Oregon Dumps Failed Health Insurance Exchange

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Oregon's health insurance exchange will shut down, sending state residents instead to the federal HealthCare.gov website -- which, for all its troubles, looks good in comparison with a state site that never enrolled a single consumer.

The board of Cover Oregon, the quasi-public agency that ran the state health insurance exchange, on Friday voted unanimously to accept a recommendation to move to merge its website into HealthCare.gov.

As reported by the Oregonian newspaper, the state had been moving toward having Deloitte overhaul the website and related back-end systems, but pulled back after the estimated cost ballooned to more than $78 million. A panel evaluating the costs concluded that a switch to the federal exchange could be accomplished for $4 million to $6 million. The one component of the state-run system to be maintained would be for enrollment in Medicaid for those eligible.

[Who's to blame for the rough rollout of HealthCare.gov? Read Kathleen Sebelius: Failed IT Project Manager?]

More than $303 million in state and federal funds have been sunk into the project so far. Oracle collected $134 million to build the online exchange. The process of assessing blame for the failure of Cover Oregon often has focused on the role of Oracle, which was the primary technology provider and implementation consultant on the project. However, Oracle never had the authority to act as system integrator, a role state IT leaders decided to take on themselves. State and federal investigations pointed to inadequate oversight and project management as problems. State of Oregon CIO Alex Pettit, who was assigned to help rescue Cover Oregon, said that in addition to costing too much, a project to repair the site in time for the next open enrollment period beginning in November was too risky.

The Cover Oregon website eventually performed well enough to provide some services to insurance agents but was never judged adequate for use by the public. Instead, all Obamacare enrollments had to be processed on paper or through other workarounds.

This is a reversal of how the health insurance exchange feature of the Affordable Care Act was supposed to work. The original Obamacare vision was that every state, or at least the vast majority of them, would operate its own exchange. In retrospect, it's easy to wonder whether that was ever a good idea, given that many of the state sites have struggled. There have been a few happy exceptions in states such as Connecticut and Kansas.

The HealthCare.gov was an embarrassment at launch, back in October, when many of those seeking insurance found it impossible to create an account and start searching for a plan, let alone sign up for insurance. Yet thanks to an intense turnaround effort, it began to perform respectably by early 2014. At the March 31 deadline for open enrollment -- the date when, despite all extensions, you were at least supposed to start your application -- the site suffered some slowdowns, but at least they were associated with high traffic and a rush of people wanting to sign up. In the following weeks, President Obama was able to announce that signups had topped a goal that previously seemed unreachable -- 7 million -- and then 8 million as more half-finished enrollments were completed.

Still, HealthCare.gov was hardly a success story, and its misadventures ultimately led to the resignation of Kathleen Sebelius as Secretary of the U.S. Department of Health and Human Services.

According to a Kaiser Health News report, New Mexico and Idaho, two states that relied on HealthCare.gov this year, are planning to have their own state exchanges operational by November 2014. With the addition of Oregon, HealthCare.gov would wind up managing enrollment for 35 states for the 2015 open enrollment period, down from 36 this year.

Healthcare IT in the Obamacare Era, the InformationWeek Healthcare digital issue on the impact of new laws and regulations. Modern technology created the opportunity to restructure the healthcare industry around accountable care organizations, but IT priorities are also being driven by the shift.

There is even a possibility that HealthCare.gov could pick up additional business from states such as Massachusetts and Maryland, both of which have struggled with underperforming insurance exchange websites. Maryland plans to spend about $45 million to purchase Connecticut's technology, built by Deloitte LLP, but that's partly contingent on securing federal funding for the change.

David F. Carr is Editor of InformationWeek Healthcare. He previously led coverage of social business and education technologies and continues to contribute in those areas. He is the editor of Social Collaboration for Dummies (Wiley, Oct. 2013) and was the social business ... View Full Bio