Oracle takes Oregon health exchange to court

The tech firm alleges breach of contract and slander over the state’s failed website.

The legal battle over Oregon’s dysfunctional health insurance exchange officially began last week when Oracle Corp. sued the state agency operating the exchange, alleging breach of contract and accusing Gov. John Kitzhaber of attempting to systematically “vilify the company in the media.”

In a 21-page complaint filed Friday in federal court for the District of Oregon, Portland Division, Oracle charges that during the early months of this year, state officials privately continued to request Oracle’s help to fix their system while engaging in a campaign of “constant public slander” against the tech company.

Oregon had appeared more prepared than many states to implement President Obama’s Affordable Care Act, but technical problems crippled Cover Oregon’s online exchange. The Web portal for consumers to buy insurance never went live after enrollment began Oct. 1. Instead, the state used paper applications to allow Oregonians to get insurance subsidies through the federal program.

Cover Oregon officials scrapped the troubled exchange in April, despite having spent $248 million, and opted to transition to the federal system. The state had dismissed Oracle, the lead website developer for Cover Oregon, the previous month.

Kitzhaber, an emergency room doctor and Democrat who is running for reelection, asked the state’s attorney general to investigate the legal options, then in May publicly urged the office to sue.

But it was Oracle, a Delaware corporation headquartered in Redwood City, Calif., that fired the first shot against the state and Cover Oregon.

The company, which has built health insurance exchanges for half a dozen other states, says that Cover Oregon still owes $23 million under its contract.

The lawsuit notes that hundreds of thousands of Oregonians were enrolled in health insurance using the software built by Oracle and other companies. Customer service representatives and health insurance agents were able to use the software to enroll consumers in a back-office capacity, but the system was never made available for consumers to enroll directly on their own.

“While f logging Oracle publicly, Cover Oregon continued privately to ask for Oracle’s help. (Indeed it continues to this day to seek Oracle’s technical help with the project),” Oracle’s legal complaint said. “Oracle gave that help for many months, in spite of the public excoriation, because it was committed to helping Cover Oregon complete the project and because Cover Oregon repeatedly promised to pay Oracle for its services. In the end, though, Cover Oregon reneged on its promises, thus prompting this lawsuit.”

Oregon ran into trouble in part because it attempted to build its healthcare exchange under the Affordable Care Act at the same time that the state embarked on an ambitious project to modernize its health and human services programs.

Oracle alleges that the state made a series of mistakes, including the failure to hire a “systems integrator” to manage the project — a mistake that federal ex- change officials also made, causing problems with the initial performance of HealthCare.gov. Oracle says state officials were overwhelmed by the task of managing dozens of subcontractors.

Oregon’s projects were also hampered by disagreements among state officials, as revealed by two independent reviews of the debacle — one of which was commissioned by Kitzhaber. Cover Oregon and state officials repeatedly changed their minds about the scope of the work they wanted, Oracle said. In addition, Oracle alleges that Rocky King, former executive director of Cover Oregon, did not seem to grasp the extent of the technical problems his agency was facing.

Days before the website was supposed to launch on Oct. 1, King sent an email to an Oracle consultant under- scoring that the Cover Oregon website should at least look good for consumers, even if it was not going to operate well.

“If the road is going to be … bumpy, let me at least be driving a good looking car,” King’s email said.

But Kitzhaber repeatedly criticized the quality of Oracle’s technical work. A federal technical review suggested that Oracle threw “bodies, rather than [a] skill set” at the website problems. And King, who stepped down earlier this year, criticized Oracle’s technical work, stating during one public meeting that the company had finally sent home the “C Team” and replaced it with the “A Team.”

Cover Oregon did not respond to a request for comment on the lawsuit. But Kitzhaber’s office did not back down from his criticism of Oracle.

“The governor is aware of the lawsuit and isn’t surprised by it; the state fully expected to end up in litigation over Oracle’s failure to deliver,” Kitzhaber spokeswoman Melissa Navas said in the statement. “The attorney general’s office will review the complaint filed by Oracle and continue to pursue legal remedies on behalf of the state.”