IBM reaches $15M settlement over false claims allegations related to Maryland's exchange

Medical justice
IBM and Cúram Software served as subcontractors in the initial troubled rollout of Maryland's health insurance exchange website. (Getty/yavdat)

IBM will pay $14.8 million to settle allegations from the Department of Justice (DOJ) that it misrepresented the capabilities of software technology during the development of Maryland's health insurance exchange (HIX) website and IT platform in violation of the False Claims Act.

Authorities say the case relates to the contract award process for developing Maryland's HIX website, which was plagued with problems when it initially launched in October 2013, according to Maryland state officials. IBM and Cúram Software served as subcontractors in the initial rollout of the health exchange's website.

IBM acquired Cúram on December 19, 2011, and on that same day submitted a proposal to the state to be a subcontractor on the HIX website development project.

The online HIX site failed within minutes of its Oct. 1, 2013, The Washington Post reported, blocking residents who were trying to get health insurance. The site continued to be beset by problems, and Maryland fired the contractor, Noridian Healthcare Solutions, in February 2014. State officials said at the time that the online health insurance marketplace had so many structural defects that the state might have to abandon all or parts of the system.

State officials also reported that the significant flaws could result in at least $30.5 million in unnecessary Medicaid spending, The Washington Post reported.

Noridian was hired in 2012 under a five-year deal and was paid around $70 million, most of which came from federal grants, according to the Baltimore Business Journal. Noridian settled with the state for $45 million in 2015.

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Maryland ended up adopting technology used by Connecticut instead, at a cost of between $40 million and $50 million, according to the BBJ.

As of press time, representatives with IBM did not respond to requests for comment.

State and federal officials allege that Cúram, with IBM's knowledge and as part of the bid evaluation process in January 2012, demonstrated its software capabilities for HIX websites. That included conducting eligibility determinations for health assistance coverage, calculating applicable tax credits, addressing changes in life events and the ability to integrate its software with another subcontractor’s health plan shopping software.

The agreement settles claims that from January 2011 to May 2014, Cúram-IBM misrepresented the development status of the Cúram Solution for Health Care Reform and the integration of Cúram software with other software needed to provide a properly functioning HIX website, according to state and federal officials.   

The settlement, announced by state and federal officials Friday, is not an admission of liability by IBM or a concession by the federal government that its claims were not well founded, according to a DOJ release.

The case was investigated by the DOJ's civil division’s commercial litigation branch, the U.S. Attorney’s Office for the District of Maryland, the Department of Health and Human Services Office of Inspector General (HHS OIG) and the Office of the Attorney General of Maryland. 

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“When companies misrepresent their products and capabilities in order to win government contracts, they enrich themselves at taxpayers’ expense,” U.S. Attorney Robert Hur said in a statement. “Today’s resolution demonstrates our continuing commitment to hold companies accountable for their actions.”        

“Companies are expected to be candid about products, skills, and abilities during contract negotiations,” Maureen Dixon, special agent in charge for the HHS OIG, said. “We will continue to work with the U.S. Department of Justice to ensure taxpayer dollars are only spent for honest, high-quality health care products and services.”