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.
“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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