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Oracle Corp. sues Oregon over health insurance exchange, alleging breach of contract

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SALEM, Ore. - Oracle Corp. has sued the state of Oregon in a fight over the state's health insurance exchange, saying government officials are using the technology company's software despite $23 million in disputed bills.

Oracle's breach-of-contract lawsuit against Cover Oregon was filed Friday in federal court in Portland. It alleges that state officials repeatedly promised to pay the company but have not done so.

The suit seeks unspecified damages.

Oregon's health insurance enrolmentwebsite was never launched to the general public. State officials have blamed Oracle, but the company says the state's bad management is responsible.

Gov. John Kitzhaber has called for the state to sue Oracle and recover some of the $134 million it's already paid to the Redwood City, California, company.

In June, Oregon issued legal demands for documents that could become evidence in a possible lawsuit against Oracle.

Officials in the governor's office and the state Department of Justice did not immediately return calls for comment. Oracle declined to comment.

The lawsuit lays out in the most detailed terms yet Oracle's side of the story.

The company says the project became a victim of bureaucratic infighting between two state agencies responsible for both the Cover Oregon website and a separate effort to modernize a complex state computer system. It says state officials were unable to define requirements for the Cover Oregon system, an essential early step, and even went on a 60-day "retreat" to develop them but "returned empty-handed."

The lawsuit also faults the state's decision not to hire a systems integrator, which works as a sort of general contractor to co-ordinate and direct the work of multiple technology vendors. With the state acting in that capacity, the lawsuit says, Oracle programmers were at the whims of indecisive and warring managers.

The website's problems became a political liability for Kitzhaber, a Democrat who has built a national reputation as a health care reformer. His Republican rival, state Rep. Dennis Richardson, has used the Cover Oregon fiasco to argue that Kitzhaber is an ineffective manager and a poor steward of public funds.

Instead of signing up for health insurance in one sitting, Oregonians had to use a hybrid paper-online process that was costly and slow, and the state had to hire more than 400 workers to help them. Altogether, about $250 million in federal funds has been spent on Oregon's exchange, including technology development, salaries, advertising and rent.

Despite the exchange's technology woes, about 454,500 Oregonians have enrolled in coverage through Cover Oregon using the hybrid process. An estimated 97,000 of those enrolled in private health plans, while about 357,500 enrolled in the Oregon Health Plan, the state's version of Medicaid.

Earlier this year, the state decided to stop building the Oracle website and transition to the federally run enrolmentwebsite.

The FBI and the federal Government Accountability Office are also investigating Oregon's exchange problems.

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