Feds Release Details of ‘Urgent’ New Contract

Failure to fix website by March puts ‘the entire health insurance industry at risk’

HHS secretary Kathleen Sebelius / AP
January 17, 2014

Newly released documents reveal the anxieties of the Department of Health and Human Services (HHS) about, which warn that failure to finish the website puts "the entire health insurance industry at risk."

The HHS released documents relating to its new contract to maintain the federal health exchange on Wednesday, justifying its reasons to expedite the procurement process because of an "urgent need" for the website to work.

The documents instruct the new contractor, Accenture Federal Services, to build "core functionality" of the website, including software that tracks enrollment and calculates subsidies to pay insurance companies. Centers for Medicare and Medicaid Services (CMS) officials have admitted that nearly half of the site has yet to be built.

CMS officials said the majority of work remains to be done on back end systems, including the financial management module, which will automate and smooth intersections with third parties including health plans.

HHS warned that if the site is not completed by March 2014, it puts the "entire health insurance industry at risk."

"CMS must immediately award a contract for these services under the auspices of the aforementioned exception to full and open competition because there is limited time to build this functionality and failure to deliver the functionality above by mid-March 2014 will result in financial harm to the Government," the "Justification for Other than Full and Open Competition" statement accompanying the contract revealed.

"If this functionality is not complete by mid-March 2014, the government could make erroneous payments to providers and insurers," it said.

The website currently has no "Financial Management platform" to account for enrollments, tax credits, and payments to insurance plans, according to the document. HHS said without such a system the "entire healthcare reform program is jeopardized."

The lack of an accounting platform will also cause "inaccurate issuance of payments to health plans which could seriously put [insurance companies] at financial risk; potentially leading to their default and disrupting continued services and coverage to consumers."

Of great concern is’s capability to manage the risk corridors of the health care law, which include payments to offset the potential losses of health insurance companies participating in the exchange.

Reinsurance payments will redistribute $10 billion in 2014 to insurance companies that take on more expensive patients, because the law does not allow individuals to be denied coverage on the basis of preexisting conditions.

The risk adjustment program also "provides payments to health insurance issuers that disproportionately attract higher-risk populations" as a result of the law.

By issuing the contract, HHS hopes that by mid-March a "Financial Management Platform" within will be complete. Among other things, the platform "tracks eligibility and enrollment transactions" and
"accounts for subsidy payments to insurance plans."

Accenture will also "enhance" existing parts of the exchange, including the call center and direct enrollment integrations.

A CMS official justified the fact that these elements have yet to be built because they were not necessary for enrollment when the site first launched on Oct. 1.

The parts of the marketplace that were essential for consumers to be able to apply for eligibility and select a plan were live on Oct. 1, according to the official. The additional functionality that has not been launched yet has to do with pieces that were not needed for Oct. 1, they said.

The document also revealed that CMS did not decide to drop the lead IT contractor CGI Federal, which oversaw’s disastrous roll out, until December.

HHS said it was necessary to expedite the contract because the normal procurement process, which requires open competition, would delay the award until September 2014.

When coming up with a list of potential contractors, HHS sought six criteria, including "no conflicts of interest" and "past performance that does not show evidence of poor performance."

HHS said the new contractor, Accenture, is "uniquely qualified" because it helped build the state exchange for California. The company has also built websites for the IRS, the Census Bureau, and the Department of Education.

Accenture said in a statement announcing the contract on Jan. 11 that they would provide 24/7 support of, "eligibility and enrollment functions, generation and transmission of enrollment forms, and features related to special enrollment periods, among other services."

The total value of the contract is estimated at $91.1 million for one year. Included in the cost is about $2 million for travel. CMS has already obligated $45 million for the initial phase of the project, and the final cost will be determined soon, according to agency officials.

The agency has already put $319 million into the website. The total cost could ultimately reach $677 million based on contract obligations by HHS.

"We have much left to do" to ensure the viability of, CMS said in a statement to the Washington Free Beacon.

"As CMS moves forward in our efforts to help consumers access quality, affordable health coverage, we have selected Accenture to become the software contractor for the portal and to prepare for next year’s open enrollment period," it said. "We have accomplished a great deal, but we have much left to do."

"We are pleased that more than 1.1 million consumers already have enrolled in a private plan in the federal Marketplace thanks to existing efforts and look forward to working with all of our contract partners to ensure a smooth transition of this work," it said.

Published under: HHS , Obamacare