States, Contractors at Odds Over Payments for Troubled Exchanges

Several states -- including Maryland, Massachusetts, Nevada and Oregon -- that encountered technical problems with their state-run health insurance exchanges are engaged in tense standoffs with the websites' builders to recoup federal funds that were paid or settle outstanding payments for the troubled sites, the Wall Street Journal reports.

According to the Journal, the states argue that the contractors are responsible for the delayed exchange launches and problem-plagued rollouts. However, some of the contractors argue that states shoulder the responsibility for the costs because they changed deadlines or added new responsibilities after finalizing the contracts.

For example:

• Maryland has said it intends to recoup a "significant" amount of the $55 million it paid Noridian Healthcare Solutions to develop its exchange, while Noridian has countered that the state added an additional 230 new technical requirements after the contract was awarded;
• Massachusetts has paid its contractor, CGI Group, just $17 million of its $89 million contract because of missed deadlines; and
• Oregon is preparing up to sue Oracle over a remaining $25.6 million in the company's contract, after the state had to shift to the federal exchange following a disastrous rollout.

According to the Journal, no lawsuits have been filed yet and the disputes over the contracts could potentially "drag on for years" (Armour, Wall Street Journal, 6/20).

Republicans have argued that hundreds of thousands of dollars in federal funds were wasted on glitch-filled, state-run insurance exchange websites. Last month, Sens. Orrin Hatch (R-Utah) and John Barasso (R-Wyo.) introduced legislation (S 2339) that would require states that abandoned such exchanges to return the funds (California Healthline, 5/15).

States Consider 2015 Exchange Funding Options

In related news, more than a dozen states that plan on continuing to operate their own health insurance exchanges are exploring options to make them self-sustaining in 2015, when federal funding for the marketplaces expires under the Affordable Care Act, Vox reports.

According to Vox, 17 states operated their own exchanges in 2014, but two of them -- Oregon and Massachusetts -- have indicated that they might shift over to the federal exchange in 2015. The remaining 15 state exchanges will have to find ways to fund themselves next year under the law.

State officials are exploring several options to continue funding, particularly as they are unsure about how much it will cost to operate a state exchange in a "non-launch" year. For example, some states are considering:

• Charging insurers a fee on monthly premiums to participate on the exchange next year, ranging from the District of Columbia's 1% surcharge to Minnesota's 3.5% fee;
• Using state appropriations to fund the exchanges, such as Washington, which plans to couple state funding with insurer fees;
• Selling other states consulting services on successful exchanges, such as Connecticut; and
• Using leftover federal funding from 2014, such as Rhode Island (Kliff, Vox, 6/22).