Health Care

Auditor’s report: No guarantee state can complete Vermont Health Connect

State Auditor Doug Hoffer. File Photo by Roger Crowley/for VTDigger
State Auditor Doug Hoffer. File Photo by Roger Crowley for VTDigger

Editor’s note: Updated at 4:15 p.m. Thursday.

Despite massive and costly efforts to improve Vermont Health Connect, State Auditor Doug Hoffer says it remains an “open question” whether the state can successfully implement a fully functioning health insurance exchange.

In a report released Thursday morning, Hoffer highlights the state’s improved supervision of contractors and a plan to correct technological deficiencies, but notes the timeline for its completion, laid out recently by the governor, is “aggressive” and still carries a “high risk” of not being met.

“The state’s actions to address shortcomings of VHC’s IT governance have been notable,” Hoffer said Thursday. “But the effectiveness of their efforts, and the value of the roughly $130 million spent on this project through the end of 2014, will not be realized unless planned improvements to the exchange are successfully released in May and the fall of this year.”

State officials agreed that the deadlines they’ve set leave them “no slack,” but maintain they will be able to automate processes that are currently performed by hand. That will relieve many of the frustrations and headaches faced by customers and should ultimately reduce the cost of operating the exchange, they said.

The state expects to spend $200 million on the exchange. The governor has said he will pull the plug on the exchange if Vermont Health Connect fails to meet deadlines in May and October.

A year and a half after VHC launched, the report shows a management structure that is still in flux, contracts that lack performance metrics or financial penalties, ongoing security shortcomings and an unsustainable reliance on expensive and inefficient manual processes.

One contractor has been paid more than $500,000 for services that have not been rendered, the auditor says.

The dysfunction has left thousands of customers waiting for weeks or months to change plans, cancel a plan, add someone to a plan or make payments. In some cases that has forced them to “delay obtaining needed care” or make out-of-pocket payments for medical services — despite paying thousands in premiums — and others have paid incorrect premium amounts, sometimes for months on end, according to the report.

In one instance, a customer was required to continue making premium payments on behalf of their deceased spouse for several months in order to keep their coverage until the change was processed, the report says.

The technological issues have resulted in the participating insurers holding millions in past-due payments on their books.

A backlog of requested coverage changes on March 9 was more than 7,500, according to the report. That number is closer to 4,900 now, a state official said Thursday. According to state officials and the auditor, that backlog must be cleared before the next technology release at the end of May.

The public won’t see any difference in the VHC website on May 31. The process for requesting a change will be the same. However, state workers and contractors will be able to enter those changes using the new automated process, which will dramatically reduce the time it takes for that change to take effect, said Lawrence Miller, chief of Health Care Reform for the Shumlin administration.

Steve Costantino and Lawrence Miller
Steven Costantino (right), commissioner of the Department of Vermont Health Access, and Lawrence Miller, chief of Health Care Reform, discuss a state auditor’s report on the performance of Vermont Health Connect. Photo by Morgan True/VTDigger

“We think it’s critical that we hit the May milestone, but we’re not going to make a decision about the best path forward on June 1,” Miller said. Missing that “milestone” would put more pressure on the fall technology release, and result in more costly manual work, but it won’t spell the end for the exchange, he said.

“The question of whether or not we take another path is going to be one that I make a recommendation in the Joint Fiscal Committee in November based on what we know then,” Miller explained.

Hoffer doesn’t make specific recommendations on whether Vermont should stick with its exchange or transition to some version of the federal exchange, except to say that no decision should be made without a careful cost-benefit analysis. Miller and other state officials say they agree.

The state is much more effectively overseeing Optum than its previous contractor, CGI, according to the report, but Hoffer raises concerns about a lack of consequences should the new primary vendor fail to deliver. Hoffer notes that Optum’s contract contains no “clauses addressing penalties or liquidated damages” should it fail to deliver. Much of the contract was negotiated hastily over the summer to prepare the state to handle the fall open enrollment period, making it hard to push for penalties.

