Short Takes On News & Events

Big Firms Win Multimillion Dollar Contracts To Build Insurance Marketplaces

By Phil Galewitz

February 19th, 2013, 3:46 PM

President Barack Obama’s health law has been criticized as a “government takeover” of health care.

But private companies are building the underpinnings of the online health insurance marketplaces that are a key element of the law – and winning contracts worth hundreds of millions to do so.

Deloitte Consulting, part of the Big Four accounting giant headquartered in New York, won four state contracts to set up the information technology systems at the heart of the marketplaces. Deloitte’s contracts with Connecticut, Kentucky, Rhode Island and Washington are worth about $250 million over the next three years, according to company and state announcements.

CGI., a U.S. subsidiary of the Montreal-based CGI Group Inc., also won contracts valued at more than $150 million in four states (Colorado, Massachusetts, Vermont and Hawaii,) and another, valued at $71 million over two years, to build the federal marketplaces that will operate in about half the states.

The marketplaces are where individuals and small businesses will be able to shop for and purchase insurance beginning next October.

But the single largest contract to build a health insurance marketplace went to Accenture, which won a $359 million deal to set up California’s exchange.

The dollar value of the deals varies widely because some contracts included updating states’ Medicaid information technology systems. The insurance websites will be tied to Medicaid information systems to help connect people to insurance coverage.

Other companies to win state contracts to build the marketplaces include Maximus, which has a $41 million contract to build the Minnesota exchange; Xerox, which has a $72 million deal in Nevada and Computer Sciences Corp., which won a $183.6 million contract in New York.

While the deals for Deloitte and CGI may seem big, the companies already have even larger state information technology contracts, said Dan Mendelson, CEO of consulting firm Avalere Health. “This is a nice new line of business for these companies, but it is not transformative,” he said.

He said companies like Deloitte and CGI had an advantage because of their experience setting up information systems for state Medicaid programs. “They already … know the systems and the people,” Mendelson said.

Pat Howard, who leads Deloitte’s public sector state health care practice, agreed, noting that Deloitte is building or running Medicaid information systems in 15 states. “We have had experience in the states and demonstrated that we can meet the aggressive timelines of the law.”

He said working with four states will bring economies of scale and help states learn from one other.

CGI Vice President Melissa Boudreault said that building a health insurance exchange requires experience in many disciplines. “The soundest exchange approaches bring together expertise and best practices in state health programs, commercial insurance, and areas such as e-commerce over the cloud and financial management,” she said.  “This is CGI’s strength and where we are very comfortable.”

10 Responses to “Big Firms Win Multimillion Dollar Contracts To Build Insurance Marketplaces”

  1. John says:

    When are we going to admit that insurance companies are the problem with regard to our healthcare system? Private insurance companies have no business making life or death decisions, especially when those life or death decisions are based on profit or loss. Is their any question how they will decide? Their decisions will always protect their profit margin, every time! The sooner we eliminate the insurance industry from having any connection with healthcare, the sooner we will begin to salvage our failed healthcare system. No other industrialized nation in the world allows private insurers to be involved in healthcare without being severely regulated and controlled. It is time that we get honest and expose the private insurers for what they really are. Private healthcare insurers are in business to make money as their primary business plan. Delivering healthcare services is a distant second in their business priorities.

  2. tmalone says:

    John, a few things:

    1. insurance policies are CONTRACTS.
    2. insurance companies do not use insurance company money to pay claims. they use POLICYHOLDER MONEY.
    3. insurance has been highly regualted and controlled for years.

    The problem isnt insurance companies. The problem is economically ignorant healthcare consumers with the mistaken belief someone else has been picking up both the hrealth insurane and healthcare tab. And we all agree that no one spends someone else’s money as carefully as they spend their own.

    Goverment is not the solution to the problem. Government IS the problem.

  3. Maggie says:

    I’m confused by the comment above. Insurance companies are a business and like any other business they are in it to make money. This is not a bad thing. It’s called capitalism. They don’t make life or death decisions for a person. They make payment decisions. Just because an insurance policy does not pay for something doesn’t mean you can’t have it. That’s your choice. When you a buy an insurance product it has rules just like anything else you buy. If you don’t like what they cover then move on to another product. Insurance companies provide a service just like many other businesses.

  4. DebbieKat says:

    Maggie – Most people cannot afford major treatments without an insurance payment and, unfortunately, many of their decisions can seem rather random… There are plenty of stories of this out there if you do a bit of searching. Hit change.org and see some of the petitions on there that have to do with insurance companies not paying for treatments that are supposedly covered under their plans. Most people also don’t have the ability to shop around for insurance. It either comes from an employer (where you have NO say in what insurance company is being used as part of a group plan) or you are subject to the whims of the insurance industry if you can purchase your own plan. I believe the new health care law has improved a bit on what insurance companies can do, but in the past, it was MUCH easier for an insurance company to drop an insured altogether because THEY decided it was cheaper than paying for some treatment even though they gladly took the insured’s premium payments for years. Making money on the backs of the sick IS a bad thing. I don’t care what you call it.

  5. HanSolo says:

    Debbie-
    So health insurers should only insure healthy people according to your philosophy because making money “on the backs of the sick IS a bad thing”. That would make their profit margins much higher. I would go to change.org but did not want to come down with laziness or apathy.

