WASHINGTON -- The company chosen by the Obama administration to oversee the repair of the new federal health insurance website faced questions from lawmakers a year ago about whether it was an appropriate choice for earlier work on the site, given that it is owned by the country's largest health insurance company.
Columbia, Md.-based Quality Software Services Inc. -- known as QSSI -- was purchased by UnitedHealth Group in September 2012, months after it was picked by the Department of Health and Human Services to help set up the Affordable Care Act website.
That called for work on three areas: build a data hub for the site so that information could be transferred between different groups, deliver a tool to help users register, and do some testing of the technology.
Republican lawmakers including Sen. Orrin Hatch of Utah, Sen. Charles Grassley of Iowa, Rep. Darrell Issa of California and Rep. Fred Upton of Michigan sent letters to UnitedHealth Group and HHS asking how QSSI had been chosen, given what they viewed as a potential conflict of interest.
The lawmakers were concerned that QSSI might have access to information or would build the technology in a way that would give UnitedHealth's insurance business an advantage.
There were also concerns about a former top regulator at the Centers for Medicare & Medicaid Services, Steve Larsen, who left the government to work for UnitedHealth Group subsidiary OptumInsight. Soon after, OptumInsight purchased QSSI with little fanfare.
No press release appears on the website for UnitedHealth Group or OptumInsight; the deal was also too small to require an SEC filing.
The only public evidence of the deal was an announcement by the law firm Jenner & Block saying it represented QSSI in the deal, which closed in September 2012.
"This raises serious questions about the conflicts of interest that may exist," Grassley and Upton wrote in letters to QSSI and UnitedHealth Group.
"Our understanding is that Steve Larsen had no role in the hiring of QSSI or any of the other IT contractors involved in the federal marketplace," UnitedHealth spokesperson Matthew Stearns said. "Because Mr. Larsen is responsible for Optum's state-based business, he does not deal with CMS."
A Senate aide said that in meetings with CMS, the agency said it understood the appearance of a conflict of interest, but the agency did not view the contract as an issue since QSSI was just building a data hub and the hub wouldn't be holding any information.
CMS also said it did not monitor what happened to QSSI -- including its acquisition by UnitedHealth -- after the contract was awarded. The Senate aide spoke on the condition of anonymity to discuss the meetings with CMS because they were private.
Stearns said Friday that UnitedHealthcare, the insurance company, and OptumInsight share a parent company --UnitedHealth Group -- but "otherwise operate independently."
One day after being grilled on Capitol Hill about its role in the new federal health insurance website's problems, QSSI will now be overseeing the repair of the government's flawed technology.
The selection of QSSI, founded in 1997, speaks both to the company's work building one of the site's more successful components -- the data-transferring hub -- and to how little time the administration has to fix the website.
"Frankly, I was surprised to see that one of those contractors was selected," said Stanley Nachimson, an independent health information technology consultant based in Reisterstown, Md. "They certainly want to make sure the whole process is fixed and is operating correctly as quickly as possible. . . . But sometimes it's hard to review your own work."
Nachimson said the administration probably didn't have many options. Bringing in a new contractor with an outside view would have required at least six weeks of waiting for the new company to be vetted and processed, he said.
Still more time would have been spent bringing the company up to speed on the guts of the Web site technology.
The company's contract to build the data hub was worth $84.5 million, according to public documents. Stearns said the new work to oversee the fixing of the site was a contract extension, and details on the size of the contract were still being worked out.
In response to a question about QSSI on a conference call Friday, Julie Bataille, communications director for the Centers for Medicare & Medicaid Services, said QSSI's role will be more akin to that of a general contractor, "overseeing the entire operation."
"If one particular issue needs to get prioritized and fixed right away," they will be in charge of getting that done, she said. She said the company was familiar with the complexity of the system. "They have done a good job already in their work supporting the federal data hub. They have the skills and expertise to address these problems right now."
Yet QSSI's work on the account registration part of the site did run into some problems after the launch. The company says that overwhelming traffic to the site gave its registration tool some problems but that by Oct. 8, error rates were "close to zero."
QSSI appears to be a much smaller company than CGI, the contractor that has borne the brunt of the criticism for its work on the health-care website.
According to Bloomberg's latest available data, QSSI has annual revenues of $12.6 million and net income of $510,000.