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									Obamacare Agency Rushed To Hire Contractor, Documents Reveal




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November 24, 2013




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Obamacare Agency Rushed To Hire Contractor, Documents Reveal



Reuters
 | Posted: 11/23/2013 2:39 pm EST
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WASHINGTON, DC - NOVEMBER 21: (AFP OUT) President Barack Obama speaks to
a group of educators in the South Court Auditorium of the White House November 21,
2013 in Washington, DC. They were being honored as ConnectED Champions of Change
for taking creative approaches in using technology to enhance learning for students in
communities across the country. (Photo by Olivier Douliery-Pool/Getty Images) | Pool
via Getty Images


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Obamacare, Obamacare Contractor, Obamacare Launch, Obamacare Rollout, Reuters,
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By Sharon Begley NEW YORK, Nov 23 (Reuters) - Caught flat-footed by the challenges
of building the financial-management and accounting parts of the U.S. government's new
online marketplace for health insurance, officials rushed to hire a familiar contractor
without seeking competing bids, according to government procurement documents
reviewed by Reuters. The documents dated in August - less than two months before the
opening of


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How To Register.]***


e and on its revelation this week that at least 30 percent of the marketplace is still being
built. Those problems and others have been revealed by congressional oversight
investigators who released emails and outside reports that paint an administration
scrambling to meet the technological challenges of the marketplace - and usually failing
to do so. CMS spokeswoman Joanne Peters said on Friday and on Saturday that
representatives of the agency were unavailable to comment on the contract or on an
estimate of when the financial management part of the marketplace is expected to be
finished. Although the consumer-facing part of the marketplace, the HealthCare.gov
website, opened for enrollments on Oct. 1, CMS had a goal of Jan. 1, 2014 for the
financial components of the system to be operational. "The prospect of a delay...even for
a few days, would result in severe consequences, financial and other," CMS said in a
"justification and approval" document explaining the lack of competition for the contract.
The contract, valued at nearly $12 million, was awarded on Aug. 9 to Novitas Solutions,
according to the documents. Novitas has numerous contracts with CMS, including to
administer doctor and hospital claims in the federal Medicare program for elderly
Americans. The problem-plagued HealthCare.gov is being worked on by contractors
racing to fix it by the end of November so that people can enroll in insurance plans for
2014 under the 2010 Affordable Care Act. The law aims to provide health care insurance
to millions of uninsured people. OBAMA ASKED FOR FEWER 'NO-BID'
CONTRACTS Federal agencies are normally required to solicit bids for work, so as to
get the best deal for taxpayers, but can award a contract to a favored company in
emergencies as long as they document the urgency. A few weeks after taking office in
2009, Obama issued a memorandum to government agency heads ordering them to
minimize the use of non-competitive contracts, calling them potentially "wasteful,
inefficient, subject to misuse." The procurement documents made clear how crucial the
financial functions on the healthcare portal are. If payments were not made on time and
accurately, CMS said, "operation of the Marketplace and the Affordable Care Act will
certainly be jeopardized." Financial management includes such functions as transmitting
premium payments to insurers. Building that capability into the Obamacare marketplace
"is already minimally two months overdue," according to the August documents. Just a
few weeks before the financial-management contract was awarded, according to emails
released last week by the House Energy and Commerce Committee, CMS officials were
becoming increasingly concerned about the status of the federal insurance marketplace,
asking for assurance that the lead contractor was not "going to crash the plane at take-
off." On Tuesday, CMS's deputy chief information officer, Henry Chao, author of the
"crash" email, told a congressional panel that 30 to 40 percent of the federal marketplace
was still under construction. Invisible to consumers are what Chao called the "back office
systems." Those include accounting and payment systems to send premiums to insurers
and transfer funds to insurers that attract more than their share of customers with high
medical costs. The no-bid contract awarded to Novitas includes these systems. Novitas is
a subsidiary of Diversified Service Options, which is wholly-owned by Blue Cross and
Blue Shield of Florida . Asked about how Novitas was awarded the contract and the work
it is doing, Florida Blue spokesman Mark Wright said a company official told him,
"We're not going to be able to get into this right now." Chao told a House Energy and
Commerce subcommittee that CMS and its contractors had focused on building
HealthCare.gov so it could launch on Oct. 1, postponing construction of "the financial
management aspects of the system." The lead contractor on HealthCare.gov, the U.S.
subsidiary of Canada's CGI Group Inc, is also involved in building the financial
management piece of the marketplace, a company official said. The construction "is a
bigger problem than people realize," said Robert Booz, a vice-president and healthcare
specialist at technology consultant Gartner. "Everyone recognizes it's going to be a
problem in January," he said, referring to financial management. In the worst case, if
financial records are wrong, then people who have signed up for, and paid a monthly
premium for, insurance may be told incorrectly that they are not covered. (Editing by
Ross Colvin and Grant McCool)
Also on HuffPost:



