Covered California Handed out $184 Million in No-Bid Health Contracts

Wednesday, October 15, 2014

Covered California (CC) was moving quick after its creation in 2010 to ink deals with contractors helping to build and implement the state's version of Obamacare as directed by the Affordable Care Act.

That was the reason, the agency told Michael Blood at Associated Press (AP), they handed out dozens of no-bid contracts worth $184 million, contrary to government policies that generally promote “open and fair competition. AP reviewed a billion dollars worth of contracts and concluded that one-fifth of the money going to outside contractors did not involve bidding.

AP reviewed contracting records obtained via the state Public Records Act which showed $4.2 million of the contracts went to the Tori Group, a consulting firm with strong ties to CC Director Peter Lee.

Tori Group founder Leesa Tori worked directly for Lee when he was chairman of the Pacific Business Group on Health and also as a senior executive at the now-defunct Pacific Health Advantage, a small business insurance exchange owned by the company. Blood identified five other people with links to Pacific Health Advantage who are now contracting with Covered California.

Four of those five are now at Tori Group. A total of 10 people at the group, including Tori, do work for Covered California. 

Consumer Watchdog, an advocacy group promoting health insurance reform measure Proposition 45 on the November ballot, fired off a letter (pdf) to Attorney General Kamala Harris demanding an investigation. “This isn't about speed,” President Jamie Court told the Sacramento Bee, “this is about being opaque. For $4.2 million to flow to a former associate without any oversight is the antithesis of open government and good government,” he said.

Court and Covered California have been at odds over Prop. 45, which would give the state insurance commissioner veto power over proposed insurance rates that apply to individuals and small businesses. Covered California officials argue that the initiative, if passed, could endanger its viability by restricting its power to negotiate rates with insurance companies.

Court countered that in her letter to Harris with a pitch for Prop. 45:

“Four health insurance companies are spending $37 million against Proposition 45’s rate regulation falsely claiming there is an 'independent commission’ overseeing health insurance rates. The Associated Press’s disclosures confirm that this ‘commission,’ Covered California, does not operate with the transparency, accountability and independence that voters expect from government agencies and need in order to be protected from health insurance company rip-offs.”

Court also provided a chart of the interlocking relationships between members of Covered California and industry consultants.

AP reported that Lee defended the no-bid contracts in a statement extolling the “unique and deep health care experience” of the contractors who “get the job done on a tight deadline.” But he promised, “As this organization matures, we will rely less on private contractors.”

‒Ken Broder


To Learn More

Consumer Watchdog Calls for Investigation of Covered California’s No-Bid Contracts (by Jim Miller, Sacramento Bee)

Probe Sought In Award Of No-Bid Health Care Deals (by Michael R. Blood, Associated Press)

Attorney General Asked to Investigate Health Insurance Executives Embroiled in No-Bid Contract Scandal at Covered California (Consumer Watchdog)

California Gives No-Bid Health Pacts (by Michael R. Blood, Associated Press)

Calif. Exchange Granted Secrecy (by Michael R. Blood, Associated Press)

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