The IT Disaster that Spends and Spends but Never Ends

Public-facing IT projects are to American public agencies what Iraq and Afghanistan are to the American military

A postwar British intellectual, CP Snow, gave a famous lecture in which he castigated British schooling for elevating the humanities to such a high perch that Britain, which owed its survival in World War II to technological innovations, had become a technical backwater compared to the US and Germany. His “two cultures” phrase entered into public discourse and caused much debate among the intelligentsia in the West, including in America, where innumeracy is freely admitted among the supposedly well-educated and being able to think and reason quantitatively is something for the foreign students to worry about.

Nothing reveals the two cultures problem quite as well as when governments try to do public-facing IT projects, meaning projects that are to be accessed and used by the general public instead of just by the government workers themselves. This is because the kinds of organizations that are good at creating and delivering IT projects that attract and serve huge audiences successfully tend to exhibit, on almost every single trait of organizational personality, the exact opposite behavior that governmental organizations display. Which is why public-agency IT systems are so often quagmires, endless fountains of cost-overruns and career-ending failures, just the way land wars in Asia are the quagmires of empires.

When looking for talent, governments value connections, credentials and compatibility — people who have spent their lives beavering away in the right schools, with the right mentors, with the right values, and who have purchased the right credentials while never causing a stir, much less a stink.

Whereas good IT shops have no time for any of that, and must instead find people who can deliver the goods. These are often unreasonable people, who are socially inept or worse, and many of them have a knack for sowing chaos in their wake.

Governments are the original hierarchies, and respect for “the office” is their holy spirit.

IT is intrinsically anti-hierarchical, because computers do not care about the title or resumé of the person writing the code, only whether the code delivers or crashes.

Government is inherently risk averse and is fanatically devoted to concealing errors.
Good IT requires the high risk tolerance needed to permit rapid, public trial and error.

Government operates on a chain of command that filters and massages all the information flowing upward towards the decision-makers, who become prisoners of their advisors.

IT is inherently open to inspection to anyone with access, and anyone with a computer can decide for themselves whether the product works.

And just as the military is unwilling to admit that their flagship product — breaking things and killing people — might just not be the best solution to every problem, and maybe even helps small molehills of trouble turn into huge mountains of catastrophe, civilian governments seem equally incapable of swearing off the opium pipe-dream that this time it will be different and that they will avoid the pitfalls and create a great IT system on time and on budget.

No doubt the lessons of Cover Oregon will be forgotten, just as the lesson of the many empires who have attempted to conquer Afghanistan have been forgotten. But hope springs eternal, and perhaps the below excerpts from a status report from DCBS to the Legislature will help raise awareness of the costs of such amnesia.

Excerpts from Oregon Health Insurance Marketplace
Report to the Joint Interim Committee on Ways and Means and Interim Senate and House Committees on Health Care — May 2016


Introduction from the Director of the Department of Consumer and Business Services
 
The Department of Consumer and Business Services (DCBS) developed this report to update the Joint Interim Committee on Ways and Means, Interim Senate Committee on Health Care, and Interim House Committee on Health Care about Oregon’s health insurance marketplace (Marketplace). In accordance with Section 21 of Senate Bill 1 (Chapter 003, 2015 Laws), DCBS provides these reports every time the interim committees meet. The reports for September 2015, November 2015, and January 2016, as well as the April 15, 2016 annual report for the Marketplace, can be found at www.oregonhealthcare.gov/reports-audits.html.
 
Since the DCBS report in January 2015, open enrollment for the Marketplace has ended. More than 147,000 Oregonians signed up for health insurance through HealthCare.gov, an increase of 35,000 or 31 percent over last year. In fact, Oregon had the highest percentage of increase in enrollment over the previous year of any HealthCare.gov state.
 
Now that open enrollment for plan year 2016 is over, DCBS is focused on providing ongoing support for Marketplace customers by answering questions, helping people enroll through special enrollment periods, and handling consumer issues. We also continue to focus on helping small businesses understand health insurance options for their employees.
 
Since our previous report, the U.S. Department of Health and Human Services finalized its rule regarding the cost of using the federal platform, HealthCare.gov. The fee will be 3 percent of premiums. HHS has requested a waiver from the Office of Management and Budget to reduce the fee to 1.5 percent for plan year 2017.

