Vermonters for Health Care Freedom is a 501 (c) (4) organization of individuals and businesses who are deeply concerned about health care reforms being implemented by Governor Shumlin, and seek patient-centered reforms that protect the traditional doctor-patient relationship.

Vermonters For Health Care Freedom Newsletter #49

Vermonters For Health Care Freedom is a reliable source of candid and insightful critiques of Vermont’s health care reform efforts. Through research and our own network of experts, VHCF regularly updates Vermonters on the state’s latest health care reform efforts. VHCF is proud to have played a significant role in exposing the pitfalls of a government-run single payer health care system, which fortunately met its demise at the end of 2014. In 2015, we focus on the impacts of the Shumlin administration’s continued push for a government-run health care system. We keep our readers informed about the facts that even the Shumlin administration would prefer not to reveal. No other Vermont organization is dedicated solely to this work.

Auditor Hoffer’s Report: Gross Negligence by the Shumlin Administration

In This Issue:

  • Hoffer’s Audit Confirms VHCF’s Reporting
  • What the Auditor Said
  • The Feds Are Coming
  • VHCF Responds on the Mark Johnson Show: Audio

Quotes of the Week:

“It was certainly news to me, when I reviewed the audit.”
Health Care Reform Chief Lawrence Miller, about the state paying contractor Benaissance $580,000 for a job that doesn’t exist.

  • “The VHC system has not been generating financial reports to be used as a financial control.”
    State Auditor Doug Hoffer, in his VHC Audit Report 

Hoffer’s Audit Confirms VHCF’s Reporting

We hate to say we told you so, but……….we told you so.

Last week, State Auditor Doug Hoffer’s long-awaited audit report on Vermont Health Connect confirmed what VHCF has been telling Vermonters for the past two years. We are glad that the Shumlin administration’s level of obfuscation and ineptitude has finally been revealed for all to see. But we are equally frustrated that it took so long and so much taxpayer money before the obvious truth came out.

It has been clear from the start that the Shumlin administration had no clue whatsoever about how to create or run a state-operated health care exchange. But on the other hand, Vermont didn’t have to create its own exchange. Thirty seven other states opted to do what New Hampshire did and joined the Federal exchange.

Right next door to us - New Hampshire’s exchange is working perfectly. Vermont’s still doesn’t work, after two painful open enrollments. N.H.’s exchange cost $8m; Vermont’s is expected to cost $200m. N.H. now has 5 insurers competing for business; Vermont has 2. N.H. has more health plans to choose from than Vermont does (individuals have 40 plans; small businesses have 21). And, while Vermont’s premiums started high and have gone up from there, NH’s premiums have decreased. Increased marketplace competition has brought a sharp reduction in average premiums as a result of the influx of carriers to the exchange. The benchmark plan (lowest cost silver plan) costs about -17% less than it did in 2014, and demonstrates the importance of competition in holding down premiums. Insurers will flock to an exchange that actually works, where they can be assured of getting paid and of being able to provide coverage for their members.

Vermonters too, could have had a working exchange, more plans to choose from, more insurers, lower premiums – and far less taxpayer expense. Vermont’s convoluted and unworkable health care exchange is solely the result of Governor Shumlin’s stubborn, self-serving and single-minded political ambition to become the first “single payer” governor.

It is absolutely infuriating that this Governor has put thousands of Vermonters through this much pain and financial hardship so that he could fulfill his own high-flying political ambitions. For two years, Shumlin has lied to the legislature, lied to the public, avoided taking responsibility, refused to change course on Vermont Health Connect, wasted taxpayers’ hard-earned money, and made promises that he had no intention of keeping - even as the words were spoken.

This man has no remorse, no shame. He is incapable of embarrassment. He simply doesn’t care. Arrogance and obfuscation are his modus operandi. He refuses to acknowledge any mistakes or failings – ever. He contradicts himself on a regular basis, and belittles those who disagree with him. He breaks the law with impunity. What a fine, upstanding citizen we have for a Governor.

Since 2013, the legislative majority’s failure to challenge Shumlin’s flawed single payer ambition has prolonged the agony of Vermonters who have to use VHC. We use the term, “legislative majority” because the Republican minority has been raising questions and challenging the administration’s statements and actions since before VHC opened in 2013. However, they were essentially drowned out or ignored. The writing has been on the wall for two years. VHCF has reported in detail and raised the flag time and time again. All legislators receive our newsletters. Yet the legislative majority chose to believe Shumlin and his apologists rather than face facts or perform independent research of their own to uncover the truth.

