Monday, December 30, 2013

Ideological Stylishness Has a Cost

“Maryland’s energy affordability gap has grown 198.8 percent between 2002 and 2011

from the National Review
Maryland would have felt lucky to get a lump of coal in its stocking this week.

Governor Martin O’Malley’s aggressive green agenda has favored expensive renewable-energy sources, driving up the cost of electricity. The 784,000 Marylanders who are living in poverty, and many more on the brink of it, have been particularly hard hit, even though sometimes the cost is offset by subsidies.

Since O’Malley assumed office in January 2007, residents’ electricity rates have increased by 43 percent, according to estimates from Change Maryland, a group chaired by Larry Hogan, a Republican who intends to run for governor. In comparison, electricity costs have risen 24 percent nationwide. Likewise, the Maryland Department of Legislative Services noted that while other states in the region saw average residential electrical rates grow by 34 to 41 percent between 1999 and 2013, in Maryland they increased by 49 percent. The average Marylander pays more than $125 a month for electricity.

Electricity has grown more expensive while incomes have remained stagnant, says Robert Strupp, the executive director of Baltimore Neighborhoods Inc., a nonprofit that helps tenants and landlords work toward fair housing. He says that residents regularly call in facing power shutoffs — and not just in the city of Baltimore. Earlier this week, a resident from affluent Howard County called in distress, he says. Though she’d already received a state voucher to help offset electricity costs, she was still struggling to keep the power on.

While myriad factors affect the price of energy, the governor’s radical environmental policies have undoubtedly contributed to its escalating expense. By 2020, O’Malley wants 18 percent of the state’s energy to be supplied from green sources, even though natural gas is at least 37 percent cheaper an energy source than onshore wind, and solar energy is at least 98 percent more expensive than conventional coal. Working toward this goal, the governor has backed several green policies, despite their impact on electricity prices.

An offshore-wind project that the Maryland legislature supported earlier this year would be among the most expensive to date. Taxpayers would fund the project, coughing up $1.73 billion in direct subsidies over the next two decades. Then they’d be forced to buy whatever wind energy the project manages to produce, at a premium; offshore wind is by far the most expensive energy source, costing at least two and a half times as much as coal or natural gas. The legislation’s fiscal and policy note estimated that offshore wind would add $1.04 billion to utility bills over the next 20 years.

Such skewed economics make sense to bureaucrats but not investors, so despite supporting legislation, the offshore wind project is unlikely to be built. While that program’s expense is currently theoretical, other green policies have been successfully implemented, driving up real energy costs.

Maryland’s Renewable Energy Portfolio Standard has created an artificial market for pricier alternative energy sources. Utility companies, forced to buy expensive energy, pass the cost along to their consumers. One analysis by the Institute for Energy Research found that in states with renewable portfolio standards, the price of electricity is almost 40 percent higher.

Maryland also participates in the Regional Greenhouse Gas Initiative, an interstate cap-and-trade program. Even the program’s advocates were forced to admit that utility companies in participating states shifted a $900 million initial cost to their consumers. Though supporters of the program claim long-term consumer savings, the argument rests in part on sticker shock that would compel households to use less energy.

That feeds nicely into other state programs, such as EmPOWER Maryland, which seeks to cut per capita electrical consumption by 15 percent by 2015. It allows utility companies to add an “implementation surcharge” to electricity bills. The law also accommodates utility companies at the expense of the consumer, ensuring that they don’t lose profits when energy use decreases. A “decoupling” policy divorces profits from sales. Practically, this creates a baseline guaranteed profit for utilities, and it often forces consumers to pay for electricity even if they didn’t use it.

The increased cost of energy isn’t just a side effect of Maryland’s environmental agenda; for radical green policymakers, it’s the point, explains Myron Ebell, the director of energy and global-warming policy at the Competitive Enterprise Institute. Already, consumption has decreased by 9.4 percent under O’Malley’s tenure, according to the Maryland Energy Administration.

“The purpose of [such green policies] is to make people poorer so they can’t use as much energy,” Ebell says. “They are making life very difficult for the lower-middle-class and working-class people and creating a greater divide between rich and poor, and despite the rhetoric that we need to reduce inequality, it’s really designed to do the opposite.”

