Contractor on Md. health exchange to pay $45M to settle claims

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The prime contractor on the bungled launch of Maryland’s health insurance exchange in 2013 has agreed to pay $45 million to avoid legal claims, state officials announced Tuesday.

Attorney General Brian E. Frosh and officials with the Maryland Health Benefit Exchange said Noridian Healthcare Solutions has agreed to pay $20 million up front and $25 million over the next five years to settle potential claims.

“It was an extremely good result,” said Carolyn Quattrocki, executive director of the Maryland Health Benefit Exchange after the settlement was announced. “There were serious questions as to whether we would have been able to recover anything had we gone forward in actual litigation.”

At least $40 million of the settlement is guaranteed by Noridian’s parent company, the North Dakota-based Noridian Mutual Insurance Company, officials said.

Quattrocki said there are “active investigations” into potential legal action against other contractors, but declined to discuss further details.

How much of the settlement will go to Maryland remains undetermined. Some of the settlement funds will be split with the federal government, which financed much of the health insurance exchange, Quattrocki said.

Maryland’s share will go back to the state’s general fund, not to the exchange itself, she said.

“(Noridian) 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,” state Attorney General Brian E. Frosh said in a statement. “This settlement sends a message that the performance was unacceptable and that those responsible will be held responsible.”

Tom McGraw, Noridian’s president and CEO, said in a statement that the company was pleased that it was able to resolve its differences with Maryland and avoid costly litigation.

“This settlement allows us to move forward and focus on our core business of processing health care claims and providing related administrative services,” McGraw said in the statement.

The board of the state’s health benefit exchange voted to approve the settlement — which covers 61 percent of what Maryland paid Noridian to develop and launch the website in 2013 — in closed session Tuesday.

The settlement is still subject to approval of several agencies, including the U.S Department of Health and Human Services and the U.S. Centers for Medicare & Medicaid Services, said David Nitkin, a spokesman for Frosh’s office. He could not say when that approval was expected, but said the office was optimistic about the outcome.

Maryland’s health insurance exchange was widely viewed as among the worst in the nation when it launched in the fall of 2013. The site crashed continuously; potential enrollees found it difficult and often impossible to log on; and the paper enrollment forms that were supposed to serve as a backup didn’t match up with what was required on the electronic enrollment.

In the entire first month of enrollment only 1,278 people were able to sign up for private coverage on Maryland’s exchange, an embarrassment made worse by Maryland’s enthusiastic support for the Affordable Care Act. The exchange’s technical woes set off a round of political finger-pointing. The mess proved to be an enormous albatross for the gubernatorial aspirations of Lt. Gov. Anthony Brown, who had been in charge of the state’s health care enrollment efforts.

Ultimately, the state acquired for $41 million the software used by Connecticut in its successful insurance exchange. Maryland’s signups have proceeded much more smoothly.

Quattrocki said some of the hardware put in place by Noridian was salvaged and re-used when the exchange switched to the new software.

According to state officials, 493,346 Marylanders enrolled through the exchange from Nov. 15, 2014 to July 5, 2015. That includes 126,346 people enrolled in private plans and 370,000 enrolled in Medicaid.

The likelihood of legal action had been broached weeks after the problems surfaced. Former Gov. Martin O’Malley vowed last year to sue over the bungled heath exchange, and he made it clear at the time who he was going after.

“We’ll see IBM in court,” O’Malley said at a 2014 news conference after the Maryland Health Benefit Exchange board’s vote to abandon the IBM technology used to build the exchange.

IBM Corp. provided the software used for core functions of the Maryland Health Connection website. Officials in Maryland — as well as Minnesota and other states where the software was used — asserted the product was not capable of performing the functions IBM said it could.

That software was created by Curam Software, a company acquired by IBM in late 2011.

Noridian, Maryland’s original prime contractor, was fired by the state in February of 2014 after receiving about $72 million  in payments. Noridian bought the Curam software, which was used to determine eligibility for tax credits and for Medicaid, from IBM.

State officials blamed the Curam software for inaccurate calculations on thousands of applications.

“I think it’s a very favorable settlement, in light of the cost savings of not having to go through litigation,” said Al Redmer Jr., Maryland’s insurance commissioner and a health exchange board member.

“The board is very focused on getting every dollar back for the taxpayer that we can,” Redmer said.