Builder of state’s health care exchange misses key deadlines

Mark Larson, commissioner of the Department of Vermont Health Access

Mark Larson, commissioner of the Department of Vermont Health Access.

The multinational corporation building Vermont’s new health insurance market has fallen behind on key deadlines, and it was recently awarded an amended contract worth twice that of the original.

The Shumlin administration signed an amended $84 million contract with Canadian IT giant CGI last month to create the Web-based market, Vermont Health Connect, and associated information technology systems. This new health insurance market, scheduled to launch Tuesday, is Vermont’s response to mandates in the federal Affordable Care Act, aka Obamacare.

The contract is just $4 million less than CGI’s agreement with the federal government for similar services that will be used across the country.

The administration said CGI has failed to meet more than half of Vermont’s 21 performance deadlines, called “critical milestones.” Although the state has the contractual power to penalize CGI for falling behind schedule, it has not exercised this authority.

The state could charge CGI as much as $125,000 a day in penalties, depending on the length of the delay and the importance of the milestone.

Mark Larson, commissioner of Vermont Health Access, which oversees the implementation of the Web-based market, said late Friday he didn’t immediately have information about which, if any, of the delayed milestones have been completed.

The CGI milestones include key functional components of the exchange, such as premium billing, verification interfaces and connections to necessary data hubs.

“We continue to reserve our right to assess liquidated damages, and we have chosen not to assess any at this point,” Larson said. “But we have not given up any right to do so.”

Tuesday, Vermont Health Connect is set to open for roughly 100,000 Vermonters buying health insurance plans independently or through businesses with 50 or fewer employees. Last week, however, the administration told VTDigger that Vermonters would not be able to actually buy plans on the market until Nov. 1.

Gov. Peter Shumlin called this hang-up a “nothing burger.” His top health care officials say they don’t expect Vermonters to buy insurance in October when they are already covered, so delaying the payment portion should have little effect on enrollment.

Larson says Vermont Health Connect will be ready next week for Vermonters to subscribe to one of 18 plans offered by two insurers: Blue Cross Blue Shield of Vermont and MVP Health Care. But the payment mechanism for buying plans on the exchange will not be ready.

“Vermont Health Connect will be ready to support Vermonters and the purchase of their health coverage on Oct. 1, and I think that is our first priority,” Larson said. “The other topic is how are we managing our vendor, and whether we are holding them accountable to the contract we have signed. I believe we are fully aware of both of those priorities. And, of course, it is hard to assess the second before we have actually finished the work on the first.”

CGI did not respond to detailed questions about the missed deadlines.

“CGI is fully committed to supporting our client and their success,” spokesperson Linda Odorisio said. “Our work on behalf of Vermont Health Connect is currently on track to provide the technical capabilities required for an effective Oct. 1 implementation.”

Larson says the state has made “digital contact” with the Internal Revenue Service’s database. A complete connection with that database will be used to automatically determine a range of subsidies that are available to Vermonters earning up to 400 percent of the federal poverty level.

Larson also said the state has electronically connected with the two insurers. This is a crucial step because the insurers will need to receive payments and personal details in order to enroll Vermonters in their health insurance plans.

Kevin Goddard, vice president for Blue Cross Blue Shield of Vermont, reiterated Friday that the connection was just being created. Asked if Blue Cross had exchanged data with the state, he responded: “There may have been an initial file or two.”

When the state signed the initial contract with CGI in December 2012, it was worth $42.5 million. The contract was then amended three times, as were the critical milestones. Larson said the state changed them when it had more information on the project.

Of the current $84 million contract, $81.5 million will come from the federal government, and only a percentage has been allocated. The remaining $2.5 million will come from the state general fund.

Larson said the bulk of the increase was a roughly $20 million addition to build the state’s new “integrated eligibility system.” This system is aimed at tying together eligibility systems for all human services programs, such as 3SquaresVT food benefits, health insurance subsidies, heating assistance and other programs.

An independent review of the state’s health IT projects last spring found that the state’s current eligibility and enrollment system for human services programs is “obsolete.” The same review estimated that Vermont Health Connect would cost the state and federal governments $427 million over five years.

This massive technological undertaking comes a year after three state IT projects went belly up: a new Department of Motor of Vehicles system, a judiciary case management program and a Department of Children and Families system.

CGI is an experienced player in the IT field. The company is building the federal health insurance market, and digital markets for some of the other 16 states that are running their own, such as Colorado and Massachusetts.