In December 2015, DCBS released a Request for Proposals (RFP) for technology solutions for both the Small Business Health Options Program (SHOP) and the individual market to help determine if paying for HealthCare.gov is the best use of public dollars. As of the writing of this report, DCBS is reviewing the information collected through the RFP process, and we expect to present our analysis and discuss options with the legislature during the May 2016 legislative days.
 
Thank you for your continued support and feedback about the Marketplace. We look forward to ensuring that the Marketplace is a trusted and valuable resource for Oregonians in need of health care coverage.

Sincerely,

Patrick M. Allen, DCBS Director

I.  Financial Condition741.222(1)(a) The financial condition of the health insurance exchange, including actual and projected revenues and expenses of the administrative operations of the exchange and commissions paid to insurance producers out of fees collected under ORS 741.105 (5)”

The financial condition of the Marketplace continues to be stable and self-sustaining for the 2015-2017 biennium. There have been many changes since the January 2016 report, including the setting of the 2017 per member per month (PMPM) assessment fee, passage of Senate Bill 5701 and House Bills 4017 and 4071, and finalizing the cost of the federal technology platform. Although not all of these actions affect the Health Insurance Exchange Fund, they are included here to provide you with a complete picture of the Marketplace.
 
Budget Authority
For reference purposes throughout this section, the DCBS 2015-2017 Legislatively Adopted Budget as of the February 2016 session is shown in the table below.
 
2015-2017 Legislatively Adopted Marketplace Budget

Section                     $ LAB                Positions          FTE

Marketplace          29,687,162                17               20.50

Shared Services     2,188,303                11                  8.17

Total                       31,875,465                28               28.67

Several changes affected the Marketplace’s Legislatively Adopted Budget:

·   SB 5701: Increase in personal services in the amount of $327,039 to adjust the limitation to reflect agreements made in the collective bargaining negotiations and changes to other payroll expense. Decrease in services and supplies budget authority in the amount of <$5,226,079>. This amount is comprised of a decrease in the amount of <$558,617> that resulted from removing 13 limited-duration and adding six permanent positions within the call center; <$6,400,000> of anticipated excess limitation; and $1,732,538 increase to the Marketplace outreach budget.

·   HB 4017: Increase in budget limitation in the amount of $415,000 for the establishment of the Basic Heath Plan (BHP), which provides health benefits coverage program for low-income residents who would otherwise be eligible to purchase coverage through the Health Insurance Marketplace. HB 4017 requires the Department of Consumer and Business Services (DCBS) and the Oregon Health Authority (OHA) to convene a stakeholder advisory workgroup. The bill directs the workgroup to develop a BHP blueprint and requires the workgroup to present a completed BHP blueprint to the appropriate legislative interim committees by Dec. 31, 2016.

·   SB 4071: Increase in budget limitation in the amount of $3,646,000. This limitation consists of an other-fund limitation increase of $1.823 million, which is funded by a general fund appropriation of $1.823 million. Although the net increase to the limitation is $3.646 million, program costs are limited to $1.823 million. SB 4071 provides for the establishment of the Compact of Free Association (COFA) Premium Assistance Program administered by DCBS to provide financial help with health care premiums and out-of-pocket costs for Pacific Islanders legally residing in Oregon under COFA. This program is funded through a general fund award through the end of the biennia and does not affect the Health Insurance Exchange Fund.

Revenue
Oregon’s Marketplace is primarily funded through PMPM fee of $9.66 for medical plans and 97 cents for dental plans purchased through the Marketplace. These rates are in effect through the end of the calendar year. Beginning January 2017, DCBS proposes to set a PMPM fee for medical plans of $6.00 and 57 cents for dental plans. The revenue forecast for the Marketplace is detailed in the table below.

Each of the ongoing revenue categories is discussed in further detail below.
 
