States retaliate against ObamaCare website developers, halt payments

Oct. 24, 2013: Cheryl Campbell, senior vice president of CGI Federal, testifies on Capitol Hill in Washington. (AP)

Several states that paid millions to set up ObamaCare exchange websites but got error-plagued systems in return are starting to fight back, halting payments to the contractors and weighing legal options.

The same contractor that shouldered a large part of the blame for botching the federal HealthCare.gov is also under fire at the state level, where the company had an array of contracts to set up local ObamaCare exchange sites. CGI Group is facing angry officials in Massachusetts and Vermont who are cutting off payments in retaliation for widespread website problems.

Massachusetts -- whose government was one of the staunchest supporters of ObamaCare, and whose health plan arguably was the model for the law -- is refusing to pay any more until a working website is delivered.

A spokesman for the Massachusetts exchange told FoxNews.com that CGI's system is "far from where it needs to be" and the state will apply "nonstop pressure" to fix the problems.

Spokesman Jason Lefferts explained that while people who are not seeking subsidies can apply online, the system still can't properly calculate subsidies for those who are. The state, then, had to create an alternate system to send those individuals additional paperwork with information about subsidies and plans. Plus, the site continues to experience error messages and log-in issues, among other problems.

Massachusetts has paid $11 million of its $69 million contract.

Vermont, too, is withholding $5.1 million to CGI over its failure to meet deadlines, according to a report in the Boston Globe. CGI, though, claims that neither state is fully cutting off its funding.

The fight over payments comes as officials weigh their legal options, and some expect a rush of lawsuits once the major problems with the various exchanges sites are addressed. Vermont is investigating CGI and, according to the Globe, Massachusetts officials will present a plan in January to ensure "accountability" for the website problems.

Massachusetts has lagged far behind on enrollment, after severe website problems that forced the state to go to its alternate system.

CGI was also the contractor in Hawaii, where the executive director of the exchange recently resigned amid meager enrollment. CGI won the Hawaii contract even after the state Senate president warned the state exchange director not to hire the firm.

CGI has had a better time with the Affordable Care Act sites in states like California and Kentucky. California registered more than 100,000 enrollees in the first two months of open enrollment.

CGI spokeswoman Linda Odorisio defended the company's work.

"CGI has led or played a major role on the most successful state insurance marketplaces in the country, including Colorado, Kentucky and California," she said in an email to FoxNews.com. "The healthcare marketplaces in both Vermont and Massachusetts are successfully processing applications from citizens to enroll in insurance, despite media reports to the contrary."

She said hundreds of Vermont residents are applying daily and more than 100,000 online applications in Massachusetts are being processed. "CGI and its resources remain dedicated to delivering continuous improvements in system performance and the user experience in both states, working closely with government leaders to ensure that contract requirements for all parties are met," she said.

But the troubles at the state level and with HealthCare.gov have put the heat on CGI. Aside from its various state contracts, its federal contract was worth nearly $94 million -- and then soared to $290 million.

During a Capitol Hill hearing in October, officials with CGI Federal and other contractors working on the site pointed fingers over the problems with the roll-out. They claimed overall "end-to-end" testing was the responsibility of an agency within the Department of Health and Human Services, as was the decision to go live on Oct. 1.

They suggested more time was needed to work out the kinks.

"We would have loved to have months," said CGI vice president Cheryl Campbell, though she earlier claimed no amount of testing could have flagged all the problems.

Asked whether there were concerns the site was not ready to go live, she said: "It was not our position to tell our client whether they should go live or not go live."

Oregon, too, is beginning to confront its lead contractor. The state has had more trouble than any other getting its system online, resorting to paper applications after failed attempts to start the website.

Oracle Corp. was the primary contractor developing the exchange technology in this case. Cover Oregon officials have said previously they've withheld about $20 million in payments from Oracle and hired a law firm to review the state's contract with the technology company.

FoxNews.com's Judson Berger and The Associated Press contributed to this report.