By Caroline Humer
Fri Jan 10, 2014 4:08pm EST
A man looks over the Affordable Care Act (commonly known as Obamacare) signup page on the HealthCare.gov website in New York in this October 2, 2013 photo illustration.
Credit: Reuters/Mike Segar
(Reuters) - The U.S. government will part ways next month with contractor CGI Federal over the troubled Obamacare enrollment website, HealthCare.gov, which struggled with technical problems when it launched in October, the company said on Friday.
U.S.-listed shares of CGI Group, the parent of CGI Federal, were down 2.9 percent at $31.57 in late trading on the New York Stock Exchange, after the Washington Post reported the news earlier in the day.
"CGI and the Centers for Medicare & Medicaid Services have mutually agreed to complete work on CGI's contract for the Federally-Facilitated Marketplace, in line with the previously scheduled February 2014 contract end date," CGI spokeswoman Linda Odorisio said in an e-mailed statement.
CGI's contract is scheduled to end Feb 28, according to documents dating from when the website contract was awarded in 2011.
The Post reported that the U.S. government will instead sign a new contract with Accenture. In an e-mailed statement, an Accenture spokesman said, "We are in discussions with clients and prospective clients all the time - but it is not appropriate to discuss new business opportunities we may or may not be pursuing."
HealthCare.gov's technology failures in the weeks after its October 1 launch created a political crisis for President Barack Obama, threatening the roll-out of his signature healthcare law to consumers and emboldening its foes among Republican lawmakers to call for its delay.
CGI has been immersed in the effort to repair the site, which began working more smoothly for hundreds of thousands of consumers only in December, allowing them to enroll in new health insurance plans offered under Obama's Affordable Care Act.
But the government's dissatisfaction over the website's early crashes, as well as aspects of the site that still do not work, are behind plans to sign a one-year contract with Accenture instead, the Post report said, quoting a person familiar with the matter.
The new agreement with Accenture is valued at about $90 million, the Post said.
The Centers for Medicare and Medicaid Services (CMS), the government agency overseeing the Obamacare roll-out, would not confirm or deny that it planned to end its contract with CGI.
"We are working with our contract partners to make a mutually agreed upon transition to ensure that HealthCare.gov continues to operate smoothly for consumers," a CMS spokeswoman said in an e-mailed statement.
This is at least the second contract for work on HealthCare.gov that the Obama administration chose not to renew.
In November, CMS said it would not renew its contract with Verizon's Terremark unit for computer servers hosting the troubled website and instead award a contract for that work to Hewlett-Packard Co.
Terremark's contract ends on March 30, the day before the deadline for Americans to sign up for health insurance for 2014 under the healthcare law. The Terremark servers suffered at least one hours-long outage last fall, making the website inaccessible.
The end of the HealthCare.Gov contract was "negligible" for CGI's financials, according to one analyst, who declined to be quoted by name.
"We're not talking about a contract being taken away; we're talking about the renewal opportunity going to someone else," the analyst said. "You could say what they're losing in effect is this $90 million, 12-month contract, which in the context of a $10 billion revenue company is nothing."
More than 1 million people in 36 states have enrolled in health plans through HealthCare.gov, most of them in December. Another 1 million people enrolled through websites run by individual exchanges in the other 14 U.S. states.
(Reporting by Sandra Maler in Washington, Caroline Humer, Lewis Krauskopf and Sharon Begley in New York, and Leah Schnurr in Toronto; Editing by Karey Van Hall, Michele Gershberg, Nick Zieminski and Dan Grebler)