Marketplace PMPM assessment: As seen in the table above, the change in PMPM is reflected with an anticipated decrease in PMPM revenue beginning the first quarter of 2017, ending March 31, 2017. As of the March 2016 enrollment data, the amount of assessment revenue earned compared to the estimated PMPM revenue forecasted is greater by $1,609,840. This increase in earned revenue is a result of medical and dental enrollments being higher than the Legislatively Adopted Budget estimate by 164,540 and 21,018 or an increase of 22.5 percent and 19.1 percent, respectively. Actual enrollment through March 31, 2016, is shown below:

The actual enrollment numbers in the table above are reported by insurance carriers to DCBS. Discrepancies between these numbers and the numbers reported by the U.S. Department of Health and Human Services are attributable to the timing associated with each reporting process. About 147,000 Oregonians signed up for coverage during open enrollment; however, every year, a certain percentage of those who sign up fail to pay their first monthly premium and effectuate their coverage. Others fail to provide documentation required by HealthCare.gov and lose their coverage. The actual enrollments reported by carriers above represent net-effectuated enrollments.
 
Insurance carriers periodically update actual enrollments, and DCBS will adjust monthly enrollment data in future reports accordingly. These updates are usual and customary for the industry and are due to nonpayment by individuals purchasing plans or coverage events such as births and deaths. Any time updated enrollment data decreases the amount owed by insurance carriers in past periods, DCBS applies credit to future assessment billings instead of providing a refund.
 
The Legislatively Adopted Budget revenue forecast is based on the expected quarterly enrollment activity shown in the following table. The enrollment projection for each quarter is the sum of three months‘ worth of enrollment (e.g., 100,000 enrollees in July plus 100,000 enrollees in August plus 100,000 enrollees in September equals 300,000 enrollments for the quarter).

As the table above shows, medical enrollments are expected to continue to increase during this biennial period and the next, while dental enrollments are expected to remain stable. The increase in enrollments, with the decrease in expected expenditures, contributed to the DCBS ability to reduce the PMPM in 2017.

DCBS bills insurance carriers the month after the reporting month, and insurance carriers have approximately 30 days to submit payment, which creates a two-month lag in receipt of revenue earned.
 

  • Cover Oregon’s Balance Transfer: All funds have been transferred to DCBS. This category is not an ongoing revenue source for DCBS.
  • OHA Transfer: The Legislatively Adopted Budget originally projected a total transfer from OHA of $13.2 million. The DCBS current estimate is $12.6 million, $600,000 less than originally anticipated, as detailed in the chart below:

As previously shown in the Revenue Forecast as of March 2016, the OHA transfer revenue will reduce significantly during the second fiscal year and then again in the first year of the 2017-2019 biennium. The first decrease in the second year of this biennium is due to the expiration of the Oracle contracts. In 2017-2019, projections include only the ongoing cost to maintain the information that has been preserved in the 2015-2017 biennium. The difference between the Legislatively Adopted Budget estimate and the current estimate is a net result of the following changes:
 

  • Original estimates included an ongoing projection of the original Speridian contract, which was completed in March 2016 when the Oracle contracts expired. The work included in this contract is no longer necessary after March 2016 and was reduced by $3.7 million.
  • The current estimate includes all new Speridian services to provide for an archiving solution of Oracle data; this cost is currently $3.3 million. This work will be shared between OHA and DCBS. OHA will cover 80 percent of the costs; DCBS will cover 20 percent.
  • The estimate also includes a contract for Tornai Consulting. This contract was not in the original projection because the statement of work is solely for OHA. However, the contract was transferred to DCBS because it fell under the body of work that was transferred from Cover Oregon. Therefore, DCBS is obligated to pay for these services and seek reimbursement from OHA, increasing the total shared contract costs by $120,000.

 
In addition to the revenue transfer for shared contracts, OHA has been billed approximately $2 million for its portion of contract costs Cover Oregon paid for and had not been reimbursed for as of June 30, 2015. This amount is not included in the IT cost- allocation table above as the obligation to pay was made to Cover Oregon, not DCBS. This amount is included in the revenue received for the quarter ending December 2015 under the OHA Transfer category. Although not reflected in the “Oregon Health Insurance Marketplace Fund, Forecast Revenues, Expenses, and Fund Balance” table below, DCBS has received reimbursement for quarter ending December 2015. DCBS bills OHA in quarterly increments. However, there is often a delay in billing and, therefore, payment as a result of a delay in receiving invoices from vendors. For example, the invoice for the quarter ending Dec. 31, 2015, was presented to OHA in early March 2016 as we were awaiting the receipt of invoices from contractors. Contractors’ invoices are required documentation used to calculate the amount DCBS is to be reimbursed. This delay has not jeopardized the Marketplace’s cash flow to date.
 