State officials acknowledge a fixed price contract would have been preferable, but they argue that maximum payment amounts for specific tasks protect the state. If those amounts are exceeded, the work will still be completed, they say.

“To me that’s the best type of getting something back from a vendor,” said Steven Costantino, the newly appointed commissioner of the Department of Vermont Health Access.

VHC does not have a contract in place with Optum to complete the fall release, but state officials say a final version of that contract is being reviewed by the federal government. They expect it will be in place by mid-June.

There are also problems with the premium payment process, which have resulted in a third-party payment processor, Benaissance, holding as much as $5 million in Vermonters’ premiums. That’s largely due to the manual change process, but it is exacerbated by the fact that Benaissance and VHC have a policy to not forward partial payments to the carriers. That means payments that are off by as little as a dollar are held by Benaissance until the customer pays in full.

VHC inherited its contract with Benaissance, originally a CGI subcontractor, after it parted ways with the tech giant over the summer.

The state has yet to negotiate a new contract with Benaissance, and as a result has paid $41,750 per month, totaling $580,000 as of the end of February, for processing small business payments.

But those services have not been rendered because the state has not yet built its small business exchange. The additional payments are expected to be nixed in a new contract the state expects to sign with Benaissance after the May release, officials said, though they did not have an exact timeline.

The state has relied on the insurers to enroll businesses directly into exchange insurance plans.

The state has “no specific plans” for how it will implement the small business portion of the exchange, according to the report. State law was changed last year to allow the carriers to continue signing up businesses indefinitely.

The state has an “allocation” for building the small business portal, but the work is being “deferred” for the time being, Miller said. The Affordable Care Act requires that states have an exchange that can serve businesses, but the feds are reviewing the requirements for such programs. The requirements could change because of low uptake among businesses nationally, Miller said.

The state has spent $126 million of its $198 million in federal grants for building the exchange. That doesn’t include any of Optum’s work, which Hoffer estimates could be as much as $40 million to this point.

That doesn’t leave much for building the small business portion, but Miller said he doesn’t anticipate needing state funds.

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Morgan True

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  • Darcie Johnston

    First this report should be called “We Told You So” by Randy Brock and VHCF.

    Why is VHC being allowed to continue? Shut VHC down we can’t afford to fund this failure and the cover up.

  • Linda Baird-White

    We’ve paid way over a Half Million for work that is NOT Being done.” (for the Small Business Portal). That should be more than ample for making the decision to pull the plug Immediately! Should have been done long ago.

  • Rich Lachapelle

    We sure could use Randy Brock in the Governor’s office at a time like this. At least we have one Democrat who does not march in lock step to protect his Party members, so we can be grateful for Doug Hoffer who actually does his job. He seems to put ethics above partisan loyalty. So the question remains, how did he ever become a Democrat?

    • Kathy Callaghan

      I think Doug is a Progressive?

  • rosemarie jackowski

    We are in deep trouble. Too bad more people did not vote for the Socialist Candidates.
    Voting has consequences.

    • Paul Lorenzini

      I thought they did vote for the socialists. Bernie, anyone from the progressive party, most of our democrats that voted for socialized medicine. I am from VT, where up is down.

  • Dave Bellini

    This financial mismanagement is why the Administration persuaded the Chairs of House Gov. Ops and House Appropriations to pen a letter for them, to them. They wish to change the subject and make it about state workers. Get the media to focus elsewhere. They would rather not be discussing the state of affairs at VHC. They prefer the news not be talking about CGI, Mark Larson , VHC, or single payer. The administration is manufacturing issues to take the spotlight off everything that continues to fail in this administration: Budget management, healthcare management, personnel management and strategic planning.

    How much does the state have to pay BCBS and is all the money accounted for?
    Will VHC actually work and what if it does not and what is the specific time table?
    Will the state recover the $2 million dollars allegedly owed to them by Cigna and if not why not?
    Where is the $10 million in annual “savings” from BCBS the Governor promised?
    Where are the original invoices from CGI?

