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Xerox Corporation (XRX - Analyst Report) is under fire and Nevada’s health insurance exchange continues to be fraught with issues, as Nevadans file class-action lawsuits against both, alleging that they remain uninsured despite having paid premiums for policies.

The lawsuit claims that thousands of Nevadans are yet to be covered by insurance even after paying premiums, due to the perceived incompetence of Xerox and the health exchange in developing the system as advertised.

The Plaintiffs

Larry Basich, a Las Vegas retiree and lead plaintiff, alleged that the premiums he paid since Oct 2013 were forwarded to a carrier who did not have his application details. Basich suffered a heart attack in January and had to undergo a triple-bypass surgery, accruing over $400,000 in medical bills, none of which were borne by the insurance companies.

Another plaintiff is Lea Swartley, who was signed up under Medicaid despite her ineligibility for the government-paid program. Post rejection by Medicaid, her private insurance coverage was supposed to be back-dated by the exchange in return for payment of two months’ premium. However, when she ran over healthcare bills of $20,000 for her son’s accident, the insurance exchange reportedly ignored her demand.

While lead plaintiff Basich’s claims are being covered by the Health Plan of Nevada after weeks of squabbling, the lawsuit asserts that there might be countless Nevadans facing similar situations.

Flawed System

A $75 million contact was awarded to Xerox to design and operate Nevada’s health insurance exchange in Sep 2012. Till date, Xerox has fallen woefully short of expectations. Weighed down by malfunctions and delays in the website, the system has been a mess from the get-go.

Payments under the contract are tied to performance benchmarks, and the state has warned that it has the power to withhold payments from Xerox in case of non-performance. So far, Xerox has received only about $12 million of the contract value.

Xerox claims that its teams are committed to resolve software issues quickly and ensure affordable healthcare insurance coverage to Nevadans. The state, however, does not seem convinced and is pursuing its competitor Deloitte Consulting LLP to conduct an external assessment and review the insurance system.
Xerox presently holds a Zacks Rank #3 (Hold). Other stocks in the sector worth reckoning include Datalink Corporation (DTLK), Smart Technologies Inc. (SMT - Snapshot Report) and Tessera Technologies Inc. (TSRA - Analyst Report), all of which sport a Zacks Rank #1 (Strong Buy).

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