  • Interest (Investment) Income: The Marketplace fund earns interest income, which contributes to the ending fund balance and is expected to be received as anticipated.
  • Federal Funds: No federal grant funds were transferred to DCBS when it took over management of the Marketplace on July 1, 2015. All federal grants are either closed or in the process of being closed.
  • Expenditures
    The following table details actual expenditures from July 2015 through Feb. 2, 2016, expenditure projections for the remaining biennial period, and the variance from the February 2016 Legislatively Adopted Budget.

 DCBS is currently projecting expenditures approximately 2 percent above the Legislatively Adopted Budget. During the February 2016 session, a portion of our limitation was removed during two different actions.
 
DCBS will be requesting adjustments to the 2015-2017 Marketplace Legislatively Adopted Budget in the May 2016 Emergency Board. SB 5701 provided for a general decrease of DCBS’s unallocated limitation that was reported in the January 2016 Marketplace Interim Report. At the same time, DCBS requested and was granted a reclassification of six limited-duration staff members to permanent, full-time status and the reduction of seven limited-duration staff. This request yielded a reduction of $558,617. When the overall unallocated limitation was calculated, these seven limited-duration positions were projected to remain vacant, contributing to the total overall unallocated limitation by the cost of these positions. When both of these actions were approved, the amount related to the seven limited-duration positions was effectively removed twice. Once a determination of the May 2016 request is made, the 2 percent overage will be corrected.
 
Of the actual expenses paid as of Feb. 29, 2016, $1,400 has been paid to insurance agents on behalf of Cover Oregon’s obligation to pay for commissions. The Marketplace is no longer responsible for paying commissions to insurance agents now that Oregon uses the federal platform, HealthCare.gov.

I. Technology Development
741.222(1)(b) “The development of the information technology system for the exchange”
 In November 2015, the U.S. Department of Health and Human Services (HHS) proposed to begin charging State-Based Exchanges on the Federal Platform (SBE-FPs) like Oregon a user fee of 3 percent of premiums for use of HealthCare.gov. In the final rule, released in February 2016, HHS stated it has sought a waiver from the Office of Management and Budget (OMB) to reduce the user fee from 3 percent to 1.5 percent of premiums for the 2017 benefit year.

Although this fee would be payable directly by insurers to the federal government and not affect the Health Insurance Exchange Fund, the state has a responsibility to explore all of the options available to make sure paying for HealthCare.gov is the best use of the policyholders’ dollars. If Oregon proceeded with an option other than the federal platform, there would be a revenue and expenditure impact on the Health Insurance Exchange Fund related to the implementation and operation of another system.

In December 2015, DCBS released an RFP to collect information about fully functional and cost- effective technology solutions for both SHOP and the individual market. Proposals were due March 4, 2016.

DCBS is using the information collected through the RFP process to compare the cost and functionality of HealthCare.gov with successful private vendor systems currently used in other states. As of the writing of this report, the results of the RFP are still under analysis. DCBS expects to have its analysis and recommendations ready for the Legislature by the May 2016 legislative days.

If the state decides to procure a system other than the federal platform, DCBS would need to seek approval from the legislature for any technology that costs more than $1 million, and DCBS would also need to receive budget authority to pay for the system. In addition, the procurement of any technology system would be subject to the state’s stage gate process.

II. Coordination with the Oregon Health Authority
741.222(1)(C) “Efforts made, in collaboration with the Oregon Health Authority, to coordinate eligibility determination and enrollment processes for qualified health plans and the state medical assistance program”
DCBS continues to maintain a close working relationship with OHA, the agency that oversees the Oregon Health Plan (OHP), Oregon’s Medicaid program, to ensure cross-agency collaboration between marketplace and Medicaid operations. Some areas of collaboration include:

Operations and Technology:

DCBS and OHA continue to work together on the management of the state’s eligibility and enrollment systems, including coordination with HealthCare.gov and other federal systems. The coordination has ensured that there is no wrong door for applicants. Currently, Oregonians can apply for Medicaid either directly through an OHP PDF application or through HealthCare.gov. Those found ineligible for OHP can apply for a special enrollment period to sign up for a qualified health plan through HealthCare.gov.

