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Dayton blames vendors, but state had direct role in MNsure missteps

The exchange staff last year made a significant change to a key contract, taking more responsibility for building MNsure’s infrastructure.

Former MNsure Executive Director April Todd-Malmlov and MN.IT Chief Information Secuirty Officer Chris Buse speak before the MNsure legislative oversight committee in September.
MinnPost file photo by James Nord

Newly released contract documents suggest the state and MNsure leaders had a more direct role in the health exchange’s many missteps than they have publicly acknowledged.

In recent weeks, Gov Mark Dayton and MNsure officials have increased their criticism of vendors, blaming the private technology companies for some of the underlying problems and glitches with the health exchange’s operation.

However, in early May, the state of Minnesota in effect took over responsibility from its lead contractor, Maximus Inc., for constructing MNsure’s technical infrastructure, according to contract amendments released to MinnPost by MNsure.

The new documents show that the exchange staff quietly made a signifcant change to its key contract for building MNsure — just months after making major revisions to the timeframe and size of the project.

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This week, Minnesota’s legislative auditor — with the support of Gov. Mark Dayton — announced that he wants to do a thorough investigation of MNsure, its leadership and the contracts — broader than what is federally required, he said.

Jim Nobles

“I think it’s been one of the confounding and unnecessary complications of all this … that [MNsure has] created an environment in which transparency and accountability have suffered,” Jim Nobles, the legislative auditor, told MinnPost.

He said he also wants to examine whether officials withheld critical information from the public. “Even credibility, because they haven’t been open and straightforward with people.”

Nobles also said he would look into the effects of the May contract amendments.

“It’s certainly something that I will pursue very vigorously to find out what triggered that decision,” Nobles said when the amendment was brought to his attention. “What exactly did it mean? Who exactly was … doing the project management?”

Legislative review, too

Key lawmakers also have been reviewing the state’s relationship with the firms that have so far failed to fully build MNsure.

DFL Rep. Joe Atkins, who co-chairs the MNsure Legislative Oversight Committee, and Republican committee member Sen. Michelle Benson want answers on Thursday, when officials will gather in St. Paul to hash out what’s happening with the exchange.

Also, the exchange’s governing board meets Wednesday, and staff members are supposed to outline their plans for an end-to-end review of the system.

Atkins, the key exchange architect in the House, said he’s been trying to figure out which company is in charge of building each part of the marketplace.

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“This changes everything,” Benson, a health care expert, said when she learned of the contract shift.

“The Dayton administration owns it lock, stock and barrel, and they can’t shove off responsibility to someone else. It actually raises it to a higher standard, their responsibility for the rollout. They can’t shove this off on IBM or Maximus.”

Atkins said he spoke with a Maximus executive charged with overseeing Minnesota last week and has asked her to provide an overview of the contract changes for the committee to review.

The DFL legislator said he’s waiting to learn more before deciding if legislative action is necessary. He called lawmakers’ foray into the internal operations of the exchange a “challenging” move to make.

“It’s an unusual place for legislators to be, where we are wondering about changes in vendors at a state agency,” he said. “That’s not something that’s in the routine purview of what legislators do. Of course, in this instance, the technical issues have grown in size to such a degree that obviously we are taking an interest in that.”

The committee will likely hear from Interim CEO Scott Leitz and the exchange governing board.

Wide-ranging audit

Nobles, meanwhile, is looking at a potentially broad future audit, separate from the end-to-end review that MNsure is planning to complete.

In addition to a typical review of the use of federal funds — totaling about $70 million in fiscal year 2013 — Nobles said he’d like to examine MNsure’s IT security and conduct a separate review of the exchange’s governance and contracting. He said it’s integral that the checks are independent.

“It has become our highest priority as an office,” Nobles said. “I’m just very concerned, frankly, and disturbed by what we have delivered. It is so far from what was promised, that I think we need to really get an independent, in-depth understanding of what happened and why.”

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“It may be to the credit of the state that they tried, but it isn’t to the credit of the state that it didn’t work,” Nobles added about the contract shift. “Because whatever they did, and whatever their intentions were, clearly the result has been woefully inadequate.”

Major contract changes

The contract documents [PDF] suggest that since the amendment changes, Maximus has taken a back seat to other vendors in building the crucial infrastructure for the health insurance exchange.

Maximus, which originally secured the $41 million contract in July 2012 to build the exchange, is now being paid less for its share of the duties, according to MNsure.

“The state will take over program management, methodology and responsibility for building the [exchange],” according to the contract revision from May 6, 2013.

The exchange, however, downplays the significance of the shift.

“Maximus continues to be the prime IT contractor on the project,” MNsure spokeswoman Jenni Bowring-McDonough wrote in an email. “It is accurate to say that the details of its role have shifted as MNsure asserted its lead in determining the business functionality and overall direction of the project.”

