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The 'policy geek' picked to save Massachusetts' Obamacare exchange

Have no fear, hCentive is here.

The CEO of the company expected to be hired to salvage Massachusetts' crippled Obamacare exchange vowed his software will quickly prove itself so that the state won't have to rely on an escape-hatch option of using the federal HealthCare.gov marketplace for enrollment next fall.

And hCentive boss Sanjay Singh said his company will accomplish that goal by keeping things simple in the first year of its rescue contract, and make sure the Massachusetts Health Connector is more than ready to begin signing up people online for Obamacare plans in November, when enrollment for 2015 begins.

"Risk mitigation is the main driver," said Singh, who noted that hCentive can upgrade its off-the-shelf software with more bells and whistles after it gets through its first year of open enrollment as the Bay State's lead software vendor.

Read MoreOne by one, states ditch health insurance exchanges

While details of a contract still have to be hashed out, the Massachusetts exchange board voted 10-1 Thursday in favor of hiring Virginia-based hCentive to provide new software to run the marketplace, replacing the disastrous technical system that was put in place last year by lead vendor CGI.

The old exchange was so glitch-ridden that it had to rely heavily on paper enrollment applications, and even then, it enrolled barely 31,000 people. Tens of thousands more were put on temporary insurance plans because of the fiasco.

Sanjay Singh, CEO of hCentive
Source: hCentive
Sanjay Singh, CEO of hCentive

The move to bring in hCentive came after the exchange, which has already burned through about $160 million for its construction, was told that fixing the existing platform would cost another $160 million.

But, cognizant of the problems the exchange has had to date, and the fact that there are about six months before open enrollment begins, the board also voted to use the federal exchange for open enrollment this fall if hCentive's software is not working as planned by that time. HealthCare.gov already handles enrollment for residents of 36 states.

Massachusetts is the third state-run exchange to scrap its Obamacare enrollment software because of serious defects. Oregon has voted to move residents in private Obamacare plans on to HealthCare.gov starting next fall. Maryland is dropping its software platform in favor of the one used by Connecticut's successful exchange.

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Massachusetts' dual-track strategy will cost about $121 million. The contract with Singh's company has not yet been finalized or signed, so he said he does not know yet how much hCentive will be paid.

But documents obtained from the Massachusetts Health Connector show that hCentive's work would cost the exchange nearly $56 million through 2015. Optum, the UnitedHealth division which is the IT contractor hired to oversee the repair of the state's exchange, holds a 24 percent stake in hCentive.

Although the dual-track strategy gives Singh's company some breathing room to work out the kinks, he told CNBC he doesn't expect to need more than four weeks from now to prove that hCentive's program will work just as well as HealthCare.gov.

After that, and before open enrollment begins, hCentive plans to tweak its software to make it a better option than the federal exchange for Massachusetts residents.

"Within the first month we will be at about parity with the federally facilitated marketplace, and they should be able to compare apples to apples," Singh said, using the official term for federally run HealthCare.gov . "Then everything we will do after that for the state will be gravy."

Singh said hCentive has an exchange software package that is essentially ready to go out of the box, and which only has to be adjusted a bit to work for the specific requirements of the Massachusetts exchange.

Read MoreObamacare premiums being paid, insurers say

In fact, in a presentation to the exchange's board on Thursday, it was noted by officials that, "Even with minimal customization, the hCentive solution, if up and running for the fall, would already put us on par with [HealthCare.gov] in terms of functionality."

Massachusetts has a particular interest in running its own exchange because of unique quirks in its own health-care law, which give some people more generous subsidies for insurance than what the federal government provides.

Sarah Iselin, the insurance executive appointed by Gov. Deval Patrick to shepherd the exchange repair effort, told The Boston Globe earlier this week that the question of whether Massachusetts could retain certain "unique aspects" of its health insurance program if HealthCare.gov becomes responsible for enrollment was still being discussed with federal officials.

Parts of hCentive's software are already in use—and have been since last fall—in the state-run insurance exchanges of New York, Colorado and Kentucky. All three of those marketplaces have been considered success stories for the first year of Obamacare enrollment.

In Massachusetts, "for enrollment this fall, we will really minimize any changes in the software. ... The bar to make any changes in the software will be very high," said Singh, who co-founded GlobalLogic, a software services company, in his basement in 1999. Eventually, the company grew to have 7,000 employees.

The complexity of exchange software, the failure to stress test it adequately and the tendency of vendors to make changes in the operating system in the weeks before last October's launch of the Obamacare marketplace have been cited as key reasons why HealthCare.gov and some state-run exchanges flopped when they were initially opened for business.

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In a profile of Singh and his company that CNBC ran last September, Singh revealed that he had created hCentive in 2009 after becoming obsessed with the congressional debate over the Affordable Care Act legislation.

"I'm a public policy geek," Singh said at the time. "This is my fantasy football."

The ACA bill, which Singh downloaded to read, talked about individual state exchanges, and a federal data hub that would be used to verify the eligibility of people for subsidies to offset their insurance costs.

And it made him think, "How do you build an Expedia for health care?"

When he launched hCentive, Singh's five-year plan was to have its software used by five state-run exchanges by 2014.

While the addition of Massachusetts leaves him one short of that goal, "I could not be happier," Singh said.

Before the launch of the Obamacare exchanges last fall, Singh's company had 500 employees, and it is close to reaching his prediction of 600 employees by the end of 2014.

"It's a big deal" to get the Massachusetts contract, he said, noting the state's status as the first in the nation to have a government-run health insurance exchange, under then-Gov. Mitt Romney in 2007.

—By CNBC's Dan Mangan.

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