IT outsourcing and subcontracting potential for Healthcare Insurance Exchanges

Health Insurance Exchange

Outsourcing and subcontracting potential for
IT service providers
2013-2014

November 1, 2012
Authored by
Harmanjit Singh

Table of Contents
1. Executive Summary ............................................................................................................................... 2
2. States’ decisions for establishing exchanges ........................................................................................ 3
3. Contract Potential ................................................................................................................................. 4
4. Contracts awarded to IT consulting/Service organizations .................................................................. 5
5. Opportunities ........................................................................................................................................ 6
5.1 Contract size:....................................................................................................................................... 7
6. References ................................................................................................................................................ 9
About the Author ........................................................................................................................................ 10

ACA outsourcing potential 2013-14 Harmanjit Singh Page 1

1. Executive Summary

HIX or the Health Insurance Exchange is emerging as the point of activity across the US
landscape with both the federal and most state governments participating in establishing public
exchanges wherein insurance policies can be compared and purchased online. The ACA or the
Affordable Care Act sets up the framework for setting up and running the exchanges post which
the states have the option of either:

 Setting up and running their own exchanges (Active purchaser)
Partnering with the federal government to establish/run the exchange (Clearing house)
 Have the federal government establish and run the exchange for the states

This document refers to the outsourcing and subcontracting potential that exists for IT consulting
and service organizations and how they can participate in the huge contracts up for grabs over
the next 2-5 years, i.e. from 2012-2014 and beyond when exchanges are required to be
operational. Federal grants for conducting feasibility and establishment of the exchanges
exceed USD 2 Billion. As of November 2012, the following is the status of the exchanges for the
states in the US [2]:

 18 states would act as active purchasers
 6 would be partnering with the federal government
 15 would have the federal government run the exchange for the states
 11 undecided

Contracts worth USD 800 Million have already been awarded to IT service and consulting
organizations as of Q3 2012.

States with undecided status have until Dec 14, 2012 to submit their exchange plans to the
federal government for certification post which they would default to a federally run exchange.
The exchanges are supposed to operationally running by Jan. 1, 2014.

Note: The information contained in this document is as of 16th November 2012 and is subject to change post laws
passed within each state. The document does not cover a background of the ACA or the HIX. The reader is advised
to check numerous online resources detailing the same. Part of this report has not been uploaded for copyright
reasons. You may contact the author for full access to the report.


2. States’ decisions for establishing exchanges

The deadline for deciding on establishment of health exchanges within the state has been extended to
December 14 2012. 18 states have already confirmed their willingness to run their own exchanges and a
few have already extended RFPs and selected contractors. The following details the state status in the
US as of November 2012:

[2]
Figure 1: Current Exchange Status


3. Contract Potential

The contract potential for the exchanges runs into USD 2 Billion. The federal government has allocated
funds to be utilized by states to undertake feasibility studies for establishing the exchanges as well as
setting up/running the same. Some states have already made use of the funds to build their exchanges.
The following table lists the contract potential for each state.

Exchange Planning Exchange Establishment
Grant Amount Grant Amount
United States $45,008,109 $1,881,290,492
Alabama $1,180,312 $8,592,139
Alaska NA NA
Arizona $999,670 $29,877,427
Arkansas $1,200,928 $26,260,555
California $529,894 $235,901,012
Colorado $1,247,599 $61,437,747
Connecticut $996,848 $115,568,109
Delaware $999,999 $3,400,096
District of Columbia $999,999 $81,186,049
Florida NA2 NA
Georgia $1,000,000 NA
Hawaii $1,000,000 $76,255,636
Idaho $998,220 $20,376,556
Illinois $1,071,784 $37,917,831
Indiana $965,415 $6,895,126
Iowa $1,000,000 $34,376,665
Kansas $1,000,000 NA
Kentucky $469,088 $69,990,613
Louisiana $29,3914 NA
Maine $1,000,000 NA5
Maryland $999,226 $150,235,442
Massachusetts $1,000,000 $53,324,443
Michigan $999,772 $9,849,305
Minnesota $1,000,000 $70,525,8926
Mississippi $670,125 $20,143,618
Missouri $1,000,000 $20,865,716
Montana $1,000,000 NA
Nebraska $895,075 $5,481,838
Nevada $1,000,000 $123,770,297
New Hampshire $334,0007 NA
New Jersey $1,223,186 $7,674,130
New Mexico $1,000,000 $34,279,483
New York $1,000,000 $154,746,207
North Carolina $999,999 $12,396,019
North Dakota $1,000,000 NA
Ohio $1,000,000 NA
Oklahoma $1,000,000 NA
Oregon $1,000,000 $15,652,301
Pennsylvania $1,000,000 $33,832,212
Rhode Island $1,000,000 $63,756,539
South Carolina $304,996 NA
South Dakota $1,000,000 $5,879,569
Tennessee $1,000,000 $8,110,165
Texas $96,4259 NA
Utah $1,000,000 NA


Exchange Planning Exchange Establishment
Grant Amount Grant Amount
Vermont $1,000,000 $122,269,334
Virginia $1,000,000 NA
Washington $996,285 $150,794,727
West Virginia $1,000,000 $9,667,694
Wisconsin $999,873 NA
Wyoming $800,000 NA

Table 1: Contract potential

4. Contracts awarded to IT consulting/Service organizations

Of the 17 states deciding to establish their own exchanges, the following lists the contract details
including amount, contractor and stage of development.