Maryland’s poorest families could breathe easier if they were allowed to use cheaper energy sources.

The Maryland Budget & Tax Policy Institute has highlighted a “home energy affordability gap,” noting that energy is considered affordable when it costs less than 7 percent of household income. But in Maryland, people at 50 percent of the federal poverty level or below devote about 40 percent of their income to energy consumption, says Richard Doran, program director of the Fuel Fund of Maryland.

Only eight states had a bigger affordability gap, according to the Maryland Budget & Tax Policy Institute. Furthermore, it noted, “Maryland’s affordability gap has grown 198.8 percent between 2002 and 2011 (the most recent data).”

Right now, Doran says, at least 500,000 state residents are struggling to pay their utility bills. And Children’s HealthWatch, which provides nonpartisan policy analysis, reported in 2011 that 15 percent of Baltimore residents had been threatened with a shutoff and that an additional 18 percent were heating their homes with a cooking stove, had experienced a shutoff, or lived in an unheated home.

Of course, no one mentions that O’Malley’s ambitious green policy has an outsize and detrimental impact on the state’s most economically vulnerable residents. But as a long, cold winter settles in, O’Malley would do well to consider the human cost of his environmental agenda.

Sunday, December 29, 2013

Affordable Health Care Turns Out to be Unaffordable... Surpised?

from Modern Healthcare
Massachusetts, whose health care reform program was used as a template for the Patient Protection and Affordable Care Act, had the highest per capita health spending in the U.S. in 2009. According to the commission's report, the state spent $9,278 per person on health care in 2009, which was 36 percent higher than the national average of $6,815, and 11.2 percent more than the next-highest state, New York, which spent $8,341.

Tuesday, December 24, 2013

Annapolis, We STILL Have a Problem...

from the Washington Post
IF PEOPLE’S health weren’t on the line, it would be darkly funny: For weeks, uninsured Marylanders trying to get coverage through the state’s health exchange have slogged through online forms and technical glitches, only for the system to freeze just before they hit the “enroll” button. The Web site is supposed to facilitate the enrollment of 150,000 Marylanders in private health insurance. As of the middle of the month, it had signed up only 7,435 — and that is after notching its highest-volume days since its Oct. 1 launch.

Gov. Martin O’Malley (D) and Lt. Gov. Anthony Brown (D), whom Mr. O’Malley tapped to be the point man on the state’s health-care rollout, say that the site has dramatically improved over the past several days, despite a server failure last week. But the site still needs work — and Mr. Brown still needs to explain how he let this happen.

Things have been so bad that figures such as Rep. John K. Delaney (D-Md.) argue that Maryland should consider moving its enrollment systems to, the federal Web site that also failed after its Oct. 1 launch. is working better now, the argument goes, so Marylanders should have at least the access that most other Americans do.

All options should be on the table, but switching to the federal site probably isn’t advisable. Mr. O’Malley’s claim that the Maryland site is better, though not perfect, seems to be bearing out. Enrollments are increasing. Changing systems in midstream would bring with it large technical challenges; for one thing, insurance companies would have to adjust their systems to interface with that of the feds while they’re trying to process enrollments on deadline.

What is necessary is more progress. The site still seems to have formidable problems. People who created accounts before the latest overhaul have struggled to log back in. The governor says the state will contact people who might have gotten stuck on the site. Good. The repairmen must also ensure that enrollment information the site sends along to insurers — in those so-called 834 files — is coming over accurately. Otherwise, people who think they’re enrolled might not have the insurance they thought they did, or not at the price they expected.

Also needed is a thorough accounting of how the state’s site ended up failing. A recent staff shakeup suggests that process has begun, but it needs to be transparent. Mr. O’Malley approved opening the broken site on Oct. 1. Mr. Brown was supposed to be leading the rollout of health-care reform all along. By their own admission, neither knew that the state’s systems had massive problems. They should investigate, and then report, what went wrong and why.

Monday, December 23, 2013

Last Day to Sign Up...

...or PAY the Penalty of NOT having Insurance Come January 1, 2014!

from Reuters
Reuters) - For most Americans who don't have health insurance, Monday is the deadline to sign up for coverage starting on January 1 under President Barack Obama's healthcare law.

