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U.S. Prosecutors Investigate Oregon's Failed Health Insurance Exchange

Federal officials are seeking all reports, memos and email between Cover Oregon and CMS about the status of the website.

The U.S. attorney's office in Portland has issued subpoenas to Oregon's health insurance exchange as part of a grand jury investigation into the spectacular failure of the state's system, which was never able to enroll consumers online even though it spent more than $248 million in taxpayer money on the operation.

Federal prosecutors and FBI agents requested an expansive list of documents from the Oregon Health Authority, a state agency, and Oregon's state health insurance exchange, known as Cover Oregon. The investigation appears to be focused on the representations that Cover Oregon made about the status and functionality of its website to officials at the Centers for Medicare and Medicaid Services, or CMS, the federal agency that parceled out the money to states to build exchanges under President Obama's Affordable Care Act.

Federal officials are seeking all reports, memos and email between Cover Oregon and CMS about the status of the website, as well as communications "in any form" from the state exchange to federal officials that related to funding requests from the state. Investigators also requested internal memos, texts and email sent between the officials overseeing the exchange and those working on the flawed website.

Cover Oregon and the Oregon Health Authority, which both received the subpoenas and were asked to testify before a grand jury on June 10, issued a joint statement: "The agencies take this request seriously and will cooperate fully with federal officials. We will work collaboratively with the U.S. Attorney's Office to provide any and all information we have and make any and all staff available to assist."

The Oregonian news organization reported that the state's principal legislative analyst overseeing information technology, Bob Cummings, wrote to Cover Oregon in 2012 outlining his concerns that the health insurance exchange was sending "overly positive reports" to federal officials that were not consistent with the progress of the project. The U.S. attorney's office specifically requested correspondence between Cummings and Cover Oregon officials, as well as email and texts between nine other officials involved in the project. Cummings did not immediately return a call for comment.

Willamette University law professor David A. Friedman, who has been closely following the problems with Oregon's exchange, cautioned that it was impossible to determine the focus of the investigation at this early stage and noted that grand juries often do not return an indictment.

The subpoena "is so broad that it is hard to tell if they're looking for anything specific," Friedman said. "They may walk away from this, like a lot of grand juries do, and say we've done an investigation and there's nothing here.... What they want to look at is -- did anyone involved with this make any misrepresentations that would lead to a gain, either a corporate, a private or a personal gain?"

The U.S. attorney's office for the District of Oregon, which is led by U.S. Atty. S. Amanda Marshall, declined to comment on the investigation.

Cover Oregon's board of directors voted unanimously in late April to jettison the troubled online system that had been built by its primary technology vendor, Oracle. The board determined that the system, which was intended to enroll consumers in private insurance plans, was too faulty and would be too expensive to fix. When the next open enrollment period for Obamacare begins in November, the state will use the federal health-care exchange,, to enroll consumers in private plans. A spokeswoman with Oracle declined comment on the subpoenas.

With its website inoperable for consumers, Oregon had to rely on paper applications to enroll more than 70,000 customers in private plans. It is one of three states that have abandoned their initial attempts to build a unique system for their state residents. Maryland, which spent $125.5 million building and operating its troubled website, opted to overhaul its system by adopting the successful technology platform developed by Connecticut at a cost of between $40 million and $50 million.

Massachusetts decided in early May to scrap the system that had been built by its original contractor, CGI, and develop a new exchange with different contractors at a cost of $121 million. If the new system is not ready by this fall, the state will temporarily enroll consumers through the federal marketplace. (The state had paid CGI about $17 million to build the system that has been largely abandoned.)

The missteps in Oregon are also being investigated by the U.S. Government Accountability Office, and the fiasco is already a major issue in Oregon's gubernatorial and U.S. Senate races this year.

Oregon Gov. John Kitzhaber, who has been accused of "gubernatorial malpractice" by his Republican opponent, state Rep. Dennis Richardson, ordered an independent review of what went wrong that was released this spring. In a letter to the U.S. attorney's office this week, Kitzhaber's general counsel, Liani Reeves, said the governor was supportive of the investigation and "committed to a thorough review of Cover Oregon to ensure the appropriate accountability and oversight for the public investment" made in the website.

Kitzhaber has also asked the Government Accountability Office to provide a "thorough appraisal of the quality of work done by our technical vendors." The GAO plans to look at what went wrong in Oregon as well as at other state exchange websites.

©2014 Los Angeles Times