Contractor building federal Obamacare exchange has a big ol’ conflict of interest

posted at 6:41 pm on December 11, 2012 by Mary Katharine Ham

Republican lawmakers are asking a contractor building Obamacare’s federal data hub and health care exchange to explain how it’s going to resolve its massive conflict of interest. Why?

Maryland-based Quality Software Services, Inc. (QSSI), was awarded the contract to build the federal data hub and other technological components of the federal exchange early this year. It was then bought by UnitedHealth Group, which also owns UnitedHealthcare— one of the nation’s biggest providers of health plans. Industry experts and competitors of UnitedHealthcare worry quite reasonably that if an insurance carrier which is supposed to compete inside the exchange shares an owner with the company building that exchange, that might turn out pretty darn well for…UnitedHealthcare.

One critic familiar with the business rivalries of the insurance industry compared UnitedHealth Group’s purchase of QSSI to the New York Yankees hiring the American League’s umpires.

This week, Sen. Chuck Grassley (R-IA) and Rep. Fred Upton (R-MI) asked UnitedHealth Group’s and QSSI’s heads to clarify the relationship between their companies and whether they’ve taken steps to mitigate conflicts of interest. Their concerns:

News outlets have reported that QSSI will likely “finalize technical and systems requirements to develop and deliver plan management services, which includes the certifying and decertifying of health plans offered on the exchange,” and “also entails monitoring agreement with health plans to ensure compliance.” This raises serious questions about the conflicts of interest that may exist as a result of the acquisition of QSSI by [UnitedHealth Group subsidiary] Optum. For example, this contract creates a situation whereby the exchange’s ultimate designer, QSSI, is in a position to tailor the system to favor the interests of its parent company, UnitedHealth Group and further maintain a monopoly over information that is unavailable to competitors, potentially allowing such information to be exploited as invaluable market intelligence and used to gain an unfair advantage over competitors.

The UnitedHealth Group response, for now:

In response to the letters, UnitedHealth Group spokesperson Matt Stearns said, “Putting our customers’ secure and proprietary interests first is a hallmark of our service and has earned us the strong confidence and trust of those we serve every day.”
Stearns added, “We look forward to responding to (lawmakers’) questions” (“Healthwatch,” The Hill, 12/10).

If you’re not impressed with the appearance of impropriety, how about actual impropriety? Sen. Orrin Hatch (R-UT) first noticed this red flag in November:

The quiet nature of the transaction, which was not disclosed to the Securities and Exchange Commission (SEC), has fueled suspicion among industry insiders that UnitedHealth Group may be gaining an advantage for its subsidiary, UnitedHealthcare.

UnitedHealth Group’s acquisition has caught the attention of Sen. Orrin Hatch (R-Utah), the ranking member on the Senate Finance Committee. He has expressed alarm over what he calls a lack of transparency in setting up a national insurance marketplace covering more than 30 states.

He asked Health and Human Services (HHS) Secretary Kathleen Sebelius in an Oct. 19 letter for a full account of contractors hired to set up the national exchange and a list of administration officials who signed off on those awards.

And, finally, there are these allegations from The Weekly Standard‘s Jeffrey Anderson, whose source suggests it was Sec. Kathleen Sebelius at Dept. of Health and Human Services who discouraged reporting to the SEC to avoid detection of exactly this conflict of interest:

When HHS became aware of UnitedHealth Group’s purchase of QSSI, it couldn’t realistically void the contract, because the Obama administration was already too far behind in setting up the federal exchanges. To void the contract would mean delaying the exchanges’ implementation by many more months. The Hill writes: “[G]iven how late the administration has been in issuing rules for the exchanges, it would be extremely difficult to void a key contract, find another company to perform the work and still meet the 2014 deadline.”

Unwilling to void the contract, HHS instead went to work on setting up a firewall designed to block United-Health Group from gaining access to QSSI’s data, presumably out of a desire to keep UnitedHealth Group from gaining an unfair advantage. Then, likely in concert with the White House — and to the chagrin of many HHS employees — Sebelius and other senior HHS officials decided that word could too easily get out about the firewall project. If it did, it would alert people to UnitedHealth Group’s having gained a potentially huge competitive advantage — a political concern for the White House on the cusp of the election, especially in light of the crony capitalism charges that have plagued this administration. Therefore, HHS, under Sebelius’s leadership, suspended work on the firewall and told United-Health Group not to alert the SEC to the purchase — as UnitedHealth Group was legally required to do within four days of the transaction — until after the election.