For others, it's not a deadline.

There is a "hardship" exception for some that permits them not to sign up any kind of health insurance at all without facing a penalty - the hardship being problems they've encountered with Obamacare and its malfunctioning website

There will also be a "good faith exception" for others, according to a senior Obama administration official.

"We'll have a special enrollment period," the official said last week, for "all those who make a good faith effort to get enrolled by the deadline" but fail to do so.

The official did not say how the government would determine whether or not the effort was made in good faith.

Still others may simply get a break from insurance companies, which the administration has urged to be flexible with people who miss the deadline.

Such is the uncertain state of "Obamacare" as it approaches what was originally supposed to be a defining moment - a signup deadline that would provide the first real test of the viability of the healthcare program brought into law by the Affordable Care Act.

Adding to the confusion is the fact that the original deadline for obtaining medical coverage was December 15. That was extended to December 23 after the federal government's website,, proved dysfunctional and sometimes non-functional.

The administration has reserved the right to change the deadline again "should exceptional circumstances pose barriers to consumers" enrolling on or before Monday.

Obama said on Friday that one million people had enrolled for new insurance plans under the law through, which serves 36 states, and 14 state-run marketplaces.

Many more enrollments are a major priority for Obama's signature healthcare reform, which officials are still hoping will help millions of uninsured and under-insured Americans finally to obtain medical coverage by the end of March.


It is not known how many consumers may have no insurance coverage during periods of 2014 because they failed to sign up on by Monday.

Some of the 14 states running their own healthcare exchanges have extended their sign-up deadlines past December 23.

On Thursday, the administration announced that if people's old insurance plans were canceled because of new standards under the law, they can claim a "hardship" exemption to the requirement that all Americans must have coverage by March 31 or face penalties that start at $95.

So some of these people may not sign up.

The Obama administration says it is trying to be flexible, but some Republican critics of the law say the frequent delays and changes have muddied the waters and confused people.

"With no clarity as to when people should sign up and who they should pay and when, it's a virtual certainty that many consumers will find themselves uncovered for a period of time through no fault of their own," Senator Orrin Hatch, a Utah Republican, said last week.

Administration officials said on Friday there are fewer than 500,000 people who have received cancellation notices from their insurance companies and have not yet found alternatives. Some were "auto-enrolled" in other plans by their insurance companies, the officials said.

The pace of sign-ups has picked up since October and November when technical problems crippled the website. Anyone who tried the website in October and November and became stuck has been getting attention from the administration.

Officials sent more than two million emails to people who could not advance through the website. They have also made more than 600,000 phone calls to consumers and mailed notices to hundreds of thousands of people, officials said.

"We are confident that we are doing everything we can so that individuals know what their options are to get coverage, whether it is at the marketplace or seeking it through the private insurers," said the senior official.

Update from CBS Baltimore
ANNAPOLIS, Md. (AP) — Insurance carriers participating in Maryland’s health care exchange have extended the deadline for individuals and families to enroll in order to be covered Jan. 1, Gov. Martin O’Malley announced Tuesday.

State residents who enroll in a qualified health plan through Maryland Health Connection by Dec. 27 can have coverage that begins Jan. 1. The previous deadline was Dec. 23. Consumers would have until Jan. 15 to pay for their coverage.

On Monday, Carefirst announced it would extend the deadline to Dec. 27, and other insurance carriers also have agreed to the later deadline, including Kaiser Permanente, United Healthcare and Evergreen Health Co-op.

The deadline extension comes as Maryland’s exchange has had computer problems since its debut on Oct. 1. O’Malley told reporters Monday that nine major problems have been addressed, but that some computer glitches continue.

O’Malley and Lt. Gov. Anthony Brown recently changed the leadership structure for the information technology portion of the Maryland Health Benefit Exchange. Isabel FitzGerald, the secretary of the Maryland Department of Information Technology, is leading the effort.

“We know the improvements to are making a difference because we are seeing more and more people successfully completing the process every day,” O’Malley said in a statement. “We will continue making improvements to the site, and we are pleased that all carriers have agreed to extend the deadline for coverage so that we can continue to work toward our goal of helping more Marylanders access quality, affordable coverage.”