“MNsure has always had overall responsibility for ensuring the project is successfully completed,” she added.

Several legal experts, asked by MinnPost to review the contract language changes, agreed that the state had taken on more direct responsibility for building the massive IT system.

“Clearly the language suggests a change of relationships where the state is assuming more day-to-day supervisory work for the project than it was before,” David Schultz, a Hamline University law school professor and political expert, said.

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“This seems to be suggesting some more direct action by the state of Minnesota, or greater engagement by the state of Minnesota in terms of the construction of the website, which makes it harder to say, ‘We had no idea what’s going on, we blame it on a third-party vendor,’ ” he said.

But that appears to be the direction state officials have been moving.

Dayton, for example, recently called out IBM Curam, a subcontractor that was to build key eligibility determination systems, for most of the major technical problems the exchange has faced since its Oct. 1 launch.

Even as IBM Curam, which has stepped up its efforts to fix the exchange’s many technical issues, has flooded MNsure with staff and resources, members of MNsure’s governing board have questioned whether the vendors are the right fit for Minnesota.

From the start, the system has been plagued with problems: issues with processing applications, incorrect program determination and tax credit calculations, problems with transferring information electronically to health carriers, an inability to handle paper applications, security concerns and lengthy call-center wait times spawned by poorly functioning technology.

MNsure has been functioning poorly enough that its leaders told some Minnesotans to consider bypassing the exchange in favor of the individual private market for coverage.

The issues surrounding MNsure only grew as the Jan. 1 deadline for getting insurance coverage approached. Republican lawmakers criticized DFLers, who pushed hard to embrace federal health care reform, and the executive director of MNsure stepped down amid the exchange’s technical failings.

The finger-pointing continued last week as IBM in part blamed Maximus for the problems Dayton cited. “The prime contractor, Maximus Inc., has overall responsibility for the MNsure system,” IBM spokeswoman Mary Welder said in a statement. 

Key question: Why the change?

The new documents raise the key question: Why did MNsure want to change the contract?

MNsure cites three primary reasons for its takeover of the project:

  • The federal government clarified regulations for implementing the Affordable Care Act, which prompted necessary changes in approach to fulfill the requirements  and comply with federal grants.
  • MNsure staff grew and became more capable.
  • The Legislature passed the enabling legislation for MNsure in March 2013.

MNsure characterized the contract amendment, which elevated the role of the subcontractors building the exchange in tandem with the state, as a growing agency flexing its muscles.

It’s unclear whether MNsure’s troubled rollout would have gone any differently if it hadn’t made the move.

Maximus’ role as “contractor” — the top layer of a more than $40 million in technical development by a group of IT firms — was stricken from many portions of the contract, although it remained the lead firm in name.

Current MNsure vendor structure


Project oversight, business requirements analysis and documentation, integrated testing oversight and exchange reporting.


System integration: quality assurance, identity management, event tracking and security.

IBM Curam

  • Module 1 - Individual eligibility and exemption


  • Module 2 - Individual enrollment
  • Module 3 - Small employer eligibility and enrollment
  • Module 4 - Health benefit plan and navigator broker certification and display
  • Module 5 - Provider display


  • Module 6 - Fund aggregation and payment
  • Module 7 - Account administration

The state and subcontractors replaced Maximus’ responsibilities in much of the contract documents. The changes also require the company to appoint a “resource” to assist the lead state project manager. In the original contract, Maximus had its own lead counterpart to head the build.

A Department of Human Services staffer who worked on MNsure remembers when Maximus’ role changed. Maximus contractors stopped participating in meetings, and a different vendor appeared to take over, said the employee, who did not want to be named because of job security issues.

Previously, Maximus had 20 to 25 staffers working on the project, with roughly 10 or 15 onsite, according to MNsure. Now, the firm has no employees in St. Paul working with MNsure, but the exchange routinely works with several staffers on contract issues.

Maximus still holds the contracts with the other vendors as part of its role with MNsure, Bowring-McDonough wrote in a follow up email. If changes in payment are offered, Maximus has to negotiate with the other firms.

Other vendors on the project include Curam, EngagePoint, Connecture and PricewaterhouseCoopers, LLP.

EngagePoint, according to the amendment, took on a larger role in coordinating the work of the other subcontractors after the positions changed.

Bowring-McDonough, the MNsure spokeswoman, wrote in an email that the shift in duties “was not related to dissatisfaction with Maximus’ work.”

The Virginia-based firm referred a request for comment to MNsure, referencing contractual requirements.

The contract shift, signed during the first week of May, also came just a few months after agency officials traveled to Washington, D.C., to take part in a meeting for states building their own health insurance exchanges.

