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Minnesota announces $41 million contract to set up health exchange

The Virginia-based Maximus firm would design and maintain a Minnesota-run insurance exchange mandated in federal law.

Minnesota announced a $41 million contract on Monday with the Virginia-based Maximus firm to design and maintain a state-run health insurance exchange mandated in the federal health insurance reform law.

The state is one of at least 15 to move forward with a health insurance exchange using executive branch authority, and Gov. Mark Dayton has been a strong proponent for a state-run exchange rather than the more rigid federal option.

The contract announced Monday is the first major movement on health insurance exchanges since the Supreme Court ruling in late June, according to the company. The agreement involves three state departments — Commerce, Health and Human Services.

The Commerce department spearheaded planning for Minnesota’s exchange, which began in 2011. An advisory task force was assembled in September to evaluate proposals for the exchange, which is often compared to such travel websites as Orbitz and Expedia.

Mike RothmanMike Rothman

“This contract is a significant milestone in the design and development of a Minnesota health insurance exchange,” Commerce Commissioner Mike Rothman said in a statement. “We can now move forward on developing the technology backbone of the exchange, a user friendly tool that will help more than 1.2 million Minnesotans choose the quality coverage they need at a price they can afford.”

Health insurance exchange proponents say the program will allow more people access to cheaper insurance.

The Commerce Department says the exchange will help with efforts to lower premiums, provide coverage to roughly 300,000 Minnesotans by 2016 and significantly expand federal Medicaid coverage. Advocates also say that exchanges will allow small businesses to gain some of the leverage that large employers currently use to bargain for coverage.

But Republican legislators, who have not participated in any exchange planning, dispute whether the program will produce any of the benefits that the Dayton administration is promising.

There also are questions about whether an exchange can be fully implemented without legislative approval. Much of the funding for this round of development comes from federal grants, and the state departments of Commerce and Human Services are sharing most of the other costs.

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“We in the administration would ask the legislators to take a look at that,” Rothman said in an interview, referring to potential legislative action on an exchange. “We’ll work with all the legislators to keep moving forward.”

The contract is expected to run through March 2014 but could be extended if the state opts to amend the contract for ongoing maintenance and support. That could cost the state up to nearly $18 million through 2016, according to contract documents.

“When you compare the price of this contract to the price of contracts similar to ours in other states, we have one of the best deals, I would say, without doubt, compared to other states,” Rothman said.

California agreed to a $359 million health insurance exchange contract. Washington set on a $63.1 million agreement and Maryland OK’d a $51.5 million contract, according to the Department of Commerce, although a spokesman noted, “No two contracts are the same.”

Leslie Wolfe, a division president at Maximus, said designing an exchange is “sort of a natural evolution of what we do.”

“Really, no one has delivered a health insurance exchange yet,” Wolfe said. “This is a very new market, and so a couple of states are a little ahead of us … but Minnesota is right in that leading number of states that are delivering this very new service for their citizens, so there are going to be very few people who say that they’ve delivered a health insurance exchange.”

Under the contract, Maximus is expected to develop technology to support the exchange, including such elements as eligibility determination, account administration, display of benefit plan costs and options, and health care provider information. The contract also calls for Maximus to make technological improvements to the state’s Medicaid system.

“Nearly 700,000 Minnesotans are expected to enroll in Medicaid coverage through the exchange,” Human Services Commissioner Lucinda Jesson said in the release. “Modernizing the state’s eligibility and enrollment system through the exchange is an important reform that will simplify the process for hundreds of thousands of Minnesotans while saving time and taxpayer dollars.”