The next company to run the Obamacare exchanges could be small enough to escape the law’s employer mandate to provide health insurance to employees. That’s because the Obama administration is giving priority to small business or companies operating in underprivileged areas to be the next firm running the healthcare.gov website.
Any business with fewer than 50 employees is exempt from the mandate to provide insurance to employees under the Patient Protection and Affordable Care Act, better known as Obamacare. The mandate has been delayed three times, and is set to go into effect next year.
Under federal standards, the firm the government will hire can earn up to $25.5 million in annual revenue and still be considered a small business. Additionally, the standards do not mention how many employees a firm can have — leaving the possibility open for a small business with fewer than 50 employees and up to $25.5 million in annual revenue to win the contract.
“Although employees are counted when a size standard is in annual revenues, it is quite possible for a company with 50 employees to meet the $25.5 million revenue threshold,” U.S. Small Business Administration spokeswoman Tiffani Shea Clements told TheBlaze.
Asked whether an exempt company could be eligible for the contract, Aaron Albright, director of media relations for the Centers for Medicare and Medicaid Services, told TheBlaze, “You’ll need to discuss those issues with a procurement expert.”
The legal process for determining a small business, Albright said, is the code set by the North American Industry Classification System, which the government uses to determine the size of a business by industry. The NAICS code for the Obamacare contract is 541512.
Private sector procurement experts agree it is possible for an exempt company to get the next contract.
“Of course – a company with one employee can sell one server for $30 million,” said Paul Karch, CEO of Gardant Global, a Florida-based consulting firm that connects businesses to government contracts.
“The government’s definition of ‘small’ is larger than many people may realize, and can be based on either number of employees or revenue,” Karch told TheBlaze. “It is generally up to the government contracting officer to select the appropriate NAICS code for a procurement. So much rests on the shoulder of the contracting officer and the actual nature of the [information technology] work.”
One federal contracting lawyer, who asked not to be quoted by name because of his work with the government, told TheBlaze a technology company earning $25 million or more could easily have fewer than 50 employees by using subcontractors.
However, he added that he doubted that a small business – even under the government’s broad definition—could handle a project of this size and scope. The procurement lawyer says he believes CMS is likely going through the motions to show they first sought a smaller company.
For the contract to run Healthcare.gov and the exchanges, the Obama administration is giving priority to bidders that are small businesses, owned by disabled veterans, owned by women or operating in a “historically under-utilized business zone,” or HUBZones.
The New York Times also reported federal officials “were particularly interested in responses from small businesses owned by women, disabled veterans and ‘socially and economically disadvantaged individuals,’ including blacks and Hispanic Americans.”
“As required by regular federal contracting procedures before CMS determines a contract strategy, we must perform market research in order to determine if there are any small businesses that could perform this work,” Albright told TheBlaze. “This requirement is called a ‘sources sought announcement’ that is required by the Small Business Administration in order to give small business an opportunity to respond.”
This will be the first competitive bid for a company to run the Obamacare exchanges after two politically connected companies – the problem-plagued CGI, later replaced by Accenture – have run the website, which the administration says oversaw 8 million signups for government-approved insurance plans.
Albright explained the initial single-bid short-term contracts were necessary to get the exchanges up and running as quickly as possible, with the understanding there would be a competitive bidding process for the long term contract.
“As we stated when we signed the contract, because of tight timeframes to build out additional functionality to support future phases of the program, we used an expedited procurement process as permitted pursuant to the federal regulations,” Albright said. “CMS is required as part of these regulations to recompete these types of contracts, and we expect to release a new solicitation for this contract in the near future.”