HHS’s actions have drawn the attention of the Senate Finance Committee. The committee’s ranking Republican, Sen. Orrin Hatch, has asked Sebelius for information, but Sebelius has not complied with his written requests and deadlines.

And, the icing on the crony cake? At the time QSSI got its contract, “the director of Obamacare’s newly established Center for Consumer Information and Insurance Oversight (CCIIO) — which the Hill describes as ‘the office tasked with crafting rules for the national exchange’ — was Steve Larsen.” Larsen left CCIIO in June and got a job with—guess who?— UnitedHealth Group. To be exact, he took a job with Optum, the exact subsidiary of UnitedHealth Group that bought QSSI.

A whopping six states got “certified” by the administration to be official state exchanges this week, and only 15 states have applied. As I’ve noted before, the administration foolishly assumed that all the states would build exchanges and it wouldn’t have to work too hard on a federal exchange. There will be only 15-17 states obliging and only a handful of those ready for open enrollment by October 2013, as required. The contract with QSSI and UnitedHealth, therefore, becomes simultaneously more important as the clock winds down to implementation and more problematic, as the company will have control over a growing number of Americans’ health coverage.

And I’m not even getting into the privacy and security concerns with creating “a central database linking critical state and federal data on every U.S. citizen for real-time access” on a tight timeline with little oversight. Good times.


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another example of excellence in bureaucracy

Slade73 on December 11, 2012 at 6:49 PM

**Alert **

President Obama: US now formally recognizes leading coalition of Syrian rebels – @abcnews

5 mins ago from abcnews.go.com by editor

canopfor on December 11, 2012 at 6:54 PM

“I WON” – BHO
What else do you need to know?

bettycooper on December 11, 2012 at 6:55 PM

I can’t keep track of the corruption anymore … it’s everywhere.

darwin on December 11, 2012 at 7:02 PM

Obamacare corruption? That’s about as unlikely as gambling at Rick’s.

malclave on December 11, 2012 at 7:02 PM

60% of Americans hate this disastrous law, but they voted for Barack anyway. I wish liberals would – I don’t know – read something now and then. Take the time to understand anything at all.

Slade73 on December 11, 2012 at 7:02 PM

More of that crony fascism.

rbj on December 11, 2012 at 7:03 PM

Obama Administration:

“Nothing to see here. Completely above board, and besides…shut up.”

predator on December 11, 2012 at 7:03 PM

All according to plan…

… It’s how the ‘exempted’ political elite ruling class will fund itself whilst the rest of the economy crashes and burns.

Seven Percent Solution on December 11, 2012 at 7:04 PM

And I’m not even getting into the privacy and security concerns with creating “a central database linking critical state and federal data on every U.S. citizen for real-time access” on a tight timeline with little oversight. Good times.

Oh don’t get your panties in a bunch MKH, for the love of Allahpundit, when has the US Government Evar screwed anything up…

SWalker on December 11, 2012 at 7:06 PM

This is inevitable when government gets involved with business. You know that supposed wall we have between religion and government? We should also have that wall between business and government.

You can’t really blame the company for doing what it has to do to survive, but you can blame the politicians and voters who set up a system that allowed and even encouraged political rent seeking.

Timin203 on December 11, 2012 at 7:06 PM

Can we do some civil disobedience with the exchanges and the rest of the Obamacare travesty? How can we slow down implementation or otherwise sabotage this thing at the grassroots level, legally? I think of our POWs in Japan in WW2, forced to work and doing all possible to mess up the plan even when beatings or death were possibilities if caught. We’re Americans in that tradition and should be able to make this not happen.

TheTownsman on December 11, 2012 at 7:27 PM

And guess who AARP’s Medicare Supp plans are insured through?
United!
Who endorsed O Care? AARP..
singing its praises.

Connect the dots peeps.

bazil9 on December 11, 2012 at 7:28 PM

This is inevitable when government gets involved with business. You know that supposed wall we have between religion and government? We should also have that wall between business and government.

Timin203 on December 11, 2012 at 7:06 PM

Not possible, Tim. This government is in the business of giving us the business. Besides, if bodies hitting the floor are ‘bumps in the road’, what’s the big deal about conflict of interest. So long as the Obamaphones, etc. keep flowing, that is.

ghostwalker1 on December 11, 2012 at 7:29 PM

I can’t keep track of the corruption anymore … it’s everywhere.
darwin on December 11, 2012 at 7:02 PM

That’s the idea! Snowed under in the blizzard of corruption:

“You’re so cold, and so tired… just lay down in the snow and sleep for awhile…”

/s

Marcola on December 11, 2012 at 7:32 PM

Not possible, Tim. This government is in the business of giving us the business. Besides, if bodies hitting the floor are ‘bumps in the road’, what’s the big deal about conflict of interest. So long as the Obamaphones, etc. keep flowing, that is.

ghostwalker1 on December 11, 2012 at 7:29 PM

I meant it in more of an academic way… That ship already sailed in this country.

