Big Firms Win Multimillion Dollar Contracts To Build Insurance Marketplaces

President Barack Obama’s health law has been criticized as a “government takeover” of health care.

But private companies are building the underpinnings of the online health insurance marketplaces that are a key element of the law – and winning contracts worth hundreds of millions to do so.

Deloitte Consulting, part of the Big Four accounting giant headquartered in New York, won four state contracts to set up the information technology systems at the heart of the marketplaces. Deloitte’s contracts with Connecticut, Kentucky, Rhode Island and Washington are worth about $250 million over the next three years, according to company and state announcements.

CGI., a U.S. subsidiary of the Montreal-based CGI Group Inc., also won contracts valued at more than $150 million in four states (Colorado, Massachusetts, Vermont and Hawaii,) and another, valued at $71 million over two years, to build the federal marketplaces that will operate in about half the states.

The marketplaces are where individuals and small businesses will be able to shop for and purchase insurance beginning next October.

But the single largest contract to build a health insurance marketplace went to Accenture, which won a $359 million deal to set up California’s exchange.

The dollar value of the deals varies widely because some contracts included updating states’ Medicaid information technology systems. The insurance websites will be tied to Medicaid information systems to help connect people to insurance coverage.

Other companies to win state contracts to build the marketplaces include Maximus, which has a $41 million contract to build the Minnesota exchange; Xerox, which has a $72 million deal in Nevada and Computer Sciences Corp., which won a $183.6 million contract in New York.

While the deals for Deloitte and CGI may seem big, the companies already have even larger state information technology contracts, said Dan Mendelson, CEO of consulting firm Avalere Health. “This is a nice new line of business for these companies, but it is not transformative,” he said.

He said companies like Deloitte and CGI had an advantage because of their experience setting up information systems for state Medicaid programs. “They already … know the systems and the people,” Mendelson said.

Pat Howard, who leads Deloitte’s public sector state health care practice, agreed, noting that Deloitte is building or running Medicaid information systems in 15 states. “We have had experience in the states and demonstrated that we can meet the aggressive timelines of the law.”

He said working with four states will bring economies of scale and help states learn from one other.

CGI Vice President Melissa Boudreault said that building a health insurance exchange requires experience in many disciplines. “The soundest exchange approaches bring together expertise and best practices in state health programs, commercial insurance, and areas such as e-commerce over the cloud and financial management,” she said.  “This is CGI’s strength and where we are very comfortable.”