Conflict of interest alleged in UnitedHealth Group acquisition of insurance exchange contractor

QSSI acquisition wasn't announced; came 10 months after contract award was finalized
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A news report is raising questions about a possible conflict of interest in the purchase of a company developing a data services hub for a national health insurance exchange by the parent of one of the country's largest private insurers.

The Hill's Healthwatch blog reported Nov. 3 that UnitedHealth Group purchased Columbia, Md.-based Quality Software Services Inc. (QSSI) in September, about a year QSSI was initially awarded the $144.6 million contract.

The contract from the Department of Health and Human Services was finalized in January, and includes other contractors including CGI Federal Inc., according to the report.

The acquisition was not reported to the Securities and Exchange Commission, according to the report, although it was unclear whether such reporting was required. UnitedHealth Group contends it was not, according to the article.

Healthwatch reported concern by unnamed insurance sources that "if an insurance company had influence over the information technology architecture used to run the exchange, it could interpret federal standards in a way to exclude competitors or make it more difficult for them to win approval," or could "have an inside track on knowing how to design plans that meet the standards."

The report contended that much of the responsibility for determining which plans are included in the insurance exchange will fall to the contractors. The exchange is supposed to be operational by fall 2013 for a 2014 launch date.

A senior executive with Optum, the UnitedHealth Group subsidiary that purchased QSSI, told Healthwatch that insurer United Healthcare is a client of Optum, along with competitors including Cigna, Humana and WellPoint. Optum Group Executive Vice President Andy Slavitt described UnitedHealthcare as "an arms-length client, separately reported financially and separately managed."

The Optum health-services business increased earnings by 28 percent in the third quarter, playing a major role in a 23 percent increase in UnitedHealth Group's third-quarter profits to $1.56 billion. Earlier this year HHS's top official in charge of implementing health reform, Steve Larsen, left the HHS Center for Consumer Information and Insurance Oversight to become an executive vice president for Optum.

A UnitedHealth Group spokesman told the blog that the company complied with all government ethics rules. Don Nathan also said QSSI would just "connect and integrate systems," with regulatory oversight and determinations of policy coming from HHS's Centers for Medicare and Medicaid Services, according to the report.

HHS Secretary Kathleen Sebelius has not yet responded to an Oct. 19 letter from Sen. Orrin Hatch (R-Utah), ranking member of the Senate Finance Committee, asking whether HHS reviewed the QSSI purchase for possible conflicts of interest, Healthwatch reported.

To learn more:
- read the Healthwatch article

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