State Contract details Worth Stage Notes

Alaska N/A ( Federal) N/A
Arkansas Partnership exchnge
[5]
California Accenture $360M+ Contract running over 4 years
Colorado CGI Group $78M Stage I HIE360 software to be used
Connecticut Deloitte Consulting $100M
Delaware N/A ( Federal) N/A
District of Accenture/Orion $82M Planning
Columbia Health $1m each
Florida N/A* ( Federal) *Possibility to create a state run exchange
Georgia
Hawaii PCG ( Public $500K Planning
Consulting Group)
[1]
Idaho KPMG led study $70M Still deciding
Illinois Infosys, CGI, N/A RFP review Reviewing proposals
Deloitte, Xerox
Indiana Studying Options
Iowa Studying Options
[6] [6]
Kansas N/A Federal N/A
Kentucky Contract not $70M
awarded
[8]
Louisiana N/A (Federal) N/A
[7]
Maine N/A (Federal) N/A
[9]
Maryland IBM, ANGARAI $136M Including operational costs
Massachusetts Cognosante $17M* *Phase I
[10]
Michigan Federal Partnership N/A
[11]
Minnesota Maximus, IBM ( $41M


State Contract details Worth Stage Notes

Subcontractor)
[12]
Mississippi eHealthinsurance N/A Phase I
Services, Inc.
Missouri N/A (Federal) N/A
Montana Studying Options
Nebraska N/A (Federal) N/A
[13]
Nevada Xerox $72M
New Hampshire N/A (Federal) N/A
New Jersey Studying Options N/A
[14]
New Mexico State Run $34M
[16]
Rhode Island Quasi public $58M Phase 2

Table 2: Current state contract status

5. Opportunities

The following graph identifies the opportunities that lie in the establishment of the state exchanges:

Figure 2
Percentage of states running each type of exchange

Thus with 64% states not opting for a state based exchange at present, there is still tremendous
potential for IT companies to eventually bid for the contracts when the states do decide to set up
exchanges in-house. Running an exchange in-house gives the state the advantage to negotiate and
purchase policies with the private insurance companies. If state run exchanges gain traction, we might
see quite a few states moving from a federal involvement to complete state participation.


Of the 33 states not opting for an in-house exchange, grant information is publicly available for 16 states
for which USD 250 Million are up on offer. Operationally the exchanges would be built to be self-
sufficient in a few years’ time, either by charging the insurance companies or by levying user fees.

5.1 Contract size:

The following lists the break-up of the potential contract size for the 16 states:

Figure 3: Contract size

The statistics from the data are reflective of political standings. The following display state exchange
decisions from senate control:

 Of the 16 states not opting for a state based exchange ( Active or clearing house), 15 are republican
 Of the 6 states opting for a clearing house structure, 2 are Democrat while 4 are Republican
 Of the 11 states with undecided status, only 2 are democrat


Figure 3: Exchange Establishment
Democrat
Republican

Thus, with a change of guard in the states or a shift in policy by the GOP, there is potential for new
exchanges to be set up in the Republican controlled states and an opportunity for IT organizations to bid
for the same. Apart from the public exchanges there are also private exchanges being set up in the
market which can increase the scope for organizations with in-house cloud based health exchange
products even more. Watch the space.


6. References
[1] http://www.idahoreporter.com/2012/kpmg-idaho-health-insurance-exchange-would-cost-77-
million-to-implement-10-million-annually-to-operate/

[2] http://www.statehealthfacts.org/comparemaptable.jsp?ind=962&cat=17&sub=205&rgnhl=3

[4] http://www.statehealthfacts.org/comparetable.jsp?ind=964&cat=17

[5] http://articles.latimes.com/2012/jun/01/business/la-fi-health-insure-exchange-20120601

[6] http://www.kansas.com/2012/11/19/2571203/kansas-views-on-wichita-voting.html

[7] http://articles.latimes.com/2012/nov/16/nation/la-na-health-care-20121117

[8] http://articles.latimes.com/2012/nov/16/nation/la-na-health-care-20121117

[9] http://www.eweek.com/enterprise-apps/ibm-smarter-cities-targets-maryland-for-health-insurance-
system/

[10] http://www.mckennalong.com/publications-advisories-3061.html

[11] http://www.istockanalyst.com/finance/story/5945394/maximus-mms-gets-minnesota-health-
insurance-exchange-contract

[12] http://ohsonline.com/articles/2012/09/01/stepping-up-the-pace.aspx

[13] http://news.xerox.com/pr/xerox/Xerox-Awarded-HIX-Contract-with-Nevada.aspx

[14] http://lubbockonline.com/filed-online/2012-11-15/new-mexico-will-establish-state-run-health-
insurance-exchange#.UKpI3uS094Y

[15] http://www.beckersasc.com/asc-turnarounds-ideas-to-improve-performance/state-by-state-
decisions-on-health-insurance-exchanges-50-statistics-on-plans-for-2014.html

[16] http://www.governing.com/blogs/view/rhode-Island-health-insurance-exchange-case-study.html


About the Author

Harmanjit Singh, B.E. (Information Technology), M.B.A. (Information Technology and Strategy)

Presently working as an IT consultant in the healthcare sphere, I have over 5 years’ experience with
Fortune 500 organizations. I have been involved in implementing large scale enterprise systems
including building one of the world’s largest online transactional systems for a Fortune 100 retail
pharmacy company in the US.

Experienced in the healthcare and the insurance industries in the US and the APAC region, I have an
active interest in tracking events in the healthcare space.

I can be reached at Harmanjit.singh@outlook.com for any comments or feedback.


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