Anatomy of a fiasco: How Cover Oregon went awry

Anatomy of a fiasco: How Cover Oregon went awry
This is a still image from one of the Cover Oregon television ads running on local TV stations. According to the ad agency that created the commercials, the two most well-known ads cost between $100,000 and $160,000 to make.
PORTLAND, Ore. (AP) - With independent consultants warning Oregon's health insurance exchange faced serious risks, the state official in charge of delivering the technology strode into a legislative committee to address questions from nervous lawmakers.

"The state of Oregon is leading the nation," declared Carolyn Lawson, chief information officer for the Oregon Health Authority and the Department of Human Services. "According to the feds, we're easily nine months ahead of any other state. We have multiple states that are asking if they can participate with us."

It was the fall of 2012, and Oregon was one of a handful of states that had received huge payouts from the federal government to be an "early innovator" building a model that other states would emulate.

Today Oregon trails them all. Nearly three months after it was supposed to go live, the online enrollment system is the only one in the nation that still hasn't launched, and the state has had to rely exclusively on paper applications.

Officials lay much of the blame on technology contractor Oracle Corp. But the fiasco also was fueled by state officials' own actions, according to interviews with state officials and a review of public records by The Associated Press. Among them: a refusal to back down from an ambitious vision even when there were signs it was flailing; a decision to do complex work on their own; and a botched handoff of the work from one agency to another.

Many of the missteps were made not by Cover Oregon, the semi-autonomous state agency created to run the exchange, but by the Oregon Health Authority technology department under Lawson's command, which controlled the money for most of the project.

After weeks of increasing scrutiny of her agency's work, Lawson resigned on Thursday for "personal reasons."

From the start, the exchange was just one piece of Oregon's grand vision: a one-stop-shop for people seeking health insurance, food stamps or other government assistance.

The state had been preparing to modernize the internal computer systems for the Oregon Health Authority and the Department of Human Services. When the federal government gave Oregon $48 million in February 2011 to start building a health insurance exchange, that project was tacked on to the modernization work.

The state chose to purchase an array of Oracle products, and there was no separate bidding process for the exchange, Lawson told the Associated Press, because it would have taken too long. There was just over two years to design and build a complex software system.

Despite internal reports recommending against it, Lawson decided Oregon would be its own systems integrator - the general contractor that would bring components together - and would work alongside Oracle to build the exchange.

Cover Oregon wasn't conceived as a technology operator. It was going to simply be an operating organization that would negotiate with insurance carriers, market the organization and run a call center. OHA would build and manage the computer system, Lawson and her counterpart at Cover Oregon, Aaron Karjala, said.

For two years, Cover Oregon held little direct decision-making power over its own technology because the federal grants paying for its development went to OHA. The money was blended with other federal and state funds and spent jointly on modernization and the exchange, said Jim Scherzinger, chief operating officer for the Department of Human Services.

That approach turned out to be a mistake.

In late 2012, legislators raised concerns about the slow progress and the costs of the exchange and modernization. And independent consultants and Cover Oregon began to worry that the exchange was being hampered by modernization's timeline. They decided the exchange should split off from the modernization project, according to emails obtained by the Associated Press.

The plan, Karjala told the AP, was for OHA to finish building the exchange, start testing it end to end in May, and hand over the nearly finished online marketplace to Cover Oregon on July 1.

The grand vision of a health IT system transformation still held, officials said - OHA would continue simultaneously working on modernization, and the state didn't consider scaling down its ambitions.

"There wasn't a sense of alarm that we can't do this," Lawson said the week before she resigned. "We had Oracle, one of the largest, one of the most knowledgeable."

In April 2013, OHA and DHS discovered they had misallocated $16 million of the federal grant and were out of funds. Cover Oregon was forced into a contract with Oracle two months earlier than planned.

Rocky King, Cover Oregon's executive director, was incensed.

"To say that I'm spitting mad would be an understatement," King wrote in May to the governor's two health advisers. King went on indefinite medical leave in December.

Publicly, Cover Oregon officials insist the handover was not a problem. Karjala said this month that he'd already been negotiating with Oracle and had secured some concessions.

The exchange hadn't yet been tested end-to-end when Cover Oregon took over in May. When Lawson's team ran the test, it proved to be a disaster.

"All of the connecting pieces in between were not working...and our team could not get all the way through," Lawson told The AP. "That was the first 'really?' It was not the outcome we expected."

A Cover Oregon expert wrote a scathing report highlighting dozens of issues with software code that would cause problems with such areas as data integrity, performance and usability.

Four days later, federal officials came to Oregon for a day-long status update. King wrote to the governor's advisers and others: "Behind the 8 ball as we are...I think our federal partners were impressed."

Cover Oregon's Karjala said he and King alerted Oracle to code problems and Oracle responded by bringing in their A-team and senior managers to work on the exchange.

Responding to questions from Sen. Merkley's office, Karjala wrote in an email that Oracle officials continued saying they could deliver the full exchange up until the weekend before it was supposed to launch.

On Oct. 1, Cover Oregon's exchange failed to go live. And in the coming months, the state and Oracle would miss many other launch deadlines. The failure deeply embarrassed the state that had bragged about being first, and made it difficult for thousands of Oregonians to sign up for coverage.

The state put the small-business part of the exchange on hold. Modernization also did not launch and was halted.

"I regret that the calendar was not our friend," Lawson told The AP before she resigned. "I think that the vision is still the right vision for the state of Oregon."