DCBS is also coordinating with OHA on the implementation of OHA’s new Medicaid eligibility and enrollment system, OregONEligibility (ONE), which began operating Dec. 15, 2015.

Outreach and Education:

DCBS and OHA are currently coordinating their outreach and education efforts. This includes but is not limited to:

·   Partnering to provide a network of community partner organizations with more than 800 enrollment assisters capable of helping and enrolling both qualified health plan and OHP eligible people.
·   Coordinating call center operations and information.
·   Using OregonHealthCare.gov as the state’s website for information about both the Marketplace and OHP so people seeking information about either have a central resource available.
·   Coordinating OHP and Marketplace messaging and materials.
·   Working together on stakeholder engagement.
·   Developing a blueprint for a Basic Health Program as required by House Bill 4017 of 2016.
·   Exploring the possibilities associated with 1332 waivers. Section 1332 of the Affordable Care Act allows states to waive specific provisions of the act in order to implement innovative state solutions to health care issues, such as establishing the Basic Health Plan.

III.  Program Integration
741.222(1)(d) “The progress of integrating the duties and functions transferred to the Department of Consumer and Business Services”
Cover Oregon Transition
The transition of duties and functions from Cover Oregon to DCBS has been completed and went smoothly. In accordance with Senate Bill 1, Cover Oregon closed June 30, 2015, and the Marketplace has been operating at DCBS since July 1, 2015.

Advisory Committee
Senate Bill 1 also established a health insurance marketplace committee. The committee provides guidance and feedback on issues affecting the marketplace, such as outreach, customer feedback, and insurance plan affordability. The Oregon Senate confirmed the members of the committee in February 2016, and the committee held its first meeting April 7, 2016.

Integration with the Senior Health Insurance Benefits Assistance Program
In December 2015, DCBS began a project to integrate the Marketplace unit and the Senior Health Insurance Benefits Assistance Program (SHIBA), which is also a part of DCBS. SHIBA provides Medicare education, training, counseling, and advocacy to Oregonians with Medicare with the support of a community-based counseling workforce that includes certified volunteers. The goal of the integration is to find ways to make best use of staff resources, outreach, and education efforts, and provide better service to Oregonians seeking health insurance, whether through the Marketplace or Medicare. DCBS expects to complete integration of the programs by June 30, 2016.

IV.  Small Business Health Options Program (SHOP)
741.222(1)(e) “The progress in planning for, developing and implementing a Small Business Health Options Program, including the key decision points, timelines and a description of how the department is engaging stakeholders in the design and decision-making process for the SHOP”
Currently, Oregon uses a direct enrollment, manual SHOP process. Any small business in Oregon with one to 50 employees can purchase a certified SHOP plan directly from one of the participating insurers. Upon request, the Marketplace will determine whether the small employer meets the requirements to participate in the SHOP program and potentially be eligible for the IRS small business tax credit. DCBS will continue to use this direct enrollment, manual process until the state adopts an automated process.

For the past few months, DCBS has been collecting information about options for an automated SHOP process. DCBS has consulted with stakeholders, including small businesses, associations, insurers, and agents, to better understand their needs and interest.

DCBS has also discussed the capabilities and cost of the federal SHOP platform with the federal government; however, Oregon will not be able to use that platform. The federal platform does not support composite rating, the rating methodology the Oregon Division of Financial Regulation requires for Oregon’s small group market. Composite rating is the practice of grouping all eligible employees together and assigning a single rating, regardless of individual factors (such as age, gender, or tobacco use) that may make somebody a higher or lower insurance risk. The Oregon Division of Financial Regulation considered changing methodologies to one the federal platform supports. However, it decided to continue to use composite rating going forward, so DCBS will need to pursue other options for an automated SHOP system.

In April 2015, DCBS released a request for information (RFI) to learn about private vendor platforms. While the RFI proved helpful, it was limiting because vendors did not provide detailed cost information in their responses. DCBS has requested cost information as part of the RFP released in December, as detailed in the technology development section of this report.
After responses to the RFP have been reviewed, DCBS will initiate a decision-making process that includes stakeholder consultation and a cost-benefit analysis.