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McDonald's

<a href="http://blogs.wsj.com/cfo/2012/07/23/mcdonalds-cfo-sees-up-to-420m-in-new-
health-care-costs/" target="_blank">Peter Bensen, McDonald's chief financial
officer</a>, said on a conference call last year that Obamacare will cost the company and
its franchisees $140 million to $420 million per year. (Photo by Justin Sullivan/Getty
Images)


Whole Foods

<a href="http://www.huffingtonpost.com/2013/01/16/whole-foods-ceo-obamacare-
fascism_n_2488029.html" target="_blank">John Mackey, CEO of Whole Foods, told
NPR</a> in January that Obamacare is "like fascism." <a
href="http://www.huffingtonpost.com/2013/01/17/whole-foods-
fascism_n_2496603.html" target="_blank">He then told HuffPost Live</a> that he
regretted making that comparison. (Photo by Mark Wilson/Getty Images)


Papa John's

<a href="http://www.huffingtonpost.com/2012/08/07/papa-johns-obamacare-
pizza_n_1752126.html" target="_blank">John Schnatter, CEO of Papa John's</a>, said
in August that Obamacare will cost the company $0.11 to $0.14 per pizza. <a
href="http://www.huffingtonpost.com/john-h-schnatter/papa-johns-
obamacare_b_2166209.html" target="_blank">But he has maintained</a> that Papa
John's offers and will continue to offer health insurance to all of its employees. (Photo by
Diane Bondareff/Invision for Papa John's International/AP Images)


Cheesecake Factory

<a href="http://www.huffingtonpost.com/2012/12/04/cheesecake-factory-ceo-david-
overton-obamacare_n_2236673.html" target="_blank">David Overton, CEO of the
Cheesecake Factory, told CBS</a> in December that Obamacare "will be very costly"
and "most people will have to [raise prices] or cheapen their product" in response. Dina
Barmasse-Gray, the Cheesecake Factory's senior vice president of human resources, said
in a statement to The Huffington Post: "We have the highest regard for the wellbeing of
our staff members, and have offered health insurance to our staff members who work at
least 25 hours per week for many years. Because of our long history of providing health
benefits, and based on our current analysis of the new requirements, we do not believe
the Affordable Health Care Act will have a material impact on us."


Boeing

<a
href="http://online.wsj.com/article/SB10001424127887324392804578358540464713464
.html" target="_blank">Boeing lobbied unsuccessfully</a> against a new Obamacare
fee, according to the Wall Street Journal. And it is generally concerned about
Obamacare's costs. "Boeing agrees with the intent of the Affordability Care Act – to
provide increased access to coverage, to improve quality, and in the long run, to help
manage the overall cost of the health care system," Boeing spokesman Joseph Tedino
said in a statement provided to The Huffington Post in March. "However, while the
details and implications of the ACA continue to emerge, the net financial impact to
Boeing since the inception of law and for the foreseeable future is negative." (Photo by
Tim Sloan/AFP/Getty Images)


CKE (Owner Of Hardee's)

<a href="http://www.businessweek.com/news/2012-09-21/hardee-s-owner-ceo-says-
2012-ipo-unlikely-as-costs-rise" target="_blank">Andrew Puzder, CEO of CKE,
told</a> Bloomberg Businessweek last year that he plans to respond to Obamacare by
selling cheaper meats and hiring more part-time workers. <a
href="http://www.newsmax.com/RonaldKessler/Hardee-s-CEO-Obamacare-
Puzder/2012/09/20/id/456919" target="_blank">He also told Newsmax</a> he plans to
build fewer restaurants in response. (Photo by Erik S. Lesser/Getty Images)


Jimmy John's

<a href="http://www.huffingtonpost.com/2012/11/15/jimmy-johns-ceo-
obamacare_n_2137679.html" target="_blank">Jimmy John's CEO Jimmy John Liautaud
told Fox News</a> last year that he plans to cut his workers' hours in order to avoid
having to offer them health insurance under Obamacare. "We have to bring them down to
28 hours [per week]," he said. "There's no other way we can survive it."
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