The Blue States Exchanges Fiasco

With the close of the open enrollment period for ObamaCare in April, the issue of failed government web sites is no longer in the news. But the situation is far from over as federal and state governments prepare for the next open enrollment period, which begins November 15.

Ironically, many of the states scrambling to come up with a working state exchange are deeply blue states that supported President Obama’s election and are led by governors that supported passage of the Affordable Care Act. Not surprisingly, all of them supported Medicaid expansion under the new law. These seven liberal states, Oregon, Massachusetts, Maryland, Minnesota, Nevada, Vermont, and Hawaii, have state exchanges that have either completely failed or are on life support.

In order to prevent such failures, the Centers for Medicaid and Medicare Services (CMS) established “gate reviews” to monitor progress in the development of state insurance exchanges. These “gate reviews” were periodic assessments of progress in seven areas. Successful completion of these reviews enabled states to continue receiving federal funds for the process. Despite these reviews, and continued funding, these states failed anyway.


These failures have come at great expense to the taxpayers. Oregon has spent over $300 million so far on their Cover Oregon web site and has yet to enroll anyone except by paper applications. After repeated complaints by a state representative, the FBI, the HHS inspector general, and the Government Accountability Office (GAO) have launched investigations into whether or not state officials misrepresented their progress in order to keep their funding. There is some evidence to suggest the web site was never intended to function; a fake web site. If true, this would represent criminal activity.

The state has struggled to keep up with the demand for new enrollees by filling out over 300,000 applications by paper. But with no hope of solving the state exchange problems before the next enrollment period in November, state officials are turning to the federal government’s web site. According to The Wall Street Journal, the cost of migrating to the federal exchange will be another $41 million.


The situation in Maryland is similar. Although it was one of the first states to begin building its exchange, the web site crashed just after the October 1 launch. The state brought in United Health Group in December to fix the website well enough for the open-enrollment period but it continued to suffer failures. The state finally voted to scrap the website and start over with the system used by the more successful Connecticut exchange. Over 290,000 applications were completed by hand to meet the demand for new enrollees. The state has already spent another $300 million taxpayer dollars and will need about $50 million more to fix the problems.

Michael Astrue, former commissioner of Social Security and general counsel of the U.S. Department of Health and Human Services, has placed the blame for this fiasco at the feet of HHS Inspector General Daniel Levinson. He first called attention to this problem last October in The Weekly Standard and then wrote an update this week called ObamaCare in the Blue States.

He is calling for an investigation of Maryland, similar to that presently being conducted in Oregon, by the FBI and HHS Inspector General Levinson. This situation  will be an early test of new HHS Secretary Sylvia Mathews Burwell who has already pledged to use “the full extent of the law” to recover misspent health exchange funding. If she fails to pursue an investigation of Maryland we can expect much of the same foot-dragging that characterized the tenure of her predecessor.

Massachusetts – home of RomneyCare

Perhaps no state was expected to have a more seamless transition to the new healthcare law than Massachusetts. The state was already the poster-child for a similar healthcare plan dubbed “RomneyCare” after Governor Mitt Romney, who presided over its implementation. The Connector, as it is called, has been in use since 2006.

But conversion of the state to the new ObamaCare plan proved more difficult than expected. Even now the state exchange still does not allow residents to obtain insurance as the ACA requires. State officials are currently debating whether or not to rebuild the website or convert to Some have estimated the state has already spent $135 million and expect the cost of conversion to reach $121 million more. Others say the true figure is over half a billion dollars.

Governor Duval Patrick has impeded attempts by his Democratic legislature to obtain an accounting of where the money has gone.  As part of his response to the crisis, Patrick has placed as many as 200,000 applicants, who requested financial assistance, on Medicaid –whether they qualified for Medicaid or not. This means additional expense to the taxpayers for payments made by Medicaid for ineligible patients. Again, the question is where is CMS and where is the inspector general?


The same sorry scenario is playing out in Minnesota as well. Once again, state officials appear to have withheld important information from the state board, the public, and the insurance companies, needed to implement the system. The MNsure website has collapsed despite the fact that they were able to pass the CMS “gate reviews”.

The real question is how did states like these slip through the process of “gate reviews” and continue to receive federal funding of non-functioning exchanges?

Astrue complains, “Again, ill-advised software contracts compounded timeline failures produced primarily by poor planning and execution. Somehow, Minnesota also miraculously passed the CMS gate reviews even though, as in Massachusetts, it could not test a beta system before its failed launch. We need to know how CMS could have possibly found adequate progress for functionality and security in light of this disarray, and law enforcement needs to know too.”


The situation is not much better in Nevada, home of Senate Majority Leader Harry Reid. They extended the period of enrollment all the way to the end of May to allow those affected by technical glitches to complete their enrollment. The Nevada Association of Health Plans has said insurance carriers are receiving incorrect payment and enrollment information and they are concerned that people may be terminated from their plans for non-payment. A class-action lawsuit was filed in May against the state’s exchange and contractor Xerox on behalf of Nevada residents who say they’ve paid their premiums but don’t have insurance. On May 20 the state announced their decision to shut down their state exchange and convert to for at least a year.


Hawaii suffers from low enrollment numbers, just like these other states. This threatens the long-term stability of its exchange. They have enrolled 7,200 in private plans and have a backlog of 11,000 applications needing to be processed. They already had a low number of uninsured residents prior to the ACA since a 1974 law that required most employers to provide coverage to employees who work more than 20 hours per week. (The ACA only requires this of employees working 30 or more hours per week.)


Vermont, home of openly socialist Senator Bernie Sanders, still faces enormous problems implementing ObamaCare despite its tiny population. Sanders has often expressed his preference for a single-payer system much like Canada. The state used the same vendor, CGI, that failed so spectacularly in implementing the federal website and has given them until July 2 to get the site working. It is not clear what they will do then if CGI fails again.


Seven states; four with completely failed exchanges and three on life support. Thus far the cost of government ineptness in just these states has been over $1.2 billion dollars ($1,279,033,737 according to CMS) with another $240 million estimated future expenses to fix the problems, according to sources at The Wall Street Journal. Two important dates are looming over this problem; First, the November 15 date for open enrollment; Second, the January 1 date when HHS loses authority to issue grants to states for their exchanges.

It is no surprise that those states that are dominated by liberal politicians are quick to spend the taxpayers’ money. Yet it is curious that those most in favor of instituting government control of healthcare seem least capable of implementing it. This bodes poorly for the future of ObamaCare.

Will the voters hold their elected officials accountable for this inept and wasteful start? It seems unlikely in blue states that voters will change their opinions nor acknowledge the futility of this government takeover of health care. But voters’ opinions may change quickly when their own healthcare is at stake. Loyalty to party may be trumped by the need to find the right doctor in times of crisis.

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