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Maryland Obamacare contractor gets subpoena

A federal watchdog issued subpoenas in its investigation into Maryland's troubled health insurance exchange, and a congressman who opposes Obamacare said there's evidence of fraud.

The now-fired lead contractor for that exchange, Noridian Healthcare Solutions, told CNBC.com it received a subpoena at the end of July in a probe of how federal funds were spent on the Maryland exchange.

Companies or entities associated with the Maryland Health Benefit Exchange have also received subpoenas in the investigation, according to sources familiar with the situation.

A man reads a pamphlet from Maryland's Obamacare exchange while waiting to speak to a health navigator in Silver Spring, Md., Saturday, Dec. 7, 2013.
Andrew Harrer | Bloomberg | Getty Images
A man reads a pamphlet from Maryland's Obamacare exchange while waiting to speak to a health navigator in Silver Spring, Md., Saturday, Dec. 7, 2013.

Rep. Andy Harris, R-Md., said in a statement Tuesday that a federal audit he had requested of the Maryland exchange last winter has moved "into a full-blown investigation" by the Office of the Inspector General of the U.S. Health and Human Services Department.

"I called for the audit of the Maryland exchange because tens of millions of taxpayer dollars were wasted, and those who wasted them should be held accountable," said Harris, an Obamacare opponent and a medical doctor.

"Now we know that fraud may have occurred and subpoenas have been issued. Lt. Gov. [Anthony] Brown was in charge of the exchange, and it appears fraud may have gone on under his watch," Harris said.

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Tom McGraw, president and CEO of Noridian Healthcare Solutions, said in a statement said: "On July 30, Noridian Healthcare Solutions received a document request from the inspector general. The company is cooperating fully as that office continues its ongoing review of the MHBE."

It is not clear who else received subpoenas. A spokeswoman for a subcontractor that Noridian used, EngagePoint, did not immediately respond to requests for comment.

Donald White, a spokesman for the HHS inspector general's office, declined to comment.

Lt. Governor of Maryland Anthony Brown accompanies his daughter Rebecca Brown to vote in Landover, Maryland, on June 12, 2014.
Juana Arias | The Washington Post | Getty Images
Lt. Governor of Maryland Anthony Brown accompanies his daughter Rebecca Brown to vote in Landover, Maryland, on June 12, 2014.

Christopher Garrett, a spokesman for the Maryland exchange, said: "The exchange has not received a subpoena. We're in close communication with the IG and helping in every way we can."

Garrett said he did not know who received any subpoenas issued by the inspector general's office.

Justin Schall, campaign manager for Brown, who is the Democratic nominee governor, said: "It's disappointing that Congressman Harris would mislead the people of Maryland and play political games with a federal investigation, but it is clear that the Republicans will say anything to achieve their extreme right-wing agenda. Neither the lieutenant governor nor anyone in his office has received any communication or requests from the Office of the Inspector General or any other federal agency."

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Maryland fired Nordian in February after paying the company $65 million and being billed an additional $13 million.

At the time, Thomas Kim, deputy secretary of operations at the Maryland health department, told officials that Noridian "severely misrepresented the maturity" of the online system it was building for the exchange, and had outsourced its primary role to a subcontractor, EngagePoint, which was not authorized to do the work. Disputes between Noridian and EngagePoint allegedly led to work stoppages when the exchange site was supposed to be under construction.

Harris requested a federal audit of the Maryland Health Benefit Exchange last spring, saying more than $100 million in federal funds used to build the Obamacare marketplace had resulted in an exchange that flopped during the first year of open enrollment in Affordable Care Act plans.

"Maryland officials ignored early warning signs and chose to waste and abuse federal taxpayer money by opening up what they knew was a flawed exchange to the public," the congressman said in a statement in March.

"I have confidence that the nonpartisan and independent HHS inspector general will thoroughly investigate and bring to light how hundreds of millions of dollars were wasted on one of the worst exchange rollouts in the country."

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Maryland's exchange finished 44th in the nation in signing up potential Obamacare enrollees. It enrolled just 67,757 people in private insurance plans, or 16.2 percent of the estimated pool.

On the heels of its launch, as the exchange tried to get its website working properly, the exchange's director, Rebecca Pearce, took a weeklong vacation in the Cayman Islands in late November. She resigned in December, after her ill-timed trip was disclosed.

The exchange's performance even after Pearce left remained bad enough that officials decided to scrap the exchange's tech platform altogether. Maryland's exchange is now moving to use the software code from Connecticut's state-run Obamacare marketplace, whose performance enrolling people in insurance plans was widely lauded, and greatly exceeded original estimates.

On Tuesday, Kevin Counihan, the head of Connecticut's exchange, Access Health CT, was named as the first-ever CEO of HealthCare.gov, the federal Obamacare marketplace that sells insurance in 36 states that are not running their own exchanges.

By CNBC's Dan Mangan

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