a memo delivered by Isabel FitzGerald, the state’s secretary of information technology, who was brought in a few months ago to oversee the project.

1)      Even if Maryland’s system had worked perfectly, it would still be three times more expensive to maintain over time than either Connecticut’s system or a partnership with the federal exchange.

According to FitzGerald’s memo, Maryland’s current technology would cost about $18 million per year, compared to $6 million a year for Connecticut’s technology or $6 million a year for a system rooted in the federal exchange.

Why the difference? Maryland Health Connection was built using off-the-shelf commercial software, so the state would have to renew multiple licenses each year to continue using those products. The core technologies of Connecticut’s system and the federal system, however, were built from the ground up, so there are no (or, at least, fewer) annual licensing fees.

The question is, why hadn’t Maryland officials realized this cost difference earlier? And if they had, why were they convinced off-the-shelf software would be worth the extra expenses that come with it?

2)      The upgrade will cost money, but we don’t know exactly how much or where those funds will come from.

The software for Connecticut’s exchange, Access Health CT, was developed by Deloitte Consulting LLP, and Maryland plans to negotiate a $40 to $50 million contract with the company to customize and implement that software here.

The federal Centers for Medicare and Medicaid Services (CMS) has to approve that plan if Maryland wants more federal money — which, of course, we do.

State health Secretary Joshua Sharfstein expects CMS will approve the plan. He expects a good portion of the $40 to $50 million-contract will be billed to Uncle Sam. But he’s not sure yet.

Sharfstein said the exchange board will likely ask the state for $3 million in “startup money.”

3)      On top of the Deloitte contract, there will also be additional costs for hardware and other infrastructure.

FitzGerald said she hopes the state can re-use about $8 million worth of hardware and software used in the current system.

The rest of Maryland’s multi-million investment — most notably, $55 million paid to former contractor Noridian Healthcare Solutions — is down the drain unless state officials seek to recoup those losses through litigation, which appears likely.

4)      There’s very little room for error.

Another open enrollment period begins Nov. 15, and FitzGerald said it will take about seven months to implement the new technology. That leaves a cushion of about two weeks, and as recent history proves, IT projects don’t always progress on schedule.

5)      None of this has any impact on the small-business, or SHOP, exchange.

Officials declined to answer any questions on the topic, such as whether this new technology could be used to create the SHOP exchange (where small businesses could buy coverage) as originally envisioned, or if that project has been shelved indefinitely.