When the Governor pulled the plug on single payer last December, the Democratic majority were left looking at their hands and wondering how they were going to get out of this one. The Progressives were furious. They trusted Shumlin to bring about their utopian dream and he let them down. Yes, it has been political all along, folks, right from the get-go. However well intended at the outset, messing with peoples’ lives for political gain is unconscionable.

Hoffer’s Revelations

Money Down the Drain – The First Year: The Hoffer audit revealed that VHC is in worse shape than Vermonters have ever been told. The state paid its original IT vendor, CGI, $75.2m for one year’s work. During that year, CGI completed only 24% of VHC’s functional requirements (others had been delivered with defects or not at all), and 34% of the non-functional requirements. Of the remaining 76% functional requirements, 19% were delivered with a defect and 57% were not delivered at all or delivered incomplete.

Nevertheless, when moving to a new contractor, Optum, in October 2014, the state signed an exit document with CGI, essentially condoning this appalling performance and agreeing not to sue them for failure to perform or to deliver on their contractual obligations. As we later learned the state did this because it could not have successfully recouped any of the $75.2m due to the administration’s egregious failure to manage the project or the vendor in any way, as reported by the BerryDunn report and others.

Is VHC Running Out of Cash? Hoffer’s audit shows that the Feds have provided Vermont with $198.7m to develop and operate a state-based exchange. According to Hoffer, the state has reportedly spent $126.7m to date (including the $75.2m wasted on CGI). However, the $126.7m does not include significant incurred costs owed to Optum and other contractors. The Optum cost alone could be upwards of $40m, not counting the other contractors. Another $3.2m was paid to but not processed yet by AHS. Adding up just these known expenses, the state has spent $169.9m of the $198.7m, leaving only $28.8m to finally make VHC work.

And the state is not exactly managing this money, either. The audit revealed that another contractor, Benaissance, has been paid $580k for 6 months ($41,750 monthly) to process payments that it never actually made. Health Care Reform Chief Lawrence Miller didn’t know this until the audit came out.

Benaissance was responsible for making sure that small businesses’ premium payments went from VHC to the insurance carriers to whom the payments were due. Except that the state decided long ago to bypass VHC and have businesses pay the carriers directly. So there weren’t any small business payments for Benaissance to process. The Benaissance contract was signed before the state decided to bypass VHC, and no one picked up on the fact that Benaissance was still being paid to do nothing.

Now suddenly (after this was discovered) Miller says that the state is signing a new contract with Benaissance that will eliminate the small business payments but increase the amount Benaissance is receiving for other work. So is the state getting the $580k back? Who knows?

Meanwhile, the audit report states, “The VHC system does not currently provide financial reports, such as weekly and monthly reporting on the dollar amounts of what has been invoiced, collected and remitted by Benaissance. Benaissance maintains a bank account of premiums paid to them and owed to carriers, customers and the State. As of 1/30/15 this balance was $5m. Per a VHC financial official, VHC has performed very limited monitoring over the bank account. As of March 24, 2015, the state had not received requested reports from Benaissance that provided details on the makeup of this balance.”

And what about the $5m? Does the state treasurer or anyone else in state government have oversight of this account? Just appalling mismanagement.

So What’s The Prognosis, Doc? The audit report states, “The Vermont Health Connect (VHC) system has critical shortcomings and the extent to which corrective actions, taken or planned, will resolve its deficiencies are uncertain”.

The system is missing critical functions. There is still a significant backlog in updating customer accounts. The automated processes have not worked sufficiently from the beginning, and the automated payment system has never worked. There are still errors in the enrollment files sent to insurers (we assume these are the ones that Benaissance does process). As of 1/30/15 the VHC system had 70 moderate-risk security weaknesses, 91% of which the state had known about for at least 13 months and still not fixed.

In a last-ditch effort to make VHC functional, the state says it expects to implement two major “releases” (fixes) - one by May 30, 2015 and the other by November 1, 2015. The state signed a contract amendment with Optum on February 20th to complete the May 30th release. Release 1 is supposed to finally automate the change of circumstance function that has been giving Vermonters so many problems. However, this function, even if it works, will only be available internally and VHC customers will still need to phone in their changes.

As of April 7th, Optum assessed the Release 1 project as “high risk” citing insufficient implementation time. One insurer sees significant schedule risks with the testing component (read: not enough time by May 30th). As of April 10th, VHC had not yet completed even the scope statement critical to Release 1.