DCBS intends to present its analysis of automated SHOP options to the interim committees during the May 2016 legislative days. In other states, SHOP has been successfully implemented in about three to six months. DCBS expects it could be implemented in Oregon in a similar timeframe after a decision is made about which option to pursue. Until an automated SHOP system is in place, Oregon will continue to use the direct enrollment, manual process for SHOP.

V.   Liabilities
741.222(1)(f) “The outstanding liabilities, if any, carried over from the Oregon Health Insurance Exchange Corporation”
As a function of Senate Bill 1, DCBS took responsibility for the liabilities of Cover Oregon. Cover Oregon’s liabilities were factored into the DCBS budget approved by the legislature for the 2015-2017 biennium. As of the date of this report, DCBS has:
·   Assumed or assigned all Cover Oregon leases
During the time of the transition of Cover Oregon functions to DCBS from March through June 2015, Cover Oregon had lease agreements for three different properties:

a.    Cherry Avenue: The Original Cover Oregon offices, located at 3414 Cherry Ave. NE in Salem, had a 60-month lease ending Nov. 1, 2016, at $14,129 per month. This property had already been sublet to a third party (Northwest Senior and Disability Services) before enactment of SB 1, and an agreement was reached with the property owner for the third party to assume the lease permanently, releasing Cover Oregon and DCBS from further liability, effective June 30, 2015.

b.    Spinnaker Place: The Cover Oregon call center location, at 2250 McGilchrist St. SE in Salem, had an 84-month lease ending Aug. 8, 2020, at $32,144 per month, not including unamortized tenant improvements (TI). Cover Oregon had already made arrangements to exit this lease due to a workforce reduction. The lease was terminated effective March 31, 2015, with $294,000 paid at termination for unamortized TI allowance (which would have been due regardless of when or how the lease was terminated), and $31,000 rent for waiver of 180-day notice for a total of $325,000 in exit costs.

c.     Durham Plaza: The Cover Oregon corporate headquarters, located at 16760 SW Upper Boones Ferry Road, #200 in Tigard, was composed of a primary lease agreement with two amendments. The primary lease was for most of the office space in suite 200, with a 90-month lease ending April 1, 2020, for $47,259 per month, not including unamortized TI. Two more suites were added later, each on a separate amendment: Suite 105, on a 75-month term ending April 1, 2020, for $4,356 per month; and suite 106, on a 70-month term ending April 1, 2020, for $5,128 per month. DCBS retained this lease, and it currently houses a field office for Oregon OSHA, a division of DCBS, and the Workers’ Compensation Board, both of which were already looking for a larger space to accommodate growth. The lease was assumed in its entirety by DCBS as of July 1, 2015.

·   Taken over the process of assigning, renegotiating, or terminating all contracts as appropriate and set up a process for handling Cover Oregon accounts payable

Attachment A: Litigation Summary
 
In 2011, the State of Oregon hired a private contractor, Oracle America, Inc., both to modernize its social services systems and develop a health insurance exchange website through which Oregonians would shop for and obtain the insurance coverage required by the federal Affordable Care Act. In early 2013, the State of Oregon transitioned the development of the health insurance exchange website to Cover Oregon. On Oct. 1, 2013, when the website was to be fully operational for the public, it did not work and was never launched to the public. On April 25, 2014, the Cover Oregon Board voted to move to the federal website for certain services. In November 2014, Cover Oregon completed its transition to the federal exchange. In addition, the State of Oregon’s project to modernize its social services systems was also placed on hold in 2013 after Oracle failed to meet a series of testing deadlines. In 2014, the State of Oregon elected to transition off of Oracle’s products for its social services systems.
 
In June 2014, the Oregon Attorney General launched a false claims investigation into Oracle’s charges for both the modernization project and the Cover Oregon website. While the investigation was pending, on Aug. 8, 2014, Oracle sued Cover Oregon in federal court for the District of Oregon for breach of contract and quantum meruit, claiming it was owed an additional $23 million for its work. On Sept. 8, 2014, Oracle amended its complaint to add the State of Oregon as a defendant and added claims for copyright infringement and breach of the implied covenant of good faith and fair dealing against Cover Oregon. Since then, Oracle has dismissed all its claims in federal court, except for copyright violations. Oracle re-filed its other claims against Cover Oregon as counterclaims in the first state court proceeding. In November 2015, the federal district court addressed the constitutionality of Oracle’s copyright claims against the State of Oregon, dismissing one portion of the claim and permitting another to go forward. The State of Oregon and Oracle appealed the district court’s ruling and the appeals are pending before the United States Court of Appeals for the Ninth Circuit.
 
