BOSTON—Massachusetts health officials said Monday they are scrapping the state's problem-plagued insurance exchange in favor of a private company's version used in other states, while considering connecting to the federal site as a backup.
Massachusetts already has comprehensive health coverage, thanks to a 2006 state law. But overhauling the state's online exchange to comply with different rules under the federal health law, passed a few years later, has raised technical challenges.
Tens of thousands of people submitted old-fashioned paper applications and about 190,000 have been put on temporary Medicaid plans until the state can determine exactly what coverage they are eligible for. The state system has had a hard time sorting out eligibility, among other issues.
In the new proposal announced Monday, the state said it plans to use off-the-shelf software from private company hCentive Inc. that has been used in Colorado and Kentucky. But Massachusetts also is working on connecting to the federally run marketplace as a backup.
The goal is to be ready by Nov. 15 this year, when the next open-enrollment period begins.
This plan "certainly has its benefits and its challenges," said Sarah Iselin, an insurance executive tapped by Gov. Deval Patrick to lead the health-site fix.
"It does, however, solve for two realities: we need a reliable website to help people during the next open enrollment period, and we need to be in a position to achieve a fully integrated system in 2015," she said.
Ms. Iselin announced plans in March to begin severing ties with CGI Group Inc., the company behind the current state site. CGI also was responsible for parts of the federal exchange, HealthCare.gov, which got off to a rocky start in October but has since improved.
Massachusetts is still negotiating with CGI about ending that relationship, and to date has paid $17 million on a $69 million contract, a state spokesman said.
The hCentive software "has the best potential to fit" short- and long-term needs, the state said in a release. The goal is to roll out something basic this fall, and potentially upgrade later as needed.
"The guidance from [the] state has been to minimize risk," said Sanjay Singh, chief executive at Reston, Va.-based hCentive, in an interview. "We will take something that is functional, already working in other states, configure and maybe do minimal customization."
The company doesn't yet know what it will be paid for its efforts, Mr. Singh said. The state and hCentive plan to discuss the matter after a Thursday board meeting for the Health Insurance Connector Authority, which runs the exchange, he said.
Meanwhile, Massachusetts will work on connecting to Healthcare.gov. This link possibly could be used for a year if the hCentive effort takes longer than expected, the state said.
Oregon, which also experienced severe technical problems on its state exchange, announced plans last month to start the federal technology.
For Massachusetts, that switch will require significant adjustments to tie in state-specific design features, the state said. These include additional subsidies that Massachusetts is offering some applicants, on top of those available from the federal government.
"Based on our assessment of the Health Connector Exchange, we agree that the dual-track strategy is the optimal approach for the state to take at this point," said John Santelli, chief information officer for Optum, a UnitedHealth Group Inc. business serving as a technology adviser.
Write to Jon Kamp at jon.kamp@wsj.com
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