  6. Jordan says:

    Debbie, they do their best to only insure the healthiest customers. I’ve seen it in action for myself. That said, the whole system is the problem, not just the insurance companies. The docs and hospitals were happy to play fast and loose in the past (even the “not for profits”), and that’s why managed care came to be in the first place. There is plenty of blame to go around.

  7. Patrick Pine says:

    There is no ‘system’ – there are several layers of involved parties who interact in different ways for different groups ranging from the VA to community clinics to drug manufacturers to individual practitioners to insurers to regulators and on and on. Health care is delivered and financed in many different ways – from workers comp to VA to Medicaid to employer insured to Taft Hartley self insured and from medical to dental to vision to retiree medical to HSAs, HRAs, and discount options. Two of the concerns I have with PPACA is that it is entirely oriented to a state by state approach when a significant share of the populace is very mobile and the health care delivery is very much localized amd the lack of any true multistate plans. For instance, California is seeking to have 19 ‘market areas’ in its public exchange. But there will not be the same option for two employees of the same organization where one lives in Portland OR and the other across the river in Vancouver WA. We have a variety of consulting firms building federal and state exchanges. In today’s world, building everything around geography and historically evolved local markets doesn’t make a lot of sense. This diversity makes the building of integrated computer systems much more complex and expensive requiring the use of these consulting firms.

  8. pappy says:

    All this talk and all these articles are just minor speeds bump on the road to universal single-payer healthcare for all Americans. The industry will fight it tooth and nail but the fact is, they have ruined it for themselves. They had a goose that laid golden eggs and they decided to get greedy. They had a cow that gave milk and they milked it dry. Consumers are dropping out regularly and opting for the emergency room for their healthcare. The 50 million uninsured grows daily. The handwriting is on the wall. Either the industry figures it out and fixes it, or we will have universal single-payer healthcare in just a few short years. Both Republicans and Democrats in Congress agree that the current healthcare system cannot be sustained. Republicans want to maintain past practices and believe that free enterprise fixes everything. Democrats came up with something different called the PPACA. Past practices and free enterprise, at least in healthcare, hasn’t worked. Will the PPACA work? Time will tell. The problem is, Republicans are scared to death that the PPACA will work. Early signs are, it seems to be gradually working. The cost of healthcare has slowed for the past three years. Is that because demand has dropped since unemployment is high? Maybe! Time will tell!

  9. Allen Simpson says:

    In this age of cloud computing and standardized business processes why does every state need to build its own system. That’s like Apple having a different contractor for every state (or nations) iTunes store (or Amazon or Best Buy…) — all of whom do many more transactions a day than these exchanges will ever do. Seems like a HUGE giveaway to the big IT vendors, who will then sell their solutions to other states and double or triple their profits. Could this money not be better used to lower the cost of premiums or increase the number of people who need coverage — or both. Who’s keeping an eye on this?

  10. I have the previous your comments with mixed reaction. Perhaps well intended (and certainly, politically expedient), it’s original intent was to allow uninsured Americans to gain access to health insurance and eliminate small group medical underwriting which, in theory, make sense. Also, upgrading and standardizing hospital, physician, RX information through the use of technology and creating more transparency relative to costs are all good things, generally speaking. That’s where it ends for me.
    It disturbing to me that NO INDIVIDUAL in our nation knows the financial impact PPACA will ultimately have on employers, individuals and taxpayers. Nor DO THEY KNOW if the quality of health care will actually be as accessible as our government predicts.
    The 2,700 page “Trojan Horse” called PPACA, the ACA or “Obamacare ” will ultimately unwind and surprise a lot of uniformed, unengaged and mislead Americans. It is the most ill-conceived piece of social reform legislation that I have ever read. Modeled after the Massachusetts Health Insurance Program (which has the highest health insurance premiums in the United States), it is “chock full” of burdensome federal requirements, hidden taxes and cutbacks which will impact employers, hospitals, physicians, employees, individuals for decades. It will most likely add a trillion dollars to our national debt. It will further burden taxpayers by creating HUNDREDS OF THOUSANDS of civil servant government jobs. How will that equate to lower health insurance premiums? Essentially, we will see the equivalent of another new federal agency like CMS. Billions of “giveaways ” in grants, low interest loans, committee positions (more federal employees). Subsidy calculations, IRS w-2 reporting and enforcement, redundant and incredibly expensive Exchange technology (and never ending costly maintenance and upgrades ) and ver possibly devastating personal data security breaches. Inflated health insurance premiums FOR ALL via mandatory high reinsurance fund premium add ons and PCORI fees as well as “essential benefits” and medical device expense “pass through” expenses ( 2.3% on thousands of items down to tongue depressors) . Limited small group tax credits which are capped and actually available to only a very few small businesses.
    On March 23rd, 2010, our Congress and Administration passed a law that NO ONE read with clarity or understanding. Watch for “packed” emergency rooms staffed with too few doctors. Working people and employers… get ready to have your deductible health care benefits TAXED. Watch your health insurance premiums rise at the same rate, if not at a higher pace than they they did over the last decade (or be willing to be placed in small provider networks with “HMO like” restrictions on high cost procedures like MRIs, because you are in an ACO).

    The “Trojan Horse” has just opened its trap door and the truth will eventually spill out into public view. Unfortunately, it will be too late.

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