    • Christopher Daniels

      my hourly rate is $75. I’ve spent a cumulative 16 hours on hold and on the phone with various customer service reps at Health Connect and MVP over the past year trying to straighten out coverage, billing, and tax forms. That’s $1200 of my time during the work day that I’ve wasted when i could have been working with clients and customers. Egad.

      I’ll echo Dave’s final comment: where are the original invoices?


      1) Who at CGI signed their name saying, effectively conducting a fraud on the State of Vermont.

      2) Who at the State reviewed the work completed against the invoice submitted and approved payment?

      There’s a massive fraud awaiting to be uncovered here.

      • Kathy Callaghan

        Peter Shumlin 2012: “I do not believe that those to blame for our current financial troubles are our law enforcement officers, firefighters and other state employees whose services we take for granted.’

        Really, Governor? Then why do you think state employees are to blame for your current financial troubles in 2015??

    • Bruce Post

      Dave, at the end of 2012, The Nation magazine published its most valuable progressives honor roll, subtitled “From Bernie Sanders to Boots Riley, from Marcia Moody to Jane McAlevey, we celebrate nineteen activists, movements and politicians.”

      Among the nineteen, it knighted Peter Shumlin as America’s most progressive governor! Here is what it wrote:

      “When congressional Democrats needed an example of a Democratic governor who was the antithesis of Wisconsin’s right-wing, anti-labor firebrand Scott Walker, they picked Vermont’s easygoing Peter Shumlin, who told the House Oversight Committee, ‘What is puzzling to me about the current debate about state budgets is that the focus has been not on bringing people together to solve common problems, like we have done in Vermont, but on division and blame. I do not believe that those to blame for our current financial troubles are our law enforcement officers, firefighters and other state employees whose services we take for granted.’ Not many governors talk like that—or mean it. Even fewer take on the challenges of state budgeting in realistic ways. Shumlin has, including as a champion of single-payer healthcare reform. Senator Sanders hails the state’s Medicare for All push as a national model. Shumlin, recently re-elected with 58 percent of the vote, will keep up that pressure in his new role as chair of the Democratic Governors Association.”

      Wow! Those must have been the days. So different, now, a little more than two years later. Just ask your fellow Vermont state employees “whose services we take for granted.”

    • Lea terhune

      It’s good to have an Auditor who is doing his job. That’s all, he’s just doing the job we elected him to do. Thank you Mr. Hoffer.

  • Craig Fuller

    Wait until it starts to effect the docs.

  • Ron Pulcer

    Thank you Auditor Hoffer for your department’s important investigation and report on VHC and related contractors.

    I only had time to read the sections on System Development and IT Governance / Project Management. Many good observations on the process.

    If there is any good news coming from this project, it would be that the so-called “lessons learned” will be applied to future projects.

    I wonder if there would be a way to do a cost-benefit analysis of whether to hire and oversee outside IT vendors and staff, versus hiring internal IT workers? That would include jobs like programmers, systems analysts, project managers, testers, database admins.

    On one hand the “outsourcing” trend was supposed to “save” IT costs. But whatever might be saved in IT salaries and benefits, requires more diligent project management and oversight. The accuracy of the technical specs is even more important when you are dealing with outside contractors.

    I have worked at two prior companies as an in-house software developer. On occasions I have worked side by side with contract programmers. If I had a question about a requirement, I would go ask the systems analyst, project leader or appropriate person. I had observed that with the contract programmers, they may or may have not asked for clarification. Even if they did ask for clarification, if they did not fully understand, they sometimes would essentially “guess” at what the specs meant. Sometimes the specs were not written very clear, but if you were an experienced in-house employee you could figure it out or go ask questions. But for contractors who may be well versed in a given technology or software language, they may not necessarily or completely understand the business that the customer is in, or what they are trying to accomplish. If the contractor “winged it” on their interpretation of the specs and “coded something up”, what did they care? They were getting paid by the hour (including overtime for correcting programs). But if you were an exempt in-house employee, you got paid only 40 hours (no addition pay for overtime hours). So there is an inherent difference in motivation between in-house IT staff and outside contractors.