CGI’s contract with Vermont rivals that of its agreement with the federal government. A June report from the U.S. Government Accountability Office shows that CGI is charging the federal government $88 million for the exchange IT systems and front-end website,, which will be used in more than 25 states.

The GAO found that the federal exchange was behind schedule.

Andrew Stein

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  • Linda Quackenbush

    Healthcare and Insurance are not synonymous! Governmental insurance is a monopoly of our rights to choose healthcare…

  • Sandra Bettis

    i think you mean healthcare and ins cos are not synonymous. what about our right to have healthcare. and what the heck is th 84 million for and why is there any charge at all??????????

  • Sandra Bettis

    and why did we need a designer at all???????????

  • Dave Bellini

    As I stated previously, “nothing burger” is synonymous with “major problem.”
    “CGI did not respond to specific questions about the details of the missed deadlines” — That the corporate equivalent of pleading the 5th. When you stink it up, lawyer up.
    It sounds like the state has performance guarantees built into the contract. That part is good. But, instead of assessing CGI the agreed upon fee for failure to perform, the state REWARDS failure and hands over another 40 million dollars. Shrewd. What’s the next step? Threaten to hand CGI 100 million dollars more if they foul it up again?

    Maybe missing one performance deadline would not be cause to terminate a contract and get another vendor. But, missing more than half of 21 “critical milestones” sounds like this company isn’t getting it done.
    I want to know why the state leaders refuse to ever level with Vermonters. Why soft pedal it and call it a “nothing burger” and try to minimize everything? Why can’t you guys just tell the whole truth the first time?

    • Hi Dave Bellini….strange as it may seem, I am totally agreeing with you!! “NOTHING BURGER”…doesn’t sound great to me. And there’s a built in clause of a ‘fine’ of sorts for not meeting performance deadlines…. VT has not exercised this option…come on Mr.
      “Nothing Burger” tell ’em!! Git ‘er done or we impose on you our rights to seek restitution!

  • Bob Orleck

    Good grief! Someone should be going to jail!

    • Was it not Shumlin who started this federally-financed folly?

    • Rick Battistoni

      Jail and/or an “involuntary career change” only happens in the private sector. It’s often assiciated with a forgotten concept called accountability.

  • Hale Irwin

    The history of huge State IT projects nationwide has had a bad history for success over the decades…..

    • Tom Haviland

      the history of *all* huge IT projects is very poor. Nothing to do with the state in particular.

  • Josh Fitzhugh

    Having recently changed operating systems at our company, I can vouch for the complexity of this process and, without a great project management and a committed vendor, the impossibility of getting it done on time. Without knowing all the details, here are some of the complexities that I see here that will likely cause delay:

    1. First, the state is not moving an existing process onto a new platform. So every change has to mapped, designed, coded and tested. We did something similar and it took us three years and we are still working on it.

    2. To have a financially sound system, testing is critical. Here, with the number of external links required (think IRS), that will be more difficult. From what I’ve read the testing has just begun. Testing is also very labor intensive. I can’t believe the system can be adequately tested for financial soundness to calculate and accept premiums in a months time. And if is screwed up, who is going to take that risk of sorting it all out?

    3. Once you are in the middle of one of these projects, the contract is very difficult to enforce. All expect some cost over runs and determining what is a defect or change order becomes almost pointless. You just want to get the project done. And unless there is an out clause, you are going to have to deal with the IT vendor for years to come. You just have to work it out.

    4. This appears to require a maze of connections to other systems, in addition to health insurers and the IRS. Each connection is a vulnerability and adds complexity . The State should be trying to keep it simple and add the nuances in phases later, but it does not seem like they are doing that.

    We can debate the policy merits of this exchange, but if the State pulls off the technological challenge anywhere close to its deadline, they and their insurance company partners deserve great kudos for just that.

    • Sandra Bettis

      ‘the state and their ins co partners’ – you got that one right.

  • Andrew Fischer

    So let’s make sure we’re all on the same page:

    1. Of the 100,000 Vermonters this web site is going to affect, 70,000 are currently insured by BCBS / MVP.

    2. Vermont spends a total now exceeding $400 million on software to build a website to move, at most, those 70,000 people to a new site where they get their roughly equivalent plans back from the same 2 providers.

