Contractor for Md. health exchange website to pay $45M

The main contractor in Maryland's initially flawed health care exchange website has agreed to repay $45 million to avoid legal action over its performance, officials announced Tuesday.

Maryland's website crashed right after opening Oct. 1, 2013, as part of President Barack Obama's health care law, and it wasn't the only state to have problems. Oregon and Nevada abandoned their state-run exchanges and now use the federal one.

Noridian Healthcare Solutions agreed to pay $20 million upfront, Maryland Attorney General Brian Frosh said. The rest will come in yearly installments of $5 million for five years. The payments represent a recovery of 61 percent of the total paid to the company for the failed website.

"This company never delivered on what it promised, and, as a result, tens of millions of taxpayer dollars were wasted, and thousands of Marylanders suffered delays and frustration," Frosh said of Noridian. "This settlement sends a message that the performance was unacceptable, and that those responsible will be held accountable."

The state later rebuilt its website with other technology.

Tom McGraw, president and CEO of Noridian, noted that states across the country that implemented their own exchanges had significant challenges.

"This settlement allows us to move forward and focus on our core business of processing health care claims and providing related administrative services," McGraw said.

Hogan, a Republican who was a vocal critic of Maryland's health care exchange rollout in his campaign last year, said the settlement represents only a first step. Hogan said Maryland will continue to aggressively pursue other avenues to recover damages.

"The rollout of Maryland's Health Exchange was a debacle that could have been avoided," Hogan said in a statement. "I have been one of the most vocal critics of this fiasco, and I am pleased that the process of recouping taxpayer losses has begun."

The Maryland agreement is subject to regulatory approval. The attorney general said it will lead to the recovery of funds for both Maryland and the federal Centers for Medicare and Medicaid Services, which provided significant funding to develop the exchange.

Frosh said the settlement represents a fair deal for taxpayers, because of limitations on Noridian's ability to pay.

"Given constraints on the company's finances, it is doubtful that Maryland could have collected this amount from Noridian Healthcare even if it obtained an equal or higher judgment after years of litigation," Frosh said.

Noridian's parent company, Noridian Mutual Insurance Company, has agreed to guarantee at least $40 million of the settlement, the attorney general's office said. The settlement also releases Maryland from all contractual obligations with Noridian, which is based in Fargo, North Dakota.

Investigation of claims against other companies involved in the development and implementation of the Maryland exchange website is continuing, the attorney general said.