    Given that young Vermonters want to stay home and work in Vermont, why not reverse the “outsource” trend? I think that IT “outsourcing” has worked as well as “trickle-down economics”. It sounds good in theory, but doesn’t always work that way in reality.

    • Walter Carpenter

      “I think that IT “outsourcing” has worked as well as “trickle-down economics”. It sounds good in theory, but doesn’t always work that way in reality.”

      Good point, Ron. Trickle-down has also never worked outside of theory — at least for the people who were supposed to be on the receiving end of the trickle down.

    • Glenn Thompson

      Ron Pulcer,

      “I think that IT “outsourcing” has worked as well as “trickle-down economics”. It sounds good in theory, but doesn’t always work that way in reality.”

      For IT outsourcing to work, there needs to be proper communication between the IT contractor and the entity that hired the contractor to perform the desired work! I must assume, an IT contractor was hired because no one within State Government had the expertise to create Vermont Health Connect? For any plan to work, it must be viable from the onset! If the plan was flawed from the beginning, then the best IT contractor in the world….isn’t going to make it work! In my line of work in the past, a common phrase used was…..”Garbage in, Garbage out’! Considering the amount of money tossed at this fiasco, I’m going to conclude the problem isn’t with the IT contractor, but with the ‘garbage’ they had to work with?

  • Ron Pulcer

    One followup: I couldn’t help but remember this quote from college days in computer science class:

    “To err is human, but to really foul things up you need a computer.”

    Paul R. Ehrlich

  • Howard Dindo

    Gee, after following all that has been going on with VHC over the last 3 years, I forgot what the Democrat politicians told us why they had to kick all the insurance companies out of the state, under a competitive environment. It must have been because they wanted to lower premiums, offer more options, reduce maximum out-of-pocket expense, improve service, make sure coverage was provided or improve access to medical providers? I guess this is what is now happening, I think! Maybe they indicated government could do a better job than those non-government workers! No, it wasn’t that. It must have been to get the more expensive doctors to charge less, which is sort of what is happening because many have left the State, which UVM predicted would happen with 24% of the PCP’s and 38% of the specialist leaving. Oh, I think I remember now. It must have been because they wanted to give the non-rich financial assistance by giving them a tax credit through the reconciliation of tax form 8969 at year end for “free money”. But, this sort of reminds me of doing the same thing under the old system of completing section 1 of Schedule A form! I’m confused, please help me understand the reasoning for this VHC program.

  • Chris Lewis

    Can the state of Vermont sue Shumlin for gross negligence?

  • We now have Mr. Hoffer’s audit of the Shumlin’s adminstration’s spending of $126 million of its $198 million in federal grants, with as much as $40 million more to be spent. This is an important report providing the taxpayers with information they have a right to know.

    The money spent in Vermont is extremely troublesome, but it’s only the tip of the iceberg. Under Obamacare, the federal government has made $4.8 billion in grants to investigate the feasibility of, or to actually develop state exchanges.

    Seventeen states elected to built their own exchanges and have spent most of the federal money with very mixed results. On a spending per capita basis, Vermont has to have close to, if not the worse performance record in the country.

    We have Mr. Hoffer’s audit of the mess in Vermont, but what is the federal government doing to insure that the $4.8 billion has been spent productively? Is the Obama administration auditing the states that elected to build exchanges and providing those audit results to the states?

    We know that the federal government provided some sort of report to the Governor last year regarding security deficiencies with the Vermont exchange. Have any other federal audits, reports or reviews been done, provided the Shumlin administration and not shared with the public? If so what do they reveal?

    If no other federal audits have been conducted on Vermont’s exchange spending or that of other states, that alone would be a major problem highlighting the incompetency of government in handling our money.