On Monday, the O’Malley administration announced that Columbia-based Optum/QSSI has been brought in to improve the overall performance of the website.

Thursday, December 19, 2013

More Evidence that the U.S. Senate Has Been Replaced by the HAL3000

“This budget bill exemplifies what is wrong with Washington,” Cruz said in a statement. “Nothing is getting fixed. No important reforms are being addressed. The people get little in return except more debt, more taxes, and no change to the Obamacare disaster."

"The Senate majority voted to allow Sen. Reid to ignore all Republican amendments," he continued. "Over and over, this is the roughshod style of leadership that characterizes this Senate and underscores why Washington badly needs to listen to the people.”

Cruz’s point about how Senate Majority Leader Sen. Harry Reid (D-NV) did not allow any amendments, including one that would have protected veterans’ pensions, was in reference to how Reid used a procedural trick referred to in D.C. parlance as “filling the amendment tree.”

Reid introduced a series of amendments that would not substantively change the legislation so as to prevent any substantive debate on or amendments to the bill before passage. Technically, under certain Senate rules, only a specific amount of amendments are allowed to be introduced, debated, and voted on. Reid filled out the list and killed any opportunity for real amendments to be considered.

Tuesday, December 17, 2013

The Eclipse of Liberty

At the start of a meeting with tech industry CEOs on NSA surveillance, Obama quipped “I’m just wondering if [Netflix CEO Reed Hastings] brought advance copies of House of Cards,” according to a pool video camera in the room.

As the CEOs laughed and joked that Obama should make a cameo appearance in the series, the president continued to praise the series, which revolves around a power-hungry House Majority Whip played by actor Kevin Spacey.

“I wish things were that ruthlessly efficient,” Obama said in his first public remarks on the show. “It’s true. It’s like Kevin Spacey, man this guy’s getting a lot of stuff done.”

Monday, December 16, 2013

The Hidden Obamacare Death Tax

from the Seattle Times
It wasn’t the moonlight, holiday-season euphoria or family pressure that made Sofia Prins and Gary Balhorn, both 62, suddenly decide to get married.

It was the fine print

As fine print is wont to do, it had buried itself in a long form — Balhorn’s application for free health insurance through the expanded state Medicaid program. As the paperwork lay on the dining-room table in Port Townsend, Prins began reading.

She was shocked: If you’re 55 or over, Medicaid can come back after you’re dead and bill your estate for ordinary health-care expenses.

The way Prins saw it, that meant health insurance via Medicaid is hardly “free” for Washington residents 55 or older. It’s a loan, one whose payback requirements aren’t well advertised. And it penalizes people who, despite having a low income, have managed to keep a home or some savings they hope to pass to heirs, Prins said.

With an estimated 223,000 adults seeking health insurance headed toward Washington’s expanded Medicaid program over the next three years, the state’s estate-recovery rules, which allow collection of nearly all medical expenses, have come under fire.

Medicaid, in keeping with federal policy, has long tapped into estates. But because most low-income adults without disabilities could not qualify for typical medical coverage through Medicaid, recovery primarily involved expenses for nursing homes and other long-term care.

The federal Affordable Care Act (ACA) changed that. Now many more low-income residents will qualify for Medicaid,
called Apple Health in Washington state.

But if they qualify for Medicaid, they’re not eligible for tax credits to subsidize a private health plan under the ACA, which requires all adults to have health insurance by March 31.

Prins, an artist, and Balhorn, a retired fisherman-turned-tango instructor, separately qualified for health insurance through Medicaid based on their sole incomes.

But if they were married, they calculated, they could “just squeak by” with enough income to qualify for a subsidized health plan — and avoid any encumbrance on the home they hope to leave to Prins’ two sons.

“We’re happy to be getting married,” Prins said last week. “Unfortunately not everyone has such an elegant solution to the problem.”

For Washington state, the solution has been much more complicated.

Over the past month, as lawmakers began hearing from worried and angry constituents, state officials began exploring what it would take to fix this collision of state rules with the ACA.

