Oregon settles lawsuit for botched healthcare rollout

Oregon settled with a California software giant in a lawsuit that accused Oracle America Inc. of collecting tens of millions of dollars to create a state health care exchange website that didn’t work. The state initially asked for more than $6 billion in punitive damages when it filed the lawsuit in 2014 against the Redwood Shores, California company, but Oregon ultimately accepted a package that included $35 million in cash payments and software licensing agreements and technical support with an estimated upfront worth of $60 million.

Non-cash value

The state paid Oracle $240 million to create its Cover Oregon website but ultimately abandoned the site and joined the federal exchange to comply with the Affordable Care Act. Most of the money used to pay Oracle was from federal funds designated to help states comply with the new health care law and that is likely why the settlement relies mostly on non-cash value, said David Friedman, an associate professor of law at Willamette University who has closely followed the litigation.

“The government would say, ‘Thank you for being our collection agency. We’re going to take that back,’” he said. “That’s why this is coming out as credits and things that are a little bit to the side of the direct verdict. Oracle has probably convinced them that this is their best shot at collecting the best value.”

Six years of unlimited Oracle software and technical support included in the deal will save the state hundreds of millions of dollars in years to come and ends a bitter legal battle that has damaged Oregon’s “collective psyche,” Attorney General Ellen Rosenblum said in a statement. “The beauty of the deal is that if we choose to take full advantage of the free (software), we are uniquely situated to modernize our statewide IT systems over the next six years -something we could not otherwise afford to do,” she said.

The cash payments include $25 million to reimburse the state’s legal fees and a $10 million grant to fund math, science and technology education in Oregon schools. Oracle has insisted the website worked but former Gov. John Kitzhaber chose not to use it for political reasons.