Vermont Health Connect will cost $9.7 million more than anticipated in this fiscal year

Vermont Health Connect is expected to cost $9.7 million more than what’s in the current budget, largely because of a mid-year change in vendors and labor intensive processes that underpin the incomplete exchange, officials said Thursday.

The General Fund impact of the overages is $3.5 million, which the administration will ask lawmakers to approve in the Budget Adjustment Act. The rest of the money will come from the federal government through Medicaid global commitment money and direct grants.

Lawrence Miller. File Photo by John Herrick/VTDigger

Lawrence Miller. File Photo by John Herrick/VTDigger

“Frankly, given what we’ve all experienced with Vermont Health Connect, I feel pretty good about coming to you with a budget adjustment impact of $3.5 million,” Lawrence Miller, the top state official responsible for the exchange, told lawmakers Thursday.

Vermont was required to take over the maintenance and operational costs of the exchange in January, and the current budget underestimated those costs by $8.3 million for the first six months of the year. Administration officials have not released details on what the estimated costs will be in fiscal year 2016, which starts July 1.

Lawmakers wanted to know how the exchange keeps racking up costs, while their constituents continue to have problems with their coverage.

“How can I explain that to anybody and have them feel any sense of confidence in where we are and where we’re going?” asked Bill Lippert, D-Hinesburg, chair of the House Health Care Committee.

Rep. Anne O’Brien, D-Richmond, a member of House Appropriations, called the increased costs “distressing,” and her committee would want greater assurances going forward.

Vermont Health Connect has been plagued by functionality problems since it was launched in October 2013. Last year, the state changed IT vendors as part of an effort to resolve the issues.

The operating costs in the current budget were based on estimates from the exchange’s original contractor, CGI, that were likely low to begin with, but were also based on that company finishing the job, officials said. Changing vendors required a costly and time-consuming knowledge transfer, and the state and new contractor, Optum, decided it was too late to complete the exchange on schedule.

That forced officials to develop a set of manual procedures to approximate how the exchange technology is eventually hoped to work, which are costly and have led to higher error rates that frustrate users.

The automated change of circumstance function is expected to be completed in April, Miller said, which will allow people to change their coverage online, eliminating the need for much of the manual processes that are causing delays. That should also reduce operating costs, he said.

“It’s just a lousy situation. I wish it were better. I’m sorry,” Miller said.

The state underestimated the complexity of the project, as did CGI and the federal government, Miller said. The underlying technology is incomplete but working, he said, and the exchange will ultimately live up to its promise.

Morgan True

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