    Mr. Hoffer, are there any other federal reports on Vermont’s exchange the people haven’t been shown?

    • Doug Hoffer

      There are at least two federal audits underway. One by the Inspector General’s Office at Health & Human Services and another by the GAO. The former should be done within a month or two. Not sure what the timeline is for the latter.

  • Bob Orleck

    “It was certainly news to me, when I reviewed the audit,” Miller said Wednesday.

    Miller says he immediately looked into the situation regarding small business payments to Benassiance after Hoffer’s report came out. He says he learned Thursday morning the continued payments were part of a verbal agreement between the administration and the vendor, in which the state agreed to leave payments in place in exchange for Benaissance agreeing not to seek more money for “all the extra costs they were dealing with.”

    Miller says Benaissance incurred development expenses beyond what the parties had anticipated in the original contract. Rather than reopen the contract, Miller says the administration decided to continue the small business payments, and call it even.

    “We weren’t paying for nothing” Miller says. “We just weren’t paying for the thing that was specified.”

    First Mr. Miller says he knew nothing about it then he looked into it the next day and then he justified the payments that were based on a verbal to do that in exchange for Benaissiance not billing for other things.

    I want to know who he talked to to learn this. Who did the verbal agreement? What are those extra costs. How much were they worth? Were they really outside of the contract? Who are these people getting all this money? This all sounds suspicious to me and an “independent” prosecutor is a must to Problem in we don’t have an “independent” prosecutor. THAT IS A BIG PROBLEM!’ “Power tends to corrupt;absolute power corrupts absolutely.” That is where we are right now. Somehow we need to get “them” out of power.

  • Vermont leads the nation in embezzlement and also ranks very high on the list of states at risk for corruption. Folks should take a closer look at the fraud litigation involving the historic Brattleboro Retreat and the hospitals transactional behavior during the period of 2003 up until the end of 2013 which is discussed at length in the 59 page federal complaint available on my website below. In addition to the huge losses suffered by the state and federal government and private insurance companies, patients of the historic hospital also suffered losses as the Retreat never timely returned credits due patients for the entire ten year period at issue in the federal complaint. By doing so, they were stealing from their very own patient population by not processing refunds absent an affirmative request from the patient to do so. The federal complaint memorializes that the Retreat didn’t discriminate when withholding money due others.

    At present, its become obvious with the attorney misconduct proceedings underway in Tennessee and the information that has been gleaned by the proceedings underway in a suburb of Nashville that both attorneys for the Brattleboro Retreat including Attorney Elizabeth Wohl of Downs Rachlin Martin PLLC in Brattleboro, Vermont and Attorney Matthew M. Curley of Bass Berry & Sims located in Nashville, Tennessee flat out lied in their Motion to Dismiss and pleadings before the federal Court which has allowed the Brattleboro Retreat to escape justice.

    I encourage all Vermonters to review the documents for themselves as everyone who does can see the purposeful misrepresentations of information contained in the federal complaint. I recommend looking at the federal complaint as Exhibit A and the Motion to Dismiss as Exhibit B and when you compare the two (aided by the 29 page submission to the TN Board of Professional Responsibility as Exhibit C) you can compare paragraph after paragraph and easily see the deception the Retreat attorney’s employed to escape justice. At bare minimum, the Retreat’s attorneys were obligated by their professional obligations as demanded by the Rules of Professional Conduct in the state in which they are licensed and specifically, were obligated to conform to the requirements of candor before the tribunal or Court.

    Fraud is in our own backyard folks and is very much part of Vermont’s dirty laundry. This is why S.140 or the Vermont False Claims Act which passed unanimously this morning out of the Senate Judiciary Committee onto the full Senate is so important with its retroactive enforcement provisions as well as its strong language to deter lawsuits by those accused of fraud against those who report the fraud or take legal action as I did.