After the meeting, the exchange significantly rethought what could be done under the tight time constraints outlined there, according to an email to staff from mid-February 2013.

An early-February presentation from MNsure leaders to state staff noted that there was “more work remaining than [the] schedule can accommodate.”

“We will all need to surrender many of the aspirational goals for the sake of realizing the absolute minimum essential,” the presentation goes on to say.

As early as then, months before the amendment was signed, it became clear that the state was taking a greater role in running the development. “The state will be managing the project going forward,” former Executive Director April Todd-Malmlov wrote in the Feb. 13 email.

Maximus wasn’t even Minnesota’s first choice to build the exchange. The state initially courted Deloitte, Todd-Malmlov said in an interview in August 2012.

“Maximus was the second choice on the full-vendor solution,” Todd-Malmlov said then, but talks with Deloitte eventually fell apart.

A contract negotiation team of nine people, including DHS exchange lead Jim Golden, Todd-Malmlov and MNsure General Counsel Mike Turpin, finalized the Maximus contract in 2012. More than 20 people across five state agencies vetted the company.

Fourteen companies submitted proposals for consideration. There were six finalists, and Maximus and the subvendors were eventually chosen in July 2012.

The contract changes also raise other questions: Did the exchange take over to improve the product? Did MNsure’s intervention actually avert an even worse disaster?

MNsure didn’t address a direct inquiry on those points, so the answer remains unclear.

But Benson, the Republican legislator, has strong views.

“I think things weren’t going well very early on,” she said during an interview. “Milestones were being missed in February, and so if they took over to try and fix it, there’s no evidence that they improved the operation, and, in addition to not improving the operation, they now had a higher standard for their own personal responsibility.”

Other problems

Further complicating questions surrounding the exchange’s difficult rollout — and the reasons behind the state’s new role in designing MNsure — have been claims that staff and its governing board have not been forthright with journalists, lawmakers and the public.

GOP lawmakers frequently criticized MNsure for not adequately answering their questions. Data requests have been slow to trickle out of the exchange, and a veteran reporter once accused staff members of lying to the press.

MNsure, for example, never put out a public announcement about the May contract change — or the two others before it — and none of the amendments were posted with the original contract documents that the exchange has on its website for review. When staff was asked about vendor relationships over the past year, they never brought up the legal modifications.

“While MNsure may not have created a press release documenting all of the adjustments made to the project, MNsure has provided copies of all of the contract documents, including all amendments in response to various data requests over the past year,” Bowring-McDonough wrote in the email.

That “culture of obfuscation,” as Benson puts it, makes it difficult to understand and trust what’s going on. 

“I think at some point they’ve got to learn that you just can’t say things that aren’t true,” Nobles said. “You just can’t make stuff up and then expect people to believe it, because there are people in the media, at the Office of the Legislative Auditor, that are going to keep after this until we really get to the bottom of it.”

In September, MinnPost asked Todd-Malmlov about specific issues with certain vendors. She chalked up concerns about vendor responsiveness outlined in internal project documents up to overzealous staff with a laugh.

“I think the staff are like, ‘I want so badly for this to work,’ and so they do everything they can, but at the end of the day, we’re dependent on vendors to be able to do that,” Todd-Malmlov said. “If I’m being honest, there’s probably a little bit of frustration in there, where the vendors aren’t responding as quickly as the staff would like them to.”

That’s a far cry from the harsh words Dayton leveled against IBM in December.

“Your product has not delivered promised functionality and has seriously hindered Minnesotans' abilities to purchase health insurance or apply for public health care programs through MNsure,” he wrote then.

It’s also unclear which official in an oversight capacity can talk about the contract changes with Maximus.

Todd-Malmlov, for instance, has been unreachable for comment since her resignation last month, and the exchange’s governing board had only been sitting for a week when the contract amendment was signed.

At that time, MNsure was housed under Minnesota Management and Budget. The contract was signed by the agency’s CFO, and Commissioner Jim Schowalter approved it, MMB spokesman John Pollard wrote in an email.

Pollard didn’t immediately respond to a request for additional information about why Schowalter approved the contract change.

The MNsure governing board took over authority for the exchange from MMB at the end of the summer, but it’s unclear how much they know about the contract amendment.  Leitz, the interim CEO, said last week that he was unfamiliar with the details of the changes.

Board Chairman Brian Beutner didn’t respond to multiple requests for comment.

Department of Human Services Commissioner Lucinda Jesson, reached last week, declined to comment about the specifics of the change.

“I wasn’t involved in those contracting decisions. I can’t comment on that,” she said. “When we look at the system as a whole and figure out what improvements we need to make, what changes we need to make, part of that is: What should we have done differently?”