British
Company Is Awarded Contract to Administer Health
Rollout
Published: July 4, 2013 - New York Times
WASHINGTON — Racing to meet an October deadline, Obama
administration officials said Thursday that they had awarded a contract worth as
much as $1.2 billion to a British company to help them sift applications for
health insurance and tax credits under the new health care law.
The company,
Serco, has extensive experience as a government contractor with the Defense
Department and intelligence agencies, and it also manages air traffic control
towers in 11 states and reviews visa applications for the State Department. But
it has little experience with the Department of Health and Human Services or the
insurance marketplaces, known as exchanges, where individuals and small
businesses are supposed to be able to shop for insurance.
Serco will help the Obama administration and states
determine who is eligible for insurance subsidies, in the form of tax credits,
and who might qualify for Medicaid. Tasks include “intake, routing, review and
troubleshooting of applications,” according to the contract.
“This is a huge undertaking,” said Alan Hill, a
spokesman for Serco’s American unit, in Reston, Va. “We have some tight
deadlines to meet.”
The exchanges are supposed to be in operation in every
state by Oct. 1. Under the contract, Mr. Hill said, Serco and its subcontractors
will immediately begin hiring 1,500 people.
Since the government first invited proposals, the
importance of the exchanges has grown for several reasons. Many states have
decided not to expand Medicaid, and the
White House announced this week that it would delay, until 2015, a
requirement for larger employers to offer coverage to employees. In addition,
many states have decided not to set up exchanges, leaving the task to the
federal government.
Several insurance and health policy experts said they
were surprised at the selection of Serco because it did not have experience with
the exchanges. But that may have helped the company win the contract. In the
last six months, federal health officials expressed concern that companies
already working with exchanges could have an unfair competitive advantage
because they had access to nonpublic information about how the government was
setting up its eligibility and enrollment system.
Serco will also help the administration decide who is
entitled to exemptions from the tax penalties that can be imposed on people who
go without health insurance starting next year.
White House officials say that in many cases federal
and state computers will be able to verify a consumer’s income and citizenship
status and determine eligibility in a matter of minutes. But contract documents
indicate that federal officials still expect that one-third of the 19 million
applications in the first year will be filed on paper.
One of Serco’s biggest tasks will be to run a giant
mail room, where it will receive paper applications, supporting documentation,
and correspondence from individuals requesting coverage and from employers and
employees seeking insurance. Serco is supposed to make digital copies of the
documents and then destroy most of the originals.
Under the contract, the company is also supposed to
help consumers and the Obama administration resolve “complex eligibility
issues.”
Contract documents say that Serco must be ready for an
increase in the volume of work, as some states planning to run their own
exchanges may need extra help from the federal government.
The government said it could expand and extend the
initial 12-month contract, bringing its potential value to $1.2 billion over
five years. Mr. Hill said the contract could be “one of the largest we’ve won”
in the United States, where Serco has 8,000 employees and more than $1.2 billion
in annual revenue.
Even as the Defense Department and other agencies face
across-the-board budget cuts, the health law has been a boon to contractors. It
would be virtually impossible for the administration to carry out the law
without contractors to run a call center, a “data services hub” and a
public-relations campaign.
The Government Accountability Office found that the
administration had spent $394 million on contracts to establish federal
insurance exchanges. More than three-fourths of the money went to 10 companies.
They include CGI Federal, a subsidiary of a Canadian company, the CGI Group ($88
million); Quality Software Services Inc. ($55 million); and Booz Allen Hamilton
($38 million).