After concluding the false claims investigation, on Aug. 22, 2014, the Attorney General, the State of Oregon, and Cover Oregon filed suit for damages against Oracle, Oracle’s co-CEO, other current and former Oracle employees, and Mythics, Inc., an Oracle distributor, for fraud, breach of contract, and violations of the Oregon False Claims Act and the Oregon Racketeer Influenced and Corrupt Organizations Act. The suit was filed in Oregon State Circuit Court for Marion County (Judge Geyer). Since the lawsuit was filed, Oracle twice removed the case to the Oregon federal district court and the federal court twice remanded the case back to Marion County Circuit Court. As of April 2016, the case is pending in state court and discovery is proceeding.

The court ordered discovery to complete in early September 2016, and ordered that a 10-week trial would begin Jan. 11, 2017. The State of Oregon seeks approximately $420 million in damages, plus penalties, punitive damages, investigative fees, attorney’s fees, and costs. Oracle filed five counterclaims for approximately $23 million for alleged unpaid services allegedly provided to Cover Oregon between October 2013 and February 2014. The court dismissed three of the five counterclaims with prejudice on Feb. 22, 2016. In March 2016, Oracle filed motions for judgment on the pleadings to dismiss the entire case based on a contention that federal and state law pre-empted the State of Oregon’s litigation against Oracle. The court will hear that motion June 17, 2016. The court also indicated it may enter an order compelling the parties into mediation.

In February 2015, Oracle threatened to shut off the hosting services the State of Oregon uses to run its Medicaid enrollment system. On Feb. 13, 2015, the State of Oregon filed an additional lawsuit in Marion County Circuit Court (Judge Geyer) to enjoin Oracle from turning off service. On Feb., 27, 2015, the Marion County court issued a preliminary injunction prohibiting Oracle from ceasing to provide hosting services for one year. During that time, the State of Oregon transitioned to a Medicaid eligibility determination and enrollment system that Kentucky developed and that does not use Oracle products. The non-Oracle system was operational in January 2016, and Oregon no longer uses the Oracle system for Medicaid eligibility determinations and enrollments.
 
On Feb.26, 2015, Oracle filed a lawsuit in Multnomah County Circuit Court (Judge Kantor) against five consultants of former Gov. John Kitzhaber. Oracle alleged that they interfered by Oracle’s contracts with Cover Oregon. That court dismissed Oracle’s claim with prejudice in July 2015. That dismissal is on appeal.
 
On Nov. 13, 2015, Oracle filed an action in Marion County Circuit Court (Judge James) under Oregon’s public records law against Gov. Kate Brown. Oracle alleges that the Office of the Governor violated the public records law by not reviewing and releasing to Oracle all the emails in former Gov. Kitzhaber’s personal email accounts that were inadvertently archived on the Department of Administrative Services servers. The Office of the Governor has filed a motion to dismiss and a motion for summary judgment.
 
On Jan. 20, 2016, Oracle filed an action in Marion County Circuit Court (Judge Armstrong) against the State of Oregon for specific enforcement of a purported settlement of all litigation involving Oracle and the State of Oregon. Oracle alleges that in October 2015, Gov. Brown’s then Chief of Staff, Brian Shipley, agreed to settle all of the State of Oregon’s and all of the Attorney General’s claims against Oracle for a credit of approximately $25 million for Oracle goods and services. The court heard the State of Oregon’s motion to dismiss on April 14, 2016.
 
On March 8, 2016, Oracle filed a petition for a writ of mandamus in the federal district court for the District of Columbia against the Secretary of the U.S. Department of Health and Human Services Sylvia Burwell. Oracle petitions for a writ to compel Burwell to order Oregon to dismiss or stay all litigation against Oracle because, Oracle alleges, Oregon’s lawsuit is pre-empted by federal law. HHS has not yet responded to the petition.
 
There are several ongoing federal investigations, including by the Government Accountability Office, the United States Grand Jury for the District of Oregon, and committees in both the United States House of Representative and Senate. The State of Oregon is cooperating fully in those investigations.