Late Friday, Gov. Jay Inslee’s office and the state Medicaid office said they plan to draft an emergency rule to limit estate recovery to long-term care and related medical expenses.

They hope to be able to change the rules before coverage begins Jan. 1.

Fixing the problem will cost the state about $3 million a year, said Dr. Bob Crittenden, Inslee’s senior health-policy adviser, but it’s the right thing to do.

“There was no intent on the part of the ACA to do estate recovery on people going into Medicaid (for health insurance),” Crittenden said. “The idea was to expand coverage.”

Unpleasant surprise

People in their 50s and 60s make up about 30 percent of the adults who have signed up for health insurance through Washington’s exchange marketplace, and about 18 percent of adults who have enrolled in health insurance through Apple Health.

Some 55- to 64-year-olds, who may have taken early retirement or who were laid off during the recession, have found themselves plunged into a low-income bracket. Unlike Medicaid recipients in the past — who were required to reduce their assets to qualify — they’re more likely to have a home or other assets.

For health coverage through Medicaid, income is now the only financial requirement.

At first, Prins was pleased at the prospect of free coverage.

But the more she thought about the fine print, the more upset she got. Why was this provision only for people age 55 and older? Why should those insured by Medicaid have to pay back health expenses from their estates when people with just a bit more income who get federal subsidies don’t? Why didn’t she and Balhorn know about this before getting to the application stage?

As Prins began searching for answers, she found that even those trained to help people sign up for insurance under the ACA weren’t aware of this provision, nor were some government officials.

Around the country, the issue has sizzled away in blogs and commentaries from both right and left. The National Women’s Law Center noted the ACA and its regulations prohibit age discrimination in programs such as Medicare and Medicaid.

Dr. Jane Orient, executive director of the politically conservative Association of American Physicians and Surgeons, writing in the The Washington Times, called the recovery provision “a cash cow for states to milk the poor and the middle class.”

“People will think this is wonderful, this is free insurance,” Orient said in an interview. “They don’t realize it’s really a loan, and is secured by any property they have.”

Even states that are now limiting estate recovery, she warned, can change the rules again if budget problems become more intense.

Unclear rules

One reason this snafu has become so troublesome is that ACA rules appear to give those who qualify for Medicaid little choice but to accept the coverage.

People cannot receive a tax credit to subsidize their purchase of a private health plan if their income qualifies them for Medicaid, said Bethany Frey, spokeswoman for the Washington Health Benefit Exchange.

But they could buy a health plan without a tax credit, she added.

For someone age 55 to 64 at the Medicaid-income level — below $15,856 a year — it’s quite a jump from free Medicaid health insurance to an unsubsidized individual plan. Premiums in King County for an age 60 non-tobacco user for the most modest plan run from $451 to $859 per month.

Ball in states’ court

It’s not the first time federal and state rules have clashed, and local officials now find themselves on the hook to ensure that the new law doesn’t create hardship.

In Oregon, state officials changed estate-recovery rules last month.

Recovery will no longer apply to health benefits for those 55 and over, the Oregon Health Authority said, although the state will collect expenses for long-term care.

On Friday, Washington Medicaid Director MaryAnne Lindeblad promised to draft an emergency rule very soon. The state also must revise the plan filed with federal authorities, but Lindeblad said she doesn’t expect problems or appeals of the rule.

As for Prins and Balhorn, they’re good with their choice.

Instead of paying $577 a month apiece for an unsubsidized private plan or worrying about losing their assets after death, as a married couple they’ll pay $76 a month for a midlevel “silver” plan with a tax credit. “Since we’ve been in an established relationship and love each other, the decision to get married was pretty easy,” Prins said.

Sunday, they made a big fruit salad, dressed in tango clothing and were married in their home. Afterward, they danced to their favorite tango music and toasted each other with orange juice and a dash of cranberry.

“I’d be very happy if the governor actually makes this change possible,” Prins said late last week. “And I’m very happy to be getting married!”

Sunday, December 8, 2013

Two Month's (+)... 3,758 Enrolled in Maryland - Where's Governor O'Malley???

from the Baltimore Sun
Although state officials have provided the public scant detail about the troubled launch of Maryland's version of Obamacare, emails and documents show that the project was beset behind the scenes for months by an array of technical issues, warring contractors and other problems.

