Blues Subsidiary To Pay Maryland $45M For Failed Exchange

BISMARCK, N.D. (AP) — A subsidiary of Blue Cross Blue Shield of North Dakota has agreed to pay the state of Maryland $45 million over the failed health care exchange that the state intended to use as part of President Barack Obama's federal health care law.

Maryland contracted with Fargo-based Noridian Healthcare Solutions to create an online marketplace where residents could sign up for health insurance, but the system crashed as soon as it opened in 2013. Maryland ditched the software provided by the company, saying it was "defective and deficient."

The settlement, approved this week by the North Dakota Department of Insurance, requires Noridian Healthcare Solutions to immediately pay Maryland $20 million and $5 million annually over the next five years. The company is a subsidiary of Noridian Mutual Insurance, which does business as Blue Cross Blue Shield of North Dakota, the state's largest health insurer.

The settlement order said Maryland appears to have paid more than $95 million to replace the system and could have sought "in excess of $100 million" had it sued in court in Maryland. Noridian Mutual Insurance and its subsidiary, Noridian Healthcare Solutions, also faced legal fees of about $15 million had it not settled, according to the order approved by North Dakota Insurance Commissioner Adam Hamm.

Hamm said in a statement that his agency "has demanded significant changes in Noridian's oversight of its subsidiaries" and will continue to closely monitor the company.

Company president and CEO Tim Huckle said in a statement that the firm "does not expect any significant impact to members." He said Noridian Healthcare Solutions operates as an independent company, and its "financial gain or loss does not impact the determination of insurance rates" for Blue Cross Blue Shield customers.

Huckle was hired last year, after the former chief executive was fired when the company reported nearly $80 million in losses in 2013, most of which was attributed to developing the defective health exchange in Maryland.

The settlement was subject to approval by the North Dakota Insurance Department, which regulates insurance companies doing business in North Dakota. The Maryland Attorney General's office did not immediately return telephone calls from The Associated Press on Friday.

The settlement calls for Noridian Mutual Insurance to guarantee the $45 million payment to Maryland, but also allows the parent company to pay up to $18.2 million to its subsidiary for the settlement.

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