    State Auditor Doug Hoffer was the only public official who would recognize or acknowledge me early in this process and his support and testimony advocating for the Vermont False Claims Act was critical. Mr. Hoffer is in my view, the State of Vermont’s biggest public asset: he seeks no higher office than the one which he currently occupies and you can always count on him to come out on the side of the people of our great state.

    One of the reasons why I was willing to stand down at the Motion to Dismiss stage and not file an Amended Complaint was because I had secured a Plan B to ferret out the fraud. Prior to the end of formal litigation last year, I contacted State Auditor Doug Hoffer and requested a meeting. At that meeting, I formally gave Mr. Hoffer in his formal capacity a complete copy of all evidence given the U.S. Attorney’s Office and the FBI including ten years of computer data that does not lie. My own attorneys didn’t know about my visit with Mr. Hoffer or my formal request that his office undertake a review of the Retreat evidence as it relates to Medicaid Fraud until later. Mr. Hoffer accepted my request and his office can speak to the scope or nature of its review.

    The Vermont False Claims Act now on its way to the full Vermont Senate will increase Vermont’s share of any federal recovery by 10% so its a win-win for Vermont. Fighting fraud should unite all parties. I encourage all representatives and senators to support the Vermont False Claims Act as its the most important anti-fraud law Vermont needs to combat an ever growing problem as evidenced by Mr. Hoffer’s formal review of multiple areas where fraud could have been at play.

    Frankly, any representative or senator who doesn’t vote in favor of the Vermont False Claims Act upon full vote in the House and Senate simply should not be in office. This legislation is for the people of our state and is intended only to protect our states precious resources from fraud. It’s a no brainer and should garner unanimous support in both houses of the legislature.

    Thomas Joseph
    Twitter: relator_joseph

  • Linda Baird-White

    I just posted about the same situation (see above).
    April 17, 2015 at 10:38 in an effort to get the proverbial ball rolling.

    This matter deserves very serious attention and a much digging. It exemplifies the ongoing corruption.

  • Steve Beck

    Like I have always said, for profit health care is the biggest scam ever perpetrated on the AmeriKan public, even more than climate change. What an embarrassment, a joke, a crime, the list goes on – it makes my head explode.

  • Bob Orleck

    Steve Beck quote: “Like I have always said, for profit health care is the biggest scam ever perpetrated … What an embarrassment, a joke, a crime, the list goes on – it makes my head explode.”

    This is not the blame of private enterprise but of incompetent government officials who don’t know what they are doing or if they do they are doing something criminal and should be in jail.

    If you want this or any political bunch managing your health care you better keep your head on because they won’t be able to fix it. Remember “All the King’s horses and all the King’s men couldn’t put Humpty Dumpty together again.” Just add the name Shumlin after King and you got Vermont Health Connect.

  • Given the numerous challenges evidenced in State Auditor Hoffer’s report, it might be a good time for VT Digger to do a follow up story on the results of Lt. Gov. Phil Scott’s trip to Rhode Island with Sen. Tim Ashe and Sen. Jane Kitchel.

    I spoke briefly with Lt. Governor Phil Scott yesterday while in Montpelier and he indicated the trip went very well. Unfortunately, Vermonter’s haven’t had a chance to hear the results of Mr. Scott’s “fact finding” trip to Rhode Island along with Sen. Tim Ashe and Sen. Jane Kitchel.

    I applaud Lt. Governor Phil Scott for his ability to think out of the box and take initiatives within his reach to solve the problems of Vermonters.

    Hopefully, VTDigger will consider a follow up story to share the results of the fact finding trip to Rhode Island with the rest of Vermont.

    Thomas Joseph
    Twitter: relator_joseph

  • Kathy Callaghan

    “If you want this or any political bunch managing your health care you better keep your head on because they won’t be able to fix it. Remember “All the King’s horses and all the King’s men couldn’t put Humpty Dumpty together again.” Just add the name Shumlin after King and you got Vermont Health Connect.”

    A word to the wise to all single payer advocates who still somehow think that the state can run a health care plan.