Since Maryland's online health exchange opened Oct. 1 for people to buy insurance under the Affordable Care Act — and immediately crashed — the two main companies in charge of the website have taken their fight to court, a corporate project manager was replaced and a high-powered consulting firm was quietly brought in to restore order. Though state officials initially said the crash of the online exchange was an unexpected and fixable problem, emails and documents obtained by The Baltimore Sun through state open-records laws outline serious issues before and after the launch.

The revelations came just days before Rebecca Pearce, the head of the exchange, resigned. State officials announced that move Friday night and pulled Carolyn Quattrocki from the governor's health reform office to serve as an interim replacement.

Just two weeks before the launch, Pearce visited the prime contractor's Linthicum headquarters and found a room of empty seats. She fired off an email questioning the company's commitment to resolve problems and reminding the contractors of what was at stake: "Tonight, I am begging. I don't know how else to say it: we have got to make this a reality."

Despite her proddings, in-fighting between contractor Noridian Healthcare Solutions and a key subcontractor, EngagePoint Inc., disintegrated amid finger-pointing and accusations in court papers. At one point, after Noridian severed contractual ties between the companies but continued to ask for help, EngagePoint CEO Pradeep Goel emailed Noridian officials: "Are you people on crack cocaine?"

Today, the exchange website, called the Maryland Health Connection, is still not operating properly for all users, and officials are scrambling to meet deadlines for the public to obtain coverage. The problems have triggered criticism from some political pundits and have proven embarrassing for Gov. Martin O'Malley and other state officials who touted the website before its launch.

Asked about the conflict between the project's contractors, Health Secretary Dr. Joshua Sharfstein said in an interview, "It's sort of like hiring a husband-and-wife team to do your roof and then they get divorced. The dispute did adversely affect the project. It was a distraction as we were launching the website and then working to address problems."

Lt. Gov. Anthony G. Brown, chosen by O'Malley to lead the state's reform efforts, claimed ultimate responsibility for the website problems last week after facing increased media and political pressure. But he said in a later interview that he had focused mainly on legislative and policy issues and depended on operational updates from Pearce's office. The reports noted everything was running smoothly and on track until September, when only minor problems were reported, he said.

"I certainly had the responsibility to ensure that if there were problems that required additional resources — changes in legislation or policies — that my responsibility was to make sure the exchange got what it needed," Brown said in an interview Friday. "And I relied on the reports that I received on the exchange. …But at no point was a red flag ever brought to my attention as if we have a problem here, we are not going to meet the launch date, or if we do meet the launch date we are going to significantly underperform."

Brown said the exchange was created as an independent agency with autonomy. Its board is chaired by Sharfstein and includes heads of the state's health care commission and insurance administration.

Sharfstein and other health department employees were copied on a number of emails that discussed problems with the exchange. Sharfstein and Brown are co-chairmen of the overarching Health Care Reform Coordinating Council, which is charged with implementing Obamacare in the state.

The shake-up at the health exchange began last week. O'Malley and Brown charged the state's chief technology officer with overseeing fixes and put Sharfstein in charge of operations, taking away Pearce's main responsibilities in managing the exchange. A few days later, she resigned.

Pearce, who was hired in 2011 at a salary of $175,000, declined to comment on problems surrounding the exchange or her resignation.

The emails provided by the state covered the two weeks before and after the website launch. They give only a limited behind-the-scenes view of creating and launching the exchange. Officials withheld an unknown number of emails, saying state law exempts them from disclosure because they involved the decision-making process of high-ranking executive officials.

The troubles in Maryland mirror problems faced by other state exchanges, as well as the federal portal providing insurance options to consumers in 36 states.

The exchanges' bumpy rollout has galvanized critics of the health law, including Republicans in Congress who say it was fresh evidence that the entire plan should be scrapped. In Maryland, the toughest criticism has come from website users who have struggled to buy insurance, as well as political opponents of Brown, a candidate for governor. They say he bears responsibility as the state's point man on health care reform.