    3. Data is showing the 30,000 uninsured aren’t necessarily motived to sign up at all, even at a price point of free.

    4. Legislators just conveniently forget that if they had invested that $400 million dollars they would have made an additional $100 million in the past year, and could have easily taken care of those with real needs and not enough money. Opportunity cost of capital is ignored.

    Is this an accurate summary of where we stand?

    • Moshe Braner

      Divide the $100 million start-up software costs by 100,000 people, that’s $1000 per person. Doncha think we coulda hired some Vermonters for far less than that to “manually” help the 100,000 get the insurance they want and need? (Choosing out of a whopping 2 options.) Instead we’re sending yet more money out of state.

      This “exchange” thing is a symptom of our collective irrational worship of two concepts: the internet, and shopping. Neither has much to do with real health care, and neither will save us any money. We need a single payer system instead.

    • John Greenberg

      ” Legislators just conveniently forget that if they had invested that $400 million dollars they would have made an additional $100 million in the past year….”

      A 25% annual rate of return? Sounds good; where do we sign up?

      • Andrew Fischer

        1 year annualized return of the S&P 500, dividends reinvested, is about 22%. The Vanguard U.S. small cap index, dividends reinvested, is over 30% returns in the past year.

        • John Greenberg

          Now try the return for 2008.

          I’m well aware that, in good years, returns can be high. But averaged over anything more than 3 years or so, returns are ALWAYS considerably lower. For a long while, the long-term average was said to be roughly 10%; after the crash of 2008, most analysts use single digit figures.

  • Patti Komline


    Thanks so much for this alarmingly informative article. It would be interesting to know what Massachusetts and Colorado paid CGI for similar work. Also, has CGI met their milestones for their federal contract? And – did the feds sign off on allocating $20m for human services programs that have no direct healthcare connection. It’s unfortunate that the $250M+ Vermont has spent thus far has gone to building a bureaucracy and not to increasing access, or lowering costs but now how much of the $84M is going to employ Canadians vs. Vermonters.

    A lot more questions need to be asked and I hope we will all be reassured with the answers…

  • rosemarie jackowski

    The Canadian Single Payer Law was 13 pages long when it passed.
    The US law is more than 2000 pages long.
    Just follow the money.

    • Walter Carpenter

      “The US law is more than 2000 pages long.
      Just follow the money.”

      If this law had been a bill for single-payer such as the Canadians have or any number of other nations, it, too, would have been 13 pages — if not exactly 13, then far simpler than it is now.

  • Craig Powers

    “In order to serve you better”…how many times do we have to hear this from those who purport to be looking out for all of our best interests in Montpelier?

    My office is starting to get many calls from people wanting to know what they are supposed to be doing about their health coverage. Since I am not authorized to give advice anymore, because I have not completed the required VHC training (even though I HAVE already done extensive training and been licensed to provide/sell health insurance for ten years), I politely advise them to call their state rep and senators for the needed help. I also advise them to go the VHC website and begin the very arduous task of educating themselves about all the mandated changes from the feds and Montpelier. Webpage after webpage of calculators and premiums and coverages and worksheets…on and on it goes…and on and on and on and on…very few without health care coverage knowledge will be able to decipher what is on there. To help out the State has hired/trained 200 (is this the real number?) Navigators to help 100,000 people…good luck getting through to one if you have questions….and NOW the VHC site is delayed again. Will the Governor and his gang step up and pay for our needed health care when a whole bunch of people lapse their coverage January 1st because the VHC is not ready? What is the contingency plan when 100,000 folks start to try and get coverage from the VHC and it is not ready by 12/1???

    Long story short…the State has done an abysmal job of preparing the affected population for this massive unnecessary change and the State continues to say that there really is nothing to fear and that “everything will be just fine”. Even the Governor has sugar coated this farce by mentioning that it is a “nothing burger”. Robin Lunge continues to smile and say…”everything will be just fine”. Mark Larson continues to smile and say no worries folks…but the clock keeps ticking and ticking.

    You know why they keep saying these things…they are not AFFECTED and do not have to stress or plan for this. I say…shame on all of you for playing with, and complicating our lives and businesses when there already was a decent system for buying health care coverage. If they believe everything is “just fine” than jump right on in and buy your coverage from the VHC. This is not reform…this is crappy planning and typical ineptness from those who keep telling us that it is just one mouse click away to health care nirvana.

    Vote these folks out at the next election. They have done a very poor job.

