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Mass., Vt. halt payments to firm behind health sites

WASHINGTON — Even as President Obama’s health insurance website limps to recovery, at least two states that used the same contractor and are still plagued with malfunctions — Massachusetts and Vermont — are taking preliminary steps to recoup taxpayer dollars.

Massachusetts officials are reviewing legal options against CGI Group, a Montreal-based information technology company, and will make recommendations on how to seek financial redress at a Jan. 9 meeting.

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So far, the state has paid $11 million of its $69 million contract with CGI. It will not pay a penny more until a functioning website has been delivered, said Jason Lefferts, spokesman for the Commonwealth Health Connector, the state’s insurance marketplace.

“CGI has consistently underperformed, which is frustrating and a serious concern,” Lefferts said. “We are holding the vendor accountable for its underperformance and will continue to apply nonstop pressure to work to fix defects and improve performance.”

Massachusetts has reverted to using an alternative software system and paper notifications for residents seeking new insurance, a significant black eye for a system that was held up as a national model for providing coverage after it debuted in 2007.

In Vermont, state officials recently alerted CGI that the state is withholding payment of $5.1 million as compensation for the company’s failure to meet key deadlines.

The state is also disputing more than $1 million in charges billed by CGI because of incomplete work that left its insurance website so far behind schedule that Vermonters could not buy coverage online, as promised under Obama’s health care law, until early December, two months after it opened.

‘There should be some financial accountability to the taxpayers.’

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“I’ve lost confidence in the contractors that were supposed to deliver a fully functioning website on Oct. 1,” said Governor Peter Shumlin of Vermont. “I’m going to continue to hold their feet to the fire until they get it right.”

Under the Affordable Care Act, Americans are supposed to obtain insurance through the new marketplaces by the end of March 2014 or face a tax penalty. An uncertain number of Americans numbering at least in the hundreds of thousands who lost coverage in 2013 were supposed to sign up by Tuesday to obtain replacement coverage that starts on Jan. 1.

In pitching the health law, President Obama said shopping for coverage would be as easy as purchasing a plane ticket online. But the race to enroll the uninsured has been an uphill slog — not only in the glitch-plagued federal HealthCare.gov site, which is serving 36 states that chose not to build their own websites, but in some of the remaining states that chose to go it on their own.

In addition to Massachusetts and Vermont, CGI is working on five other state-based marketplaces — in Hawaii, Colorado, Kentucky, New Mexico, and California — with mixed success. Hawaii’s marketplace launched two weeks late, with comparison shopping among insurances plans not possible until Oct. 15.

In Kentucky and Colorado, the rollout was a lot smoother, with the sites functioning as they should for the most part. California also has performed better than the federal website.

CGI spokeswoman Linda Odorisio said the company is working to fix state websites and has already improved performance of the much-maligned federal marketplace.

The federal government has spent $319 million so far building the HealthCare.gov insurance site and total obligations are expected to be $677 million, according to the administration. Its contract with CGI, one of numerous contractors on the site, totaled $93.7 million, but an administration spokeswoman could not specify how much of that has already been paid.

The Obama administration has launched an investigation into what went wrong, but has not yet indicated if it would take any legal action to recover taxpayer money based on substandard performance.

“We must take steps to ensure that our contractors are well managed, and that they fulfill their commitments and provide good services and products for our tax dollars,” wrote Kathleen Sebelius, secretary of Health and Human Services, in a recent blog post.

The mounting public criticism by state officials against CGI is an early indicator of the legal tussle expected in coming months. The malfunctions have made enrollment frustrating even in states that have long supported health care overhaul such as Vermont and Massachusetts, the state on which the federal law was modeled.

“Even states where there was good will, where the government was totally committed to implementing the law, have experienced a mess,” said Joe Onek, a longtime Washington attorney and health law expert who has worked for the Carter and Clinton administrations, as well as Nancy Pelosi and Edward M. Kennedy.

“I would expect all sorts of litigation related to this, but nobody is interested in filing that now because they need the cooperation of these same people to get their systems up and running,” Onek said.

Jean Yang, executive director of the Massachusetts Connector, said she does not believe CGI has committed enough company resources to the state’s site. The state until recently was unable to successfully enroll a single person in its revamped marketplace.

The Connector staff is expected to present a plan to its board of directors in January for “rectifying issues, including ensuring that accountability for the website problems is addressed,” Lefferts said.

The state, which has allowed consumers to obtain insurance through the Connector since 2006, had to revamp its insurance Web portal under the Affordable Care Act so that consumers could be immediately notified whether they qualify for insurance subsidies.

The new site was supposed to streamline the insurance application process and eliminate the need for people to file separate applications for subsidies.

That hasn’t happened. Parts of the website used to determine people’s program eligibility have been completely unusable. Even basic functions, such as account log-ins and password resets, have been problematic.

“There should be some financial accountability to the taxpayers who have funded this,” said Amy Whitcomb Slemmer, executive director of Health Care For All, a Boston-based health advocacy group.

As of early December, Vermont had paid $18.6 million of its $82.6 million contract with CGI. The state is in the midst of investigating the full extent of CGI’s shortcomings and may seek additional remedies, said a letter from the state to CGI.

Individuals shopping for coverage are now able to do so on the Vermont marketplace, but they cannot submit their payment electronically — a feature that was delayed so software engineers could focus on fixing the website’s core function. Consumers can pay with a check.

The portal for Vermont small businesses to buy coverage for employees is still not working. Shumlin has made backup accommodations, saying employers can purchase insurance directly from insurers or extend their current plans through the end of March.

Odorisio said CGI is reviewing Vermont’s letters signaling intent to recover damages.

“CGI fully intends to honor the terms of its contract,” Odorisio said in a statement.

Chelsea Conaboy of the Globe staff contributed to this report. Tracy Jan can be reached at tjan@globe.com.
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