Timin203 on December 11, 2012 at 7:34 PM

More of that crony fascism.

Excellent term, for what we see taking place.
Oh, and BTW: What popup ad appeared at the top of the HotAir page while I was reviewing this article? Why, an ad for United HealthCare! How conveeeeeenient, as Church Lady might say.

orangemtl on December 11, 2012 at 7:35 PM

This will yet go down as THE MOST CORRUPT ADMINISTRATION, EVAH!

GarandFan on December 11, 2012 at 7:40 PM

From incompetence to corruption?

No, both were fully in place from the beginning of President Choom’s administration.

RoadRunner on December 11, 2012 at 7:48 PM

Industry experts and competitors of UnitedHealthcare worry quite reasonably that if an insurance carrier which is supposed to compete inside the exchange shares an owner with the company building that exchange, that might turn out pretty darn well for…UnitedHealthcare.

Note to self:
1.Buy UnitedHealth Group Incorporated stock.
2. Move to a different country before you get old.

BoxHead1 on December 11, 2012 at 7:52 PM

This will yet go down as THE MOST CORRUPT ADMINISTRATION, EVAH!

GarandFan on December 11, 2012 at 7:40 PM

I was too young to remember Watergate but man that seems like child’s play compared to this disaster.

gophergirl on December 11, 2012 at 7:54 PM

Hahaha, the laws haven’t even gone into effect yet, and this will be the tip of the iceberg. My guess is one of the primary reasons for the Obama administration to pass this boondoggle in the first place is to enrich themselves and all their cronies and everyone who helped them pass the bill. It’s the American way!

scalleywag on December 11, 2012 at 8:02 PM

Wasn’t one of Romney chums big into this also? Wasn’t Romney going to appoint his buddy to oversee these exchanges?

The money is so massive, the stakes so high, that just about anyone would be tempted to cheat for a few hundred million in their pocket.

right2bright on December 11, 2012 at 8:27 PM

I was too young to remember Watergate but man that seems like child’s play compared to this disaster.

gophergirl on December 11, 2012 at 7:54 PM

Watergate was a journalists dream…that’s about it…pick about any thing the past 3 years and Watergate is chump change compared to Fast & Furious, Benghazi, Tax evasion by people heading up our economic system…good grief, I need a drink…

right2bright on December 11, 2012 at 8:29 PM

And guess who AARP’s Medicare Supp plans are insured through?
United!
Who endorsed O Care? AARP..
singing its praises.

Connect the dots peeps.

bazil9 on December 11, 2012 at 7:28 PM

Exactly! I pointed this out here at Hot Air before ObamaCare got shoved through. Unbelievable that people are just now questioing this.

Connie on December 11, 2012 at 8:45 PM

Political Incest, Cronyism, and Malfeasance. Oh, my.

It’s so unlike this administration to misstep like that…

locomotivebreath1901 on December 11, 2012 at 8:48 PM

This kind of crap makes me so sick that I can barely read it. It makes me feel so helpless to fight against this monstrosity of injustice. My only solution is Let. It. Burn. Get it over with and be done with it! It makes me sick!

texgal on December 11, 2012 at 9:38 PM

What…?

You mean the cronyism, corruption, and incompetence that Romney refused to highlight and condemn?

That corruption?

With a impeachment-proof Senate, talk means nothing.

CPT. Charles on December 12, 2012 at 2:20 AM

Most people with any knowledge of this situation along with the ability to understand it are opposed to this kind of, what I call, criminal activity. Criminal because if it happened in the private sector these people would all be indicted and probably convicted.

The really big question though is: who is going to do anything about it? Our elected officials are complicit and really support it because they are only interested in being reelected and can not rock the boat. Therefore, it will eventually be up to society to change it and I don’t know if they have the will after decades of being dumbed down.

Pardonme on December 12, 2012 at 8:41 AM

I guarantee the only reason Optum hired Larson was because of his having been the director of CCIIO. Companies doing government contracts do it all the time… the company I work for does it all the time… in order to procure those “connections” to improve their chances of winning contracts.

gravityman on December 12, 2012 at 10:55 AM