Frosh: More lawsuits against Md. health exchange vendors likely

The failed rollout of the Maryland Health Benefit Exchange was the direct result of the state’s reliance on false statements made by vendors, and additional lawsuits against those companies are likely, according to Attorney General Brian E. Frosh.

Frosh notified legislative leaders in a letter last week of the general results of an investigation conducted by his office. The letter was sent as the Office of Legislative audits works on a review that could determine what caused the system to fail.

“It is our further understanding, however, that (the Office of Legislative Audits) has not yet considered or examined whether the troubled launch was caused by the poor performance of the contractors selected to build the Maryland Health Connection or by misrepresentations made by contractors concerning the system they proposed to build,” Frosh wrote. ”

Frosh went on to say that an investigation by his office, which included “witness interviews, expert software analysis, and limited document discovery,” lays the blame squarely on contractors.

“The attorney general has notified the leaders of the General Assembly that vendor misstatements about their software and vendor poor performance are the actual and proximate causes of the failed launch,” said David Nitkin, a Frosh spokesman, on Thursday. “We are also alerting state auditors that we need to share with them the information that has been uncovered and produced in connection with our investigation and future litigation.”

Nitkin said the attorney general’s investigation is ongoing and declined to name potential targets of expected future litigation. The spokesman said that documentation and evidence produced by the investigation would be turned over to state auditors.

“The attorney general expects and hopes that this investigation will lead to litigation, and then significant recovery for the benefit of taxpayers — in the near future,” Nitkin said.

Sen. Guy J. Guzzone, D-Howard County and co-chairman of the Joint Audit Committee, said Frosh’s letter represented the first time legislators were learning of results of Frosh’s investigation and called the information “pretty new to us.”

“This is the first time, to my knowledge, that I’ve heard an independent investigation that this level of significant responsibility for the failure of the system falls in the laps of the vendors who were hired to build the exchange,” Guzzone said. “We should have a full accounting of all aspects of what went into the launch of this system and what occurred. The citizens of Maryland deserve that.”

A spokesman for Republican Gov. Larry Hogan called on the attorney general and auditor to make public any findings of fault related to the exchange.

“The rollout of the health exchange was a complete disaster, not only costing the state hundreds of millions of dollars but a good piece of the state’s reputation, as well,” said Douglass Mayer, a Hogan spokesman. “Clearly there are many, many people to blame including the previous administration and the contractors involved in the contracts. If there’s another report out there detailing what took place and the mistakes that were made then it should be released immediately.”

Maryland abandoned its exchange in April 2014 in favor of a system developed by Connecticut. At the time, then-Gov. Martin O’Malley, during a news conference, singled out IBM, one of exchange’s primary subcontractors.

IBM was responsible for programming that would handle eligibility and enrollment for the exchange.

“Somebody said to me, ‘In retrospect, what have you learned?’ ” O’Malley. “I said: ‘I learned that we should have hired Deloitte instead of IBM.’ ”

O’Malley added: “We take responsibility for fixing this, and we’ll see IBM in court.”

A spokesman for IBM did not respond to a request for comment.

In July, the state reached a $45 million settlement agreement with Noridian Healthcare Solutions. The North Dakota-based company will pay $20 million up front and the balance over five years. That deal still requires the approval of the North Dakota Insurance Department.

Maryland has nearly completed negotiations with the federal government related to the Noridian settlement. It is expected that much of the settlement will be returned to the federal government, which provided $180 million for the state to set up its system.