O'Malley has also been a target of critics. He recently said that he wanted the website's major technical problems fixed by mid-December. That statement came a day after Sharfstein told state lawmakers it was unclear when the site would be entirely free of glitches — an answer that drew criticism from Republicans and some Democrats.

Technology experts and those involved in setting up the websites say they are among the most complex web endeavors ever undertaken. State officials say there wasn't sufficient time to test the sites after the federal government released regulations related to the Affordable Care Act, and there was no pre-launch access to federal computers used to check consumers' eligibility for subsidies.

In Maryland, Sharfstein said the complexity was compounded because of an aging state Medicaid computer system that needed to be integrated into the exchange. Officials also chose to customize existing technology that proved tougher to retrofit than expected, he said.

"Unlike buying a book online from Amazon, this process is more akin to applying for a passport, buying a home, and receiving an individually calculated tax credit all through a single web portal," O'Malley said Friday night. "We had more user glitches and user problems than we had hoped.

"A longer testing period might have allowed us to prioritize and address more of these problems before the launch date. Time and ultimate success will tell whether the decision to purchase off-the-shelf software and employ multiple contractor entities were good or bad decisions."
The companies

In early 2012, the state gave a $71 million contract to develop the website to a Noridian-led team that included Curam Software, IBM and Connecture. To save time in creating the exchange, the Maryland legislature exempted the contract from the normal procurement process, and North Dakota-based Noridian outscored three other bidders.

Sharfstein said Noridian will likely remain at work in its Linthicum offices beyond its contract's year-end expiration. The company has already been paid about $57 million but the state contract allows penalties for delays. State officials declined to comment on whether any penalties will be sought.

Noridian is ultimately responsible for delivering the system, Sharfstein said. EngagePoint, which is based in Calverton, was not included in the original contract and appeared to have been hired without the exchange's knowledge, officials said.

The state first learned of the companies' "deep strains" in the three months before the website launched, according to documents in U.S. District Court in Baltimore. The issues disputed included accounting, project management, intellectual property and payment.

Emails offer a glimpse at how their differences affected efforts to build the site and then fix post-launch problems. Pearce repeatedly questioned the contractors' commitment to the project after Gov. Martin O'Malley announced on national TV that Maryland's site would go live on time.

On Sept. 22, after Sen. Barbara Mikulski echoed the governor in publicly applauding Maryland's readiness, Pearce wrote the contractors: "It's time to get this right. Now. Period."

Noridian was also criticizing the subcontractor it hired. On Sept. 25, Noridian's project manager wrote to Goel, complaining that EngagePoint refused to perform critical work: "EngagePoint is responsible for 'designing and implementing [an exchange] system,'" the project manager wrote.

The 8 a.m. launch was supposed to allow the estimated 800,000 uninsured Marylanders to sign in and browse 45 plans from six insurers. Officials had warned of "bumps in the road," but the site crashed in minutes.

The state provided few emails from the first day. In one, contractors said they would work on the firewall; Sharfstein said later in an interview that it was eventually altered to allow more users onto the site.

Problems persisted the next day. Pearce repeatedly asked for updates, but the answers appeared unsatisfactory, emails show.

"As the executives in charge of this program, I would like to understand from you exactly what is happening with the project and what you are doing to address the issues," she wrote to the contractors at 7:56 a.m. on Oct. 2. By 4:10 p.m., she questioned why 85,000 people had hit the "get started" button, but there fewer than 500 accounts had been created.

About a half-hour later, she wrote to the contractors, "Can you please provide an update on what is going on right now? Who is on site? What has anyone learned?"

Some of the companies' emails focused on achievements rather than dwelling on worsening problems.

Noridian CEO Tom McGraw wrote to state officials on Oct. 4, "We have seen increases in all aspects of the system performance over the last several hours and anticipate that these will start showing in the next report."

But four days later McGraw notified state officials that the project manager was being replaced.

Meanwhile, Marylanders like Luke Goembel were stymied by a host of problems that included frozen screens, problems with verification and difficulty creating accounts.

When the website opened, the Baltimore scientist tried to buy insurance for his family, but got an error message. Three days later, Goembel got a message to call customer service.

Goembel tried the website again that day, but says that after entering information about his identity, the site froze. Later he got a "server error" message. And still he had no online account.
Customer service started a paper application for him on Oct. 18.

