The abrupt announcement came after insurers had long believed they would need to obtain that hardware to comply with the policy. Those servers alone can range in cost from $10,000 for ones used by small plans, and up to $50,000 for servers used by larger plans. Administrative costs related to the service can run much higher.
"All these plans have upfront costs . . . and suddenly they come out and say, 'You don't need to do that,' " said Bobby Koritala, chief product officer of Infogix, an insurance data integrity provider. "Roughly 50 to 60 percent of the plans have their infrastructure in place."
The announcement came more than six months after insurers had suggested a cloud-based solution just like the one that now will be provided by Amazon. Insurers had argued that the cloud was a more technologically efficient and cost-effective solution.
"CMS never responded to say 'we will look at giving you an alternative,' " said Eric Sullivan, vice president of product innovation and data strategies of Inovalon, a health-care data solutions provider.
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Sullivan noted that in the past five months, CMS had been "canceling meetings" that were supposed to brief insurers on the edge server issue.
In last week's conference call, Sullivan said, CMS officials told the insurers that the Amazon cloud option was in response to the insurers' feedback from last year.
"The unfortunate thing is ... this response is very late in the game," Sullivan said.
Months ago Infogix had even asked CMS for permission to create a hosting service on Amazon Web Services, which it would then manage for insurers. But Infogix said CMS never answered that request.
"It was deafening silence," Koritala said. He said Infogix had spoken to insurers representing a majority of the health-care exchange market about creating such a solution on Amazon Web Services.
"We think it's the right thing for CMS to do, to centralize [the data], but we're not happy about CMS stretching it out," he said.
If CMS had given Infogix the green light months ago to set up its own Amazon solution, Koritala said, "We could have had that infrastructure up now. I have no doubt in my mind about that . . . we could have done it within three to six months."