The Rising Cost Of Massachusetts’ Failed Insurance Website

The cost to launch and maintain a website where Massachusetts residents can sign up for health insurance is estimated at $121 million through the end of next year. The actual price could be plus or minus 20 percent of that figure. Gov. Deval Patrick’s special assistant, Sarah Iselin, outlined the plans and expenses at a Health Connector board meeting Thursday.

“That’s shockingly high,” said Erika Beahr, a consultant from Waltham who buys health insurance through the Connector. “The state has to have a working website, but it’s hard to understand why it should cost so much in this day and age.”

Part of the reason for the high cost is that the state will spend a few months, at least, building toward two websites, as first outlined Monday. Iselin defended that decision Thursday.

“We’re really making the best of a bad situation.”
– Sarah Iselin,
special assistant to the governor

“It’s not as though there were other things that were viable that we rejected,” Iselin said. “We could spend 30-40 percent more and try to fix our existing exchange, and be in the same position we were in last fall.”

Iselin says she and her team looked at importing a site built by another state, but concluded that customizing it to fit Massachusetts could not be done in time for the next open enrollment, in November.

“I wish that we were in a different situation, but we’re not and we’re really making the best of a bad situation,” she said.

The Dual-Track Solution

The plan is to buy some “off the shelf” portals or components for a new website from Virginia-based hCentive — things like an enrollment program, a chain of questions to determine income eligibility and an online shopping tool. Massachusetts will tailor the hCentive products to include local health insurance plans and subsidies the state will provide, in addition to federal assistance.

If the hCentive site isn’t ready, the state will be prepped to merge with HealthCare.gov. But only for one year. The state would keep working on an hCentive site for 2015. (This assumes whomever is elected governor in November agrees, but that’s another story.)

The move to HealthCare.gov would be much cheaper than the hCentive option. Iselin showed the Connector board this chart that breaks down the costs. (Here, FFM, or Federally Facilitated Marketplace, is HealthCare.gov.):
The cost estimate for fixing the state's broken health insurance website

Continued payments to Optum, the firm that has been advising Iselin, are included in the $121 million. Optum will replace CGI as the state’s systems integrator, bringing the components, software and hardware together on the new site. CGI built the failed website.

Conflicted Interests?

So did Optum advise Iselin to hire itself? A spokesperson for the Patrick administration said “given Optum’s successful work with us … combined with the role they played in turning HealthCare.gov around, they were our preferred IT expert to partner with for fall 2014.”

But some board members are bothered by apparent conflicts of interest.

“I wish we’d had more opportunity to discuss the fact that Optum was the evaluator as well as CGI’s replacement,” Ian Duncan said. He and fellow board member George Gosner also raised questions about Optum’s role in helping the state select hCentive. Optum owns 24 percent of hCentive.

Gosner was the only board member who did not vote for the two-track approach during Thursday’s meeting. Several members spoke in favor of it.

“I very much want us to end up with hCentive working, and being able to maintain a state-based exchange,” board member Nancy Turnbull said. She says the state needs a site that can be customized for all the ways Medicaid, subsidies and insurance are different in Massachusetts.

Connector Board Doesn’t Oversee Website

The Connector vote was not binding. All the vetting and decisions about the website are being made by Iselin, Patrick and an executive steering committee that does not hold public meetings. It’s a committee model that was put in place to build the first website. Iselin says there’s a key difference. This time, someone is in charge.

“Having a single point of accountability with authority to make decisions is a hugely important conclusion for this project,” Iselin said. “We didn’t have that kind of governance structure at place in the beginning; we have it now.”

Iselin has been overseeing the website fix for almost four months and will return to her job at Blue Cross Blue Shield of Massachusetts soon. She will be replaced by Maydad Cohen, Patrick’s deputy chief of staff for Cabinet affairs.

Who Pays?

The state’s initial federal website development grant was $175 million. Connector Board Chair Glen Shor says about $65 million of that has been spent. Much of the $110 million that is left is obligated, but some of it will be available for the new site. No one has firm numbers at this stage. In any case, the state plans to ask the feds for additional money.

Some critics say requesting more money now — before the past spending is explained, and before there is a firm budget for the new website — is irresponsible.

“It just sets up taxpayers to pay well over a half a billion dollars for [Affordable Care Act] exchange-related activities to, maybe, have a state-based exchange that basically works like it did in 2010,” said Josh Archambault, with the free market-oriented Pioneer Institute. “This is now Massachusetts’ Big Dig IT project.”

Archambault’s half billion number is higher than any the Patrick administration has used. He’s including a grant to UMass and one that went to MassHealth.

But there are other expenses, besides the new site, that stem from the failed one. The state is spending $10 million a month to supplement benefits for some residents whose subsidized coverage will likely be extended through the end of the year. And there are monthly bills for Optum — $16 million for February and March, so far.

In addition, the state has spent $51.7 million on temporary coverage for 190,000 residents (although many of these people may have qualified for coverage whether the site worked or not). The federal government may pay up to half of the cost of this group, once the state knows which program each person qualifies for.

If You Have Insurance Through The Connector…

You’ll probably stay with the coverage you have through the end of the year. So if you are one of the roughly 100,000 people who were on Commonwealth Care last year, and have had your policy extended, you will probably keep that policy through December. If you are in temporary coverage, you too, Iselin said, may be in that system until Jan. 1, 2015.

But what happens next year depends, in part, on whether the state gets its own site up and running or asks everyone to enroll through HealthCare.gov.

The Massachusetts Association of Health Plans (MAHP) wrote to the Connector board saying “the technical problems, compressed time frame and significant additional costs of having to build two systems may result in some health plans being unable to participate in the Connector.”

MAHP says it has hired attorneys to determine if the state has the legal authority to move Massachusetts into the federal health exchange.

A leading health care consumer group is also weighing in against moving to HealthCare.gov.

“While the federal HealthCare.gov option should be kept as a fallback, the state would best be served by a website that supports state affordability standards and allows access to all state-specific coverage programs,” said Amy Whitcomb Slemmer, Health Care for All’s executive director.

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