Maryland official announces $14.8M settlement with IBM; State recoups money spent on botched health exchange rollout under ACA

Maryland will recoup millions of dollars spent on the disastrous rollout of the state's health insurance exchange created under the Affordable Care Act under a settlement with IBM, which supplied the technology.

Maryland Attorney General Brian E. Frosh announced the $14.8 million settlement with IBM and its Curam Software unit Friday, a little more than five years after then-Gov. Martin O'Malley blamed the technology giant for the website's problems and said: "We take responsibility for fixing this, and we'll see IBM in court."

The online marketplace, where people who don't get health insurance through an employer could buy coverage, crashed on the first day of open enrollment in the fall of 2013.

The failure was a high-profile black mark on O'Malley, who was running for president at the time, and his Lt. Gov. Anthony Brown, who was running for governor. Both had praised Maryland's support for the health law, a signature domestic achievement for president Barack Obama, and the state's preparation. Neither Maryland politician, both Democrats, was successful.

There were similar embarrassments around the country, as many state-run exchange websites failed to work properly. But Maryland's site was among the worst. O'Malley and Brown pushed for a quick fix, but as technical problems and complaints piled up, the IBM technology was scrapped for new technology.

IBM didn't respond Friday to a request for comment.

The state has been investigating and pursuing reimbursement since then, and this settlement wraps up the years-long effort.

Frosh already settled with the main contractor, Noridian, for $45 million in 2015. The latest settlement is with IBM, a subcontractor, which the state accused of violations of Maryland's False Claims Act. The companies did not admit wrongdoing.

"They basically promised off-the-shelf software," Frosh said. "Not only did they not have off-the-shelf software, what they wrote just didn't work. The health exchange crashed and burned right out of the box. It took a long time to figure out exactly what was in the software."

Frosh said the massive delays frustrated people who needed health insurance.

Health exchange officials set up manual workarounds to enroll residents in private health insurance as a technology team scrambled to get the online system working.

Several months after open enrollment began, the board overseeing the exchange voted to adopt technology developed by Deloitte Consulting for the successful Connecticut exchange. Isabel FitzGerald, secretary of the state's Department of Information Technology, stepped in to help fix the exchange. She hired Deloitte, in a no-bid contract worth up to $50 million, to retrofit Connecticut's software for Maryland - a somewhat controversial move at the time because her husband was a Deloitte official.

FitzGerald was later indicted by the U.S. Attorney's Office in Maryland on bribery charges stemming from her time in the IT department. She pleaded not guilty, and the charges have not been resolved.

In the meantime, exchange officials and local leaders traded blame for the website's woes. Officials discovered that contractors and subcontractors had been squabbling behind the scenes and that many technical problems were known ahead of the website launch.

Republican Larry Hogan, Brown's opponent, criticized the botched exchange rollout and the O'Malley administration for a lack of transparency, and, later, the extensive use of emergency contracting to fix the site. Hogan was ultimately elected governor.

A Baltimore Sun investigation found exchange officials awarded more than $84 million in contracts without competition, about a third of the money spent on the troubled website.

Eventually, hundreds of thousands of people signed up for insurance, as well as for Medicaid, the federal-state health program for low-income residents, through the website, but not after significant delays and extensions. It continues to work as intended, without technical problems.

Maryland's share of the IBM settlement is $2.8 million. The federal government, which financed much of the exchange development, will get the rest.

Frosh bemoaned the millions of dollars and time wasted but said it's satisfying that Marylanders can now access insurance.

"They made a bigger mess than the $60 million, which is what we recovered," he said. "I think we did reasonably well. First of all, the exchange is up and running and people are getting health insurance. That's great. It was a mess and cost us a bundle of money to pay IBM and then pay to fix it, but this is [a] satisfactory resolution."

meredith.cohn@baltsun.com

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Credit: By Meredith Cohn - The Baltimore Sun - meredith.cohn@baltsun.com;twitter.com/mercohn