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2 states refuse to pay contractor for botched healthcare websites

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Two New England states are refusing to pay the contractor behind the troubled Healthcare.gov, saying the same company failed to deliver on contracts to create state-run exchanges. 

Massachusetts and Vermont, two states that supported President Barack Obama's healthcare overhaul and chose to run their own insurance exchanges, have stopped making payments to CGI Federal, saying that the company has yet to produce working websites nearly three months after the start of the open enrollment period.

The Boston Globe reports that Massachusetts, a forerunner of government-based insurance marketplaces, has ceased payments to CGI after paying $11 million of a $69 million contract. 

“CGI has consistently underperformed, which is frustrating and a serious concern,” Jason Lefferts, a spokesman for the state marketplace, told the Globe. “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 had a state exchange since 2006 (in fact, it was the model for the federal Affordable Care Act), but state officials were forced to revamp it under the federal law. The Bay State contracted with CGI Federal, the same firm that was awarded $93 million to build the federal exchange, to streamline the existing Commonwealth Health Connector. Among other changes, CGI would have simplified the application process so that only a single application would have to be filed to obtain coverage and subsidies.

Problems with the new Massachusetts system are so bad, however, that the state has reverted to using older software and issuing paper notifications of enrollment. The Globe says that until recently, the revamped exchange was unable to enroll a single person. The executive director of the exchange said CGI failed to provide adequate resources to Massachusetts. In January, the state exchange's board of directors will weigh further options for rectifying the CGI contract.

But Massachusetts isn't the only New England State fed up with CGI. Vermont also announced that it will no longer make payments on a $82.6 million contract with the firm after already paying $18.6 million for a product that is still rife with technical issues. The state said they would be withholding $5.1 million in payments for missed deadlines. They will also dispute another $1 million in charges.

Vermont officials say their exchange still does not fully work. Even today, the state cannot accept electronic payments. Users can finally shop for an insurance plan online, but they have to mail a check to secure a plan.

The backlash from these two states only adds to the mountain of criticism facing CGI. The company was the primary contractor behind Healthcare.gov, the federal exchange serving 36 states. From the moment it launched on Oct. 1, the federal exchange was plagued by well-documented technical issues. Frequent crashes, time outs and miscommunications made is so only 50,000 people could sign up for health insurance in the first month - well below projections set by the Obama administration. 

The firm has worked to improve the federal site and has made significant progress. It was reported this month that the federal exchange is now working correctly at least 90 percent of the time. However, there are continued reports of backend errors that result in insurances companies either failing to get information about new enrollments or getting the wrong information. 

Word that Massachusetts and Vermont are no longer making payments caps off a week of bad news for the federal contractor. Earlier this week, the Washington Post brought to light CGI Federal's long history of government IT project blunders.

Photo by State Library of Massachusetts/Flickr