from – Reason Foundation – by Peter Suderman –
A state-by-state analysis of failed health care exchanges
Of all the failures spawned by Obamacare, perhaps the most complete was the meltdown of Oregon’s health insurance exchange. After spending three years and being awarded $300 million in federal money to build a website where citizens could buy insurance, the Beaver State has absolutely nothing to show for it.
Oregon was one of 14 states, plus the District of Columbia, that chose to build its own exchange rather than join the federal portal Healthcare.gov. Dubbed Cover Oregon, it was one of the most ambitious efforts in the nation. In January 2013, the state won a $226 million federal grant to build and operate the system.
“This is a strong vote of confidence from our federal partners,” said Democratic Gov. John Kitzhaber at the time. Kitzhaber promised that the online insurance portal would increase access to information, boost value, and promote overall health. It was to be ready in the fall, in time for the nationwide launch of the exchanges.
In addition to the $226 million grant, Cover Oregon was also the recipient of almost $80 million more in federal cash, including a $48.1 million Early Innovator grant awarded in the hope that the system could eventually serve as a model for other state-based exchanges. This was the second largest of the Early Innovator grants handed out.
In the months prior to launch, Oregon’s ambitions were lauded, with The Washington Post suggesting in May 2013 that it “may be the White House’s favorite health exchange.” There were adulatory profiles of the state’s exchange technology in publications such as Government Technology and Information Week.
But even before the scheduled unveiling of the exchanges in October, problems began to appear. In August, the state became the first to announce that its online functionality would be delayed.
Initially, state officials indicated that the setback would last only a few weeks. But at the end of October, the system was still plagued by technical problems. Gov. Kitzhaber continued to insist that the project was still largely on track. “I think we’re in really good shape here in Oregon. Do we have some problems? Yes. Are we concerned? Of course,” he told KATU News. “But I believe we’ll come through this very well.”
By January, however, it was unclear whether the state’s exchange would ever get off the ground. A scathing report in The Oregonian revealed that Maximus, a quality assurance firm hired to keep tabs on the project, had repeatedly filed critical reports indicating that the project was risky, poorly managed, and unlikely to be ready on time. In response to one particularly critical report from the consultants, the exchange’s chief information officer, Carolyn Lawson, had threatened to withhold payment unless the company delivered a rewrite with a different verdict. Throughout 2013, testing on project components was delayed, and when tests had occurred they revealed an unready system rife with major glitches.
State officials had pressed on anyway, spending $9 million on a twee advertising campaign featuring folk singer Laura Gibson—a contract that was expanded to $21 million in October, even as the glitches multiplied.
In the following months, Cover Oregon completely collapsed. Five senior officials involved in the project resigned. In April, state officials decided to scrap all existing work on the state-run exchange and join the federal portal. It was the first state to do so, but it would not be the last.
In May, the FBI indicated that it was looking into fraud allegations made by Oregon State Rep. Patrick Sheehan, a Republican long critical of the exchange. Sheehan requested that the FBI look into charges that state exchange officials had knowingly created dummy websites during the build-out process in order to fool federal officials checking in on the state’s progress. Later that month, federal prosecutors issued subpoenas for state records related to the exchange development process, pursuant to a grand jury investigation.
Oregon was Obamacare’s most complete tech failure, but it wasn’t the only state-run exchange to result in disgrace. A half-dozen other states either collapsed completely or experienced severe technical malfunctions, including several projects once hailed as being among the most technologically advanced.
- Total federal grants: $305.2 million
Days before the October 2013 launch of Obamacare’s national health exchanges, President Obama chose Largo, Maryland, as the backdrop for a speech touting the law’s benefits. In the speech, he praised state legislators for their work and suggested that state-run exchanges were ahead of the curve.
But the Maryland site failed immediately after going live and never recovered. The exchange director resigned in December and investigations found that officials had been warned repeatedly by outside consultants that the project faced significant risks. In March the state fired one of its tech contractors, Noridian Healthcare Solutions. And in April the state decided to toss its existing exchange technology and try again with software copied from Connecticut.
- Total federal grants: $171 million
Before Obamacare was signed into law, Massachusetts was the only state with a fully operational online health insurance exchange. It was slow, requiring offline paper processing to judge eligibility for subsidies, but it worked. Then Obamacare came along, and the state was forced to upgrade to a new exchange.
As in Oregon, the state’s plans were ambitious. Emails obtained by the Boston Herald found that state officials hoped to build “the absolute Rolls-Royce of any health exchange.” But the updated, Obamacare-compliant system never worked. State officials fired their tech vendor, scrapped the entire system, and requested $121 million to start over on a new exchange.
- Total federal grants: $179 million
Nevada was the only state with a Republican governor that chose to build and run its own health insurance exchange. The project did not go well.
Plagued by bugs, delays, and outages, the Xerox-built system never functioned enough to be usable for most people. The state only signed up a third of its target of 118,000 people for coverage. The exchange director announced his resignation in February, and in April an independent assessment by consultants at Deloitte reported that “the current project team has not proven they can successfully deliver the required management, processes or solution to successfully deliver an operational exchange.”
At the end of May, the state’s exchange board voted to scrap its system and partner with the federal exchange for the coming open enrollment season, while working toward rebuilding a new system for later years.
- Total federal grants: $90.7 million
Throughout its development, Minnesota’s exchange, MNSure, was plagued by poor management at both the federal and state level. State officials delayed picking a tech contractor, leaving it less time to complete the work, and then had to rework the system a few months before launch in order to comply with late-breaking revisions to federal exchange requirements.
When the system launched in October, it sputtered, and was nearly impossible to use. By mid-December, the exchange director had resigned, and Optum, an outside consulting group, found that there was no clear management structure in place; the project was operating in “crisis mode.” There were at least 210 software defects, Optum reported, and rebuilding the system could take as long as two years.
- Total federal grants: $153.7 million
Vermont has always had a problem with Obamacare: The president’s health law just isn’t progressive enough. In 2011 local officials announced a plan to implement a single-payer system in the state in 2017, when statewide waivers to the law become available. In the meantime, they would build an exchange.
But Vermont relied on CGI Federal, which also built the flawed federal system, and months after launch much of the planned functionality remained offline. At the end of April, about 8,000 state residents were stuck in coverage limbo due to ongoing problems with the site.
An independent review reported that the state and its tech vendors were in over their heads. They “had never completed a software development project of this magnitude and did not fully understand the Affordable Care Act.” Republican state legislators have called for an investigation into the build-out process, alleging that CGI may have created a dummy website demo to fool federal authorities. State and federal officials said they were likely to proceed with an audit.
- Total federal grants: $165.2 million
Hawaii’s health exchange was taken down almost immediately after the October launch and didn’t go back online until October 15. But even after the site was finally live, enrollment remained exceedingly low.
In December, the state’s exchange director stepped down. Technical problems persisted throughout the open enrollment period, and so did low sign-up numbers. By the end of March, just 8,592 people had signed up for insurance through the state exchange, making it the most costly in the nation on a per-person basis, with a price tag of $23,899 per sign-up, according to a report by a former HHS official.
- Total federal grants: $205 million