  • Tom Pelham

    This is astounding; that the contract of the consulting IT firm for the Vermont’s health care exchange has doubled from $42 million to $84 million and that Vermont’s contract is about equal to that for similar work for the federal government’s exchange to be used for 25 other states. Forget for the moment that this is mostly “federal funds”, it’s still taxpayer dollars. $84 million is equivalent to more than 6% of the state’s fiscal 2014 general fund revenues. It is more than 3 times bigger than the entire $25 million Earned Income Tax Credit program; it is 4.75 times bigger than the current $17.7 million funding for the Low Income Heating Assistance Program (LiHeap) and more than 3 times bigger than the $26.8 million appropriation for 3Squares food subsidies. All these programs have been quite controversial of late due to proposals by Governor Shumlin or congressional republicans to cut them. Yet, as a measure of proportionality, $84 million could fund all these programs and more. Astounding.

    I’ve long known that Mark Larson is not a numbers person. When serving as Vice Chair of House Appropriations, he often said that the state budget was “cut” by $100 million when in fact it was increased substantially. His message was more PR than substance. But a $42 million contract amendment for a total contract of $84 million. Astounding.

    Astounding as well is how sanguine Vermont’s media (VT.Digger excluded) is about all this. This one contract amendment is likely larger than all those combined that have made headlines over recent years.

  • Why do we need to use a Canadian IT Company? Is the United States that far behind the rest of the world. I’m sure VT is that far behind we keep pushing high tech company’s out of state. Look at IBM..

    • Sandra Bettis

      we don’t push ibm – they said back in the 80’s that they would go when the numbers no longer added up. you might want to try blaming apple etc but not vt.

    • Sandra Bettis


  • Here we go again.

    Millions upon millions of taxpayer dollars, albeit mostly federal ones at this point in the venture, are being sent virtually “down the rabbit hole”; and, although Governor Shumlin might have (mis)used the term with which to describe what some are generously referring to as merely a “hang-up”, it appears there might be not much to show for it but a nothingburger.

    Along with others, one if left to wonder about why there are some working within state government, apparently including Governor Shumlin, who are rather eager to reward failure upon failure, particularly — among other things — when it comes to throwing away heaps and heaps of taxpayer funds for projects like these.

    Only time will tell; and, more than likely, after it is far too late do anything real and meaningful about it either, when this entire thing is “too big to fail.”

    Not to worry though, federal and state taxpayers are already bailing it out ahead if time.

    The *nothingburger* Vermont Health Connect television ad from about a month or so ago was bad er, rather, horrible enough.

    However, other than potential incompetence somewhere with state government or wherever else the fault might lie, does anyone actually know exactly why “Vermont Health Connect and associated information technology systems” is ending up costing nearly as much as what the feds are paying for its version?

  • Dave Bellini

    If an employee missed 10 or more “critical” deadlines and called it a “nothing burger” would they still have a job?
    I don’t want to be forced to buy health insurance from Abbott and Costello.

  • Ken McPherson

    Why does Vermont need it’s own system. My Fortune 500 clients learned 20 years ago that it’s far more efficient to adopt a common system with parameter-driven options rather than write their own to exploit w limited (if any) competitive advantage gained by rolling their own. We have not yet heard about the annual cost of maintaining and updating this monster. Lots of people laughed at Y2K, but in reality it justified migration of a huge number of applications from enormously expensive proprietary code to standardized systems. It’s very difficult to understand why a miniature state like Vermont needs a custom system.

    • Bob Orleck

      Ken: I am sure you have heard of the Napoleon complex. Our overcompensating. Vermont is an experiment for big money in other states that want to do their social engineering here and not first in their own state. I think I know what it felt like to call the eniwetok atoll my home back in the 40’s and 50’s. Just look at Vermont and the politically dunderheaded antics they have stuffed down our throats in the past 10 years. I don’t even have to mention what they are. You know what they are. Wake up folks and get rid of Shumlin and his gang. You may think that these are good people you are electing but they are destroying any chance we may ever have of returning our state to a normal thinking one.

      • Eniwetok – wow – now there’s a reference most folks will have to look up (spent time out there cleaning up radioactive debris)

      • Walter Carpenter

        “Just look at Vermont and the politically dunderheaded antics they have stuffed down our throats in the past 10 years”

        And what are these “dunderheaded antics?”

