UnitedHealth Signs Pact To Repair Hawaii Exchange

Aug. 22--The company that fixed the federal Obamacare health insurance exchange is preparing to replace embattled contractor CGI Group Inc. as the main technology vendor for the faulty Hawaii Health Connector.

UnitedHealth Group Inc., the nation's largest medical insurer, cleaned up the mess that CGI made with the national healthcare.gov website and has been the go-to company for several states -- including Maryland, Massachusetts and Minnesota -- to salvage their online health insurance marketplaces.

CGI won contracts worth $73 million to build and operate the Hawaii Connector, which has been plagued with problems since its inception. It failed to launch on Oct. 1 as planned, often crashed and took users hours to navigate. After nearly 11 months of operation and using up most of its $204.3 million federal grant, the exchange has enrolled just 10,800 people.

Minnesota-based UnitedHealth said in a document obtained by the Honolulu Star-Advertiser that its Optum unit, which provides information and technology services, was awarded the Hawaii exchange contract.

CGI said it was invited to bid on the contract but declined.

In a document UnitedHealth drew up for Honolulu hotels seeking housing cost estimates for employees, it said anywhere between six and 70 workers would need accommodations from August to May to work on the Connector contract. UnitedHealth asked for a response by Aug. 12.

"UnitedHealth group was awarded the Hawaii Exchange contract and will be sending employees to this area for an extended period of time to manage this piece of business," the document said.

Despite UnitedHealth's statements to the contrary, Tom Matsuda, the Connector's interim executive director, said he has not yet selected a new contractor to revamp the Hawaii exchange.

"We are evaluating proposals but have not made a final decision and, to be clear, there is no contract with any new vendor," Matsuda said.

Matsuda said the Hawaii contract is for "ongoing improvements to its marketplace operations and online system." He didn't disclose the value of the contract or say whether the new vendor would be rebuilding from scratch the entire system.

Hawaii's health exchange, created by President Barack Obama's Affordable Care Act, has been criticized as the nation's worst and has been a black eye for the president's home state and Gov. Neil Abercrombie, one of its staunchest supporters, who lost the primary election earlier this month.

The Connector initially awarded CGI a $53 million, four-year contract to build the exchange and subsequently gave it an additional $20 million for maintenance and operations. But CGI failed to meet the scheduled Oct. 1 launch date due to software problems and Hawaii was last in the country to go live with health plans on Oct. 15. Matsuda didn't say how much the Connector has paid CGI to date. He also didn't address whether the Connector will be seeking any refunds from CGI for the bungled launch of the exchange.

"It's like pulling teeth from a chicken trying to get information from them," said Sen. Sam Slom (R, Diamond Head-Kahala-Hawaii Kai), adding that the Connector hasn't held CGI accountable for its lack of productivity. "The taxpayers and elected officials should continue to be frustrated with the lack of specificity and how much this is actually costing. It's exasperating that you just can't get an easy answer."

The Connector, which was expecting its funding to end on Dec. 31, said earlier this week it can continue using federal grant money throughout 2015. Matsuda said the nonprofit had approximately $75 million of its original $204.3 million in grants remaining as of June. Lawmakers have also appropriated $1.5 million for operations next year.

CGI defended the work it has done for the Connector.

"Today, Hawaii's Health Connector is live and operational, serving the residents of Hawaii," said Linda Odorisio, CGI's vice president. "Although invited, CGI chose not to bid on the RFP issued by the Connector for new enhancement work. While our implementation project is scheduled to end soon, we will continue to host the system as requested by the Connector."

The Obama administration ended its contract with CGI, which also built the equally problematic federal exchange, and hired UnitedHealth as the new lead contractor, crediting the company for helping to fix the broken system.

Before being hired by the Connector, Montreal-based CGI already had a checkered history in Hawaii. The company previously riled lawmakers after the state paid CGI $87.5 million between 1999 and 2011 to modernize the Tax Department's collection system that officials say has never worked properly. The state is preparing to spend at least another $32 million to redo that project.

UnitedHealth has been praised for its work in other states.

Maryland Health Secretary Joshua Sharfstein told Bloomberg News, "We went with them because of their successful experience with healthcare.gov. They've been a great partner in keeping our system moving forward, and thinking about the future."

UnitedHealth already does business in the islands. It runs one of state's two Quest health plans -- the Medicaid insurance program for low-income residents. But it won't be offering medical policies on the Connector in 2015.

"Our first priority has been and will continue to be honoring our commitments to existing local customers, members and care providers," said Tyler Mason, UnitedHealth Group vice president. "Though we are not participating on the Hawaii exchange in 2015, we remain fully committed to our business in Hawaii and the 230,000 UnitedHealthcare members we currently serve outside the exchange and look forward to seeing this important growth market mature and develop over time."

OUT:

CGI Group

Headquarters: Montreal

Hawaii contracts: $70 million for Hawaii Health Connector; $87.5 million for Tax Department

IN:

Optum

Subsidiary of UnitedHealth Group Inc.

Headquarters: Eden Prairie, Minn.

Previous experience: took over for CGI to fix healthcare.gov; fixed health exchanges in Maryland, Massachusetts and Minnesota

Bloomberg News contributed to this report.

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