Release 2 is the November release. It is expected to include automated renewal processing for both VHC plans and Medicaid. As of April 13th, the scope of Release 2 had not been established. The state does not even have a contract with Optum for Release 2. The state will not know whether it has the funding for Release 2 until it has negotiated a price with Optum. If the price is too high, the state will either have to reduce the scope of the work or find another funding source. Under the current contract, Optum is being paid on a “time and materials” basis so the longer the current work drags on, the less money left for Releases 1 and 2.

Optum’s performance is critical to the success of both these releases. However, the state’s Optum contracts lack any provisions that would allow the state to impose monetary consequences if Optum fails to perform timely and quality deliverables. There are no clauses for penalties, liquidated damages or retainage pending satisfactory completion of the work. Optum has assumed little contractual risk and the state has limited its ability to seek recourse if Optum fails to perform. From the Hoffer report: “This is a significant issue because timely contracting has been a problem. According to an independent verification and validation contractor, as of April 3, 2015, the VHC development project has been in long-term “red” or high-risk, status due to continuous contracting delays and unresolved agreement on the scope to support all VHC requirements”.

In addition, the state still employs CGI as a “vendor host”. The actual VHC system is housed at CGI’s data centers in Phoenix and Philadelphia. From the Hoffer report: “In December 2014 the State “became aware” (quotes ours) that CGI did not intend to extend its contract with the state for these services beyond June 30, 2015. As of April 9, 2015, the state had not signed a contract with a vendor to take over these hosting responsibilities. In mid-February 2015, the Department of Information and Innovation (DII) estimated that the change to a new hosting vendor would take 4 – 5 months which means that it is expected to be completed between Release 1 and Release 2.”

Hoffer says that “Even if releases 1 and 2 are successfully implemented the VHC system will still be missing significant requirements. The State has reduced the scope of its VHC system development plans and is not including all the requirements in the 2015 releases because of funding constraints. Specifically, as of February 18, 2015, there were at least 45 requirements….that were removed from the scope of Release 1 or Release 2…”

The Feds Are Coming

Shumlin did not have an epiphany nor was he showing compassion for Vermonters when he announced recently that the state would consider pulling the plug on VHC and moving to a federal-state partnership exchange. No, his back is finally against the wall and he knows it. Shumlin knows that the Feds are coming. In addition to the State Auditor’s damaging report, the Feds are also auditing Vermont’s use of their money - and one of those audits is due out soon.

VHCF has learned though a confidential federal source that the HHS Office of the Inspector General (OIG) has been investigating Vermont Health Connect for over a year. The OIG ‘s FY2015 oversight strategy for the health insurance marketplaces (Federal and state-run) continues to focus on proper expenditure of taxpayer funds and the efficient and effective operation of the marketplaces. From the HHS OIG Work Plan/FY 2015 Appendix A: “To this end, in FY 2015 we will continue to address key risks in the areas of payments, eligibility and enrollment, management and administration of marketplace programs and security of information technology and consumer information.” “Our marketplace work aims to answer critical questions in four key areas: (1) Payments – are taxpayer funds being expended correctly for their intended purposes?; (2) Eligibility – are the right people getting the right benefits?; (3) Management and Administration – is HHS managing and administering Marketplace effective and efficiently; (4) Security – Is consumers’ personal information safe?

In a response to a Vermont Digger commentator, Auditor Hoffer confirmed our information and stated, “There are at least two federal audits underway. One is by the Inspector General’s Office at Health & Human Services and another by the GAO”. The GAO is the U.S. Government Accountability Office, an independent, nonpartisan agency that works for Congress. Often called the “congressional watchdog”, GAO investigates whether federal funds are being spent efficiently and effectively.


VHCF Responds – Audio

WDEV radio host Mark Johnson gave VHCF an opportunity to respond to the latest developments on Vermont Health Connect. We talk about the Auditor’s report and the state’s responses to our public records requests on the Optum billings and how much the state owes Blue Cross. Listen here:



Earlier this month, a few dozen Vermonters gathered at the University of Vermont for a seminar billed as “Healthcare 101.” But first, they had to wait for a half hour in the fluorescently lit hallways of the George D. Aiken Center for a security guard to open the reserved classroom.

“This is what’s going to happen,” quipped one sardonic attendee, trying the door handle. “You’ll show up for health care and the doors will be locked.”

- Seven Days Newspaper; full article HERE.

  • Employers pay 40% of the healthcare costs – and were never consulted.
  • An appointed board will determine benefits, coverage, funding, deductibles, co-pays, premiums, technology, provider payments, etc.
  • Under this law, you will not be allowed to purchase insurance outside of the Vermont Health Benefit Exchange.