UnitedHealth deal draws concern

UnitedHealth Group Inc. has drawn scrutiny from a congressional leader after purchasing a technology company that the U.S. government has hired to help build a federal insurance exchange.

The exchanges, which will launch in 2014 as part of the Affordable Care Act, are online marketplaces where Minnetonka-based UnitedHealth will be competing with other plans to sign up new enrollees.

Sen. Orrin Hatch, R-Utah, raised concerns about potential conflict of interest in an Oct. 19 letter to U.S. Health and Human Services Secretary Kathleen Sebelius.

At issue is a contract awarded to Quality Software Services Inc., or QSSI, a Columbia, Md.-based company that specializes in building sophisticated health care IT architecture and systems integration.

The federal government hired QSSI to build a data services "hub," that will help states verify eligibility for consumers using the exchanges. The hub will tap into a variety of federal agencies, such as Homeland Security, Social Security, Treasury and Justice, providing real-time access at a single location.

The Centers for Medicare and Medicaid Services originally awarded the contract to QSSI on Sept. 30, 2011, but the agency spent several months investigating the decision after it came under protest by an unnamed firm that also had received an IT contract.

QSSI was re-awarded the contract on Jan. 18, according to Inside Health Policy, a Washington publication that covers federal health and safety regulations. The five-year contract is worth about $93.7 million, with the first year valued at $55.7 million. Including all options, it could be worth $144.6 million when completed in March 2017.

Other questions surround Steve Larsen, a former official at the government agency charged with developing rules for the federal exchange, who started working at Optum this summer. Hatch's letter seeks details about who was involved in awarding the contract.

UnitedHealth, the nation's largest health insurer with sales of more than $100 billion, was not required to report the deal to the SEC, and Optum officials declined to provide any details. A material event requiring disclosure typically represents 5 percent of sales. QSSI, a private company, reported annual sales of $12.6 million in February 2011.

The Hill, a daily that covers Congress, first reported on the concerns. It quoted Optum Vice President Andy Slavitt describing UnitedHealthcare as "an arm's-length client, separately reported financially and separately managed."

Optum spokesman Brian Kane told the Star Tribune that QSSI is "not involved in judgments or evaluations related to regulatory oversight," and stressed that responsibility for vetting lies with the Centers for Medicare and Medicaid.

Hatch called for a more thorough review and transparency of contractors and subcontractors selected to build the federal exchange.