Over the next month, Goembel finally was able to create an account, but before he could buy a plan for his family of four with subsidies, he had to repeatedly call for help, enter the same information over and over online, tolerate error messages and recheck his eligibility for assistance three times.

Eventually, the family was enrolled in a plan significantly better and 40 percent cheaper than his previous coverage, with dental insurance.

Still, he's angry about the delays. "The Maryland system is severely flawed," he says. "The state was sold a bill of goods."
The dispute

Soon after the website's launch, emails among the contractors and exchange officials began to focus more on the dispute between Noridian and EngagePoint.

Chuck Milligan, who heads the state's Medicaid program, whose recipients will eventually use the exchange, complained that the contractors were too distracted by a new argument over who should be the state's prime contractor. The companies had proposed that EngagePoint take over as the prime contractor, but state officials said there was no time to consider such a shift.

"We do not have time to waste," he emailed the contractors. "We hope your email was not intended to convey that the team will not proceed with conviction while it awaits the resolution of the prime issue."

The top executive at Noridian also stepped in by mid-month, holding a meeting with contractors, state officials and consultants it hired from McKinsey & Company, a global management consulting firm. McKinsey was hired at the state's suggestion, but paid for by Noridian.

Paul von Ebers, CEO of Noridian Mutual Insurance Co., Noridian's parent company, wrote on Oct. 10 that the consultants "expressed concern with ongoing coordination issues between the Noridian and EngagePoint teams." He requested a meeting to resolve "working differences" between the companies.

This was days before Noridian fired EngagePoint, sparking the angry email exchanges and dueling lawsuits between the companies. Noridian then sought to hire EngagePoint workers; EngagePoint sued and was met with a counter-suit.

"We are expected to do piecemeal work for Noridian after contract termination because you just woke up and decided you don't know what you are doing?" Goel wrote Oct. 26. "We are not going to respond to ridiculous emails from Noridian demanding our team members show up for work after being escorted out of the office."

Noridian's McGraw declined to be interviewed but said in a statement that his company was responsible for designing and implementing the system. It is a work in progress, he added.

"The complexity of this project has led to a number of major issues beyond what was anticipated; one example is federal regulations that redefined the system's requirements during development," he said in the statement. "Noridian and subcontractors have been working to systematically identify the cause and resolve each issue."
He declined to comment on the litigation with EngagePoint.

Goel, the EngagePoint CEO, said in a telephone interview that he was never told his company's work was unsatisfactory. The conflict with Noridian at first involved the way the project was being managed, he said.

After EngagePoint's firing, the companies battled over $6 million that EngagePoint said it is owed for work, Goel said. He also said Noridian wants to hold EngagePoint responsible for certain financial obligations, such as potential state penalties for missing performance goals, even though it is no longer part of the contract.

Goel said problems with the exchange lie with the complexity of the job, connecting federal, state and insurer sites for the first time ever.

"It's not like Legos where everything is designed by the same company and fits beautifully," he said. "You're trying to get all the pieces to talk to each other."

He admits that emotions were running high immediately after the firing, but said he wants the exchange to succeed and has given Noridian information when asked.

EngagePoint also has contracts to work on exchanges in other states, including Minnesota. A spokeswoman for the Minnesota exchange said officials in that state have been happy with the company's work.

Improvements have been made to Maryland's website, officials said, including easing the firewall, increasing memory and rewriting code to reduce errors. Combined, they have made the site "far more functional" than it was on Oct. 1, Sharfstein said.

As of Friday, 3,758 people were enrolled in private insurance plans. More than 97,000 are expected to gain coverage under Medicaid. And officials maintain that their goal is to sign up 150,000 in private plans by the March 31 deadline for Americans to buy insurance or face a penalty.

Larry Burgee, an associate professor of information systems at Stevenson University, says Maryland could have avoided problems with better planning. For example, states should not have all tried to create their own sites but rather should have pooled resources, tested a few systems and all gone with the best, said Burgee, who teaches a class on the federal exchange website.

He added, "All this money was spent, and in Maryland we hear about two companies fighting. ... People at the top need to take the fall for this."