        • Walter Carpenter

          “populace that everything most of us have had to pay for is suddenly some type of ‘civil right’”

          So why should health care not be a civil right for all of us — rich, poor, middle, laborer, employer, teacher, student, etc — where we all pay and are all in?

      • Walter Carpenter

        “You may think that these are good people you are electing but they are destroying any chance we may ever have of returning our state to a normal thinking one.”

        And what is a normal thinking state in your eyes? Should we just let the health care non-system as it currently is just go on as normal. It is $5 billion a year now; by 2020 it could be ten billion if not more. Does a normal thinking state according to your definition just let it go and shrug it off to say oh, well? Or does this state try to do something about it….which is what this state is now doing?

  • Michael Keane

    Josh Fisher may have written the most sensible posting. IT projects have inherent risks, and the more entities that need to be involved, or connected, increase the risk.

    That being said, when a firm misses 21 critical milestones (and I question the redundant term—most milestones are critical in one way or another, if only for showing what was accomplished), it’s time for a serious assessment of the project team, both on the vendor and on the client side, and of the appropriateness of the deliverables, timeline, and the resources allocated.

    Very few major IT initiatives come in “on time and on budget. It’s important for the vendor to be real candid upfront about identifying the risks and putting in place measures to mitigate them. How well has that happened here? How well were the goals, approaches, and methodologies of the project scrutinized before launching, by either the client or the vendor? Clients can’t just hand over stuff to the vendor and assume things will go fine. And vendors can’t just go down a path without understanding what success in the project looks like to the client.

    As to CGI: it’s a Quebec Canadian company, yes, and a good one. But it broke into the US market 20 years ago. Around 12 years ago, CGI acquired American Management Systems, Inc. of Fairfax, VA. a billion dollar IT services and consulting firm. CGI bought AMS to have a firm foothold in the US market. So it has US resources on site, without having to bring consultants in from Canada. It may not have many Vermonters working on this project; there may not be that many Vermonters who have extensive knowledge of government and health IT systems and regulations.

  • Cynthia Browning

    It is worth noting that if Vermont had made participation in this health insurance exchange VOLUNTARY instead of mandatory, the difficulty of the programming task and the number of people affected would both have been much smaller. People who had insurance and companies satisfied with the coverage they provided could have continued as they were, and a lot of uncertainty and transactions costs could have been avoided.

    The Administration and Legislative leadership made participation mandatory because they are already preparing for the future “single payer” state run insurance program, for which they have as yet no announced funding source or firm cost estimates.

    I devoutly hope that all of the Vermont Health Connect systems work well because if they do not it is Vermonters who will suffer.

    • Cheryl Pariseau

      If my employer chooses to have us go to the exchange and get our insurance my premiums will go up 80% ($194.02 to $349) per month. I am not eligible for a subsidy because it is based on the entire household income. Nevertheless, this 80% increase will not include me covering my daughter, which I do now. If I continue to cover my daughter my premiums would be about $800 per month. My deductible will double ($3000 to $6000) and I will no longer have vision coverage. If my jobs does drop our coverage I will for the first time in my life be without health care coverage because I cannot afford it. So for me this is far from a success.

  • Cynthia Browning

    P.S. Forgot: for Mr. McPherson above, my recollection is that the annual operating costs of the health benefits exchange will be about $18 million, and this will not be federally funded. I will try to confirm this.

    Rep. Cynthia Browning, Arlington

  • mike Bessler

    I tried on get on the VT exchange last week and it was impossible. I never got past the 1st few steps. Can I call VT BC/BS direct and simply sign up for one of their plans? I’m currently covered with Catamount which they are scrapping and putting us on the exchange. Higher co-pays, higher deductible, roughly the same rate we are paying now.

    • Bill Gardyne

      per ACA regulations, carriers like BCBS & MVP cannot sign up people directly. You have to do it yourself or seek free assistance from a Navigator or paid assistance from a Registered Broker.

      • Linda Quackenbush

        Nobody “wants” care that is handled by agents of the state! I not signing up! If I need care I’ll pay cash or go to a walk in clinic…

        • Sandra Bettis

          ‘nobody’ is a broad statement. you don’t want the financial part of your health care handled by the state but you are ok with the financial part of your health care handled by an ins co?

          • walter carpenter

            Or being paid for by the rest of us.

      • mike Bessler

        Thanks, I’m going to wait another coupla weeks until I revisit the site. My current coverage is in effect until year end.

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