Featured Health Business Daily Story, Oct. 26, 2012
Reprinted from INSIDE HEALTH INSURANCE EXCHANGES, a hard-hitting monthly newsletter with news and strategic insights on the development and operation of state and private exchanges.
On Sept. 30 — 10 days after winning a contract to develop Nevada’s insurance exchange — Xerox Corp. finalized a deal to develop the Small Business Health Options Program (SHOP) exchange and customer care center for another state insurance exchange, HEX has learned. Xerox will be one of several vendors involved in that exchange, which won’t be publicly named until after the election.
Through a series of acquisitions, Xerox has become the nation’s largest administrator of Medicaid plans and operates Medicaid management information systems in states including California and Texas. Moving into the development of insurance exchanges was seen as a “natural extension,” says Will Saunders, group president of government health care solutions at Xerox.
On Sept. 20, Xerox said it had been awarded a $72 million contract to help build an online Web portal for Nevada’s Silver State Health Insurance Exchange. To date, Nevada has received $74.7 million in federal grant money — including a $50 million Level 2 establishment grant in August, which will be used to cover the information technology (IT) contract.
It’s been a year since Nevada issued a request for information (RFI) to develop a Web portal for its insurance exchange. A dozen vendors responded to what was then an information-gathering exercise.
When it comes to building the IT needed for an insurance exchange, states basically have three options:
(1) Hire a vendor and build an IT system from the ground up.
(2) Purchase off-the-shelf technology where the state is responsible for IT updates.
(3) Use a software-as-a-service (SaaS) approach, in which the IT software is leased from a vendor, explains Jon Hager, executive director of Nevada’s insurance exchange.
Nevada opted for the SaaS approach — using Xerox’s cloud-based Health Insurance Exchange (HIX) Solution Suite — so that it can have the latest technology and not have to install regular updates itself. The contract, he tells HEX, gives Nevada the flexibility to maintain control over the exchange.
Saunders says Xerox has passed on about half of the exchange bids it has look at. Many of those were seeking an arrangement where the state would own the IT system. “But we don’t think there’s time for that,” he explains. “We think our SaaS model represents low delivery risk and high value, and that’s what we’re looking to implement.”
In addition to developing a Web portal, the request for proposals (RFP) asked prospective vendors to develop a call center, online selection tools for health insurance plans and a system that will allow the exchange to collect premium dollars from enrollees and distribute those funds to the appropriate insurance carriers.
The RFP was approved by CMS in March, and sent out shortly after that. By early May, the state had received four bids, which it whittled down to two finalists.
“We asked those vendors to come back May 29 with a list of items [from the RFP] that they thought were vague or confusing that might cause them to add costs…and come up with ways to mitigate the risk and mutually lower the costs,” Hager explains.
In August, each vendor was given two or three hours for a presentation, and a decision was made that evening to choose Xerox. The next two days were spent discussing the work, and “making them feel comfortable with us,” Hager recalls.
The contract includes some financial penalties if the work doesn’t progress as expected. Despite the tight deadlines for exchange development, Saunders says the Nevada exchange “is a little ahead of the ballgame.”
The state also has a contract with Deloitte to build a new Medicaid and Children’s Health Insurance Program (CHIP) eligibility system that will replace the state’s existing, outdated technology. That system will be housed inside the Nevada Division of Welfare and Supportive Services. The two systems will be linked through interfaces and be able to share eligibility information.
Users will enter a single Web portal where they’ll be asked to input demographic and income information. If a person is eligible for Medicaid, for example, the Medicaid interface will take over and move the applicant through the enrollment process, Hager explains, adding that representatives from Deloitte and Xerox meet at least every other day. While some states are looking for a vendor to manage both elements of an exchange, Saunders warns that such a strategy can be risky.
In May, Xerox said it had formed an alliance with CHOICE Administrators Exchange Solutions in all 50 states to offer a cloud-based HIX solution.
While Florida Gov. Rick Scott (R) has opposed the reform law and the development of an exchange, a nonprofit corporation, Florida Health Choices (FHC), is building an online insurance marketplace aimed at small employers.
In June, FHC signed a nine-year, $68 million contract with Xerox and CHOICE Administrators to develop a Web portal, statewide customer contact center and IT system to make eligibility determinations. The private exchange will be a marketplace for the state’s school boards.
The nonprofit previously had a contract with Ceridian Exchange Services, which it severed in March after FHC complained that a Ceridian subcontractor breached the contract by using offshore workers in China, according to the Tampa Bay Business Journal. Ceridian agreed to return $250,000 without admitting any wrongdoing, according to the paper.
States that aren’t already developing an exchange likely will be unable to meet HHS’s strict deadlines. Xerox now is considering bids only from states looking to have an exchange in place by Jan. 1, 2015, or later.
“I think eventually every state is going to want to operate its own exchange. Many states will default for a year or two [to a federally facilitated exchange], but they’ll all want to run their own.”
© 2012 by Atlantic Information Services, Inc. All Rights Reserved.
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