Highlight on Maryland: State settles with former health exchange contractor

Maryland can expect to recoup the $45 million it previously spent on the development of the state’s health insurance exchange website, according to settlement details announced in a press release from Maryland Governor Larry Hogan (R). Noridian Healthcare Solutions LLC (Noridian), the contractor behind Maryland’s flawed health insurance exchange website, will pay the settlement to avoid legal action regarding its performance.

The state claims that technical problems with the Maryland health insurance exchange are responsible for some of the worst sign-up rates for private health care plans in the country. This is because the website never worked properly, and it delayed the applications of thousands of people without employer health care and left them in need of coverage.

“The roll-out of Maryland’s Health Exchange was a debacle that could have been avoided,” Hogan said. “I have been one of the most vocal critics of this fiasco, and I am pleased that the process of recouping taxpayer losses has begun. This settlement represents only the first step in the process and we’ll continue to aggressively pursue other avenues to recover damages.”

Per the settlement agreement, Maryland is released from its obligation to Noridian. Maryland can expect to receive just over 60 percent of the amount it paid Noridian for the development and launch of the health insurance exchange website in 2013. Some of the money will also go to the federal government, as it provided a considerable amount of funding towards the site. Noridian will pay $20 million upfront and the remaining $25 million in annual installments of $5 million over five years.

According to the press release, because of Noridian’s financial constraints, even if a judgment of the same amount or higher were obtained through years of litigation, it is very possible that Maryland would not have been able to recoup the settlement amount. Because of Noridian’s inability to reimburse the full amount of the contract, the agreement is a fair deal for the state’s taxpayers. Noridian’s parent company guaranteed at least $40 million of the settlement payment and the North Dakota-based insurer fired its CEO last year, after losing $80 million, $50 million of which was attributed to Noridian Healthcare.

“We are pleased that we were able to resolve our differences with the state of Maryland over the Maryland health insurance exchange project and avoid lengthy and costly litigation,” Tom McGraw, Noridian’s president and CEO, said in a statement. “This settlement allows us to move forward and focus on our core business of processing health care claims and providing related administrative services.”

The first open enrollment in Maryland saw 63,002 sign-ups for qualified health plans through the health insurance exchange website. Enrollments jumped in the second year, with 264,245 sign-ups on the health insurance exchange.

To date, Maryland is just the second state to settle with its health insurance exchange development contractor. Massachusetts appears to be the only state which has previously publicly settled with a main contractor, paying the company, CGI, $35 million. Oregon is in the middle of a lawsuit against its developer, but no terms have been reached as of yet.