Covered California

Officials at the Covered California insurance exchange, the state’s implementation of Obamacare, worry passage of Prop. 45 could damage its operations, potentially affecting insurance coverage for millions of Californians. But the board has chosen not to notify California voters of their concerns by formally opposing Prop. 45.

“The initiative could seriously undermine the work that we have underway, our operations, and could compromise the terrific movement and progress that we are making with implementing health reform in California,” said Covered California Board Member Kimberley Belshé at the board’s recent meeting (webcast here).

Board Member Diana Dooley agreed. “I personally have very serious concerns about the interaction of the plain language of this initiative and the work that we’ve invested in making the Affordable Care Act real in California and to some considerable degree somewhat successful,” she said.

Those concerns were confirmed in a report by Executive Director Peter Lee, which found, “Proposition 45 could have a significant detrimental impact on Covered California’s operations….”

Prop. 45

Known as the Insurance Rate Public Justification and Accountability Act, Prop. 45 would require health insurance rates to be approved by the state insurance commissioner, similar to the car insurance rate approval mandated by Proposition 103 in 1988.

Lee’s Prop. 45 analysis cited several concerns:

“Covered California’s role as an active [insurance] purchaser could be significantly undermined if health plans negotiating with Covered California are reluctant to consider or negotiate on factors other than price because of uncertainty about the subsequent price that will be approved (or ordered) by CDI [California Department of Insurance].
“If for any reason a new rate were not approved in time for open enrollment, plans would ‘default’ to the old rate for the entire next year.
“Current timelines under Proposition 103 [if applied to medical care under Prop. 45] would provide significant disruption to the offering of plans for the annual open enrollment.
“One risk that Covered California needs to be concerned about is the potential of health plans withdrawing in advance of or during the rate regulation process. To the extent a mandatory intervenor hearing process is unresolved in time to meet the open enrollment deadline, a plan’s proposed rate could not go forward.
“Almost 90% of Covered California’s consumers receive federal subsidies to reduce their net premiums…. [I]f the rate change sets a new ‘second lowest silver’ plan, some consumers could see their costs increase due to the adjustment of the prices used for the tax credit calculation and the potential reduction of the purchasing power of the tax credits.”

Warn voters?

The Covered California board members could have laid out their concerns in a resolution opposing Prop. 45 to help voters make a better informed decision ahead of the Nov. 4 election. But they unanimously declined to do so.

“I think the beauty and the right kind of influence of this board is to remain as apolitical as possible,” said Board Member Robert Ross. “I’m philosophically opposed to taking any formal position on this ballot measure or any other. I think there’s plenty of politics to go around. Let it go on and let’s try to keep it out of the deliberations of this body.”

The board’s decision to remain neutral on Prop. 45 was welcomed by more than a dozen Prop. 45 supporters who spoke at the meeting.

“People will differ in their analysis of whether Prop. 45 will make the world better for consumers or not better,” said Betsy Imholz, representing Consumers Union. “But one thing is indisputable, that the insurance industry is unanimously and vociferously opposed to it. Were you to align with that position, I think it would create a bad public image.

“And were it to pass, I think the public would be watching closely and questioning your implementation of the act. You don’t need that. None of us needs that. We just want to move forward with the very successful work that you’ve been doing over the past several years.”

Elizabeth Pataki, a retired intensive care nurse representing the California Alliance for Retired Americans, agreed.

“Since Covered California is prohibited under California and federal law from spending taxpayer money to campaign for the ballot initiatives, and since you negotiate with the powerful health care industry to ensure Californians must buy health care and have access to that care, as such it’s very important that you avoid taking sides and getting involved in a political fight with consumer advocates on one side and the health care industry on the other,” she said.

“We need Proposition 45 because there have been 185 percent increases in rates, which have caused severe difficulties. Those severe difficulties include working people and retired people going bankrupt. Proposition 45 will apply the same rates as car coverage. It does not undermine the Affordable Care Act. And it’s public, it’s transparent, it’s open. The public can see what’s happening.”

Concerns

Only one person argued that the board should make its concerns public about Prop. 45.

“We have substantial experience with Prop. 103,” said Steve Young, representing the Independent Insurance Agents and Brokers of California. “From our position, Prop. 45 was a sham. What it is represented to be is not in fact what it would be. We believe and are sure that there is no empirical evidence to suggest that the Prop. 103 rating law, or especially the public intervention process, has done anything to lower insurance costs in property casualty insurance.

“Our view is Covered California itself already has done and will continue to do more to temper and lower insurance costs for California consumers than Prop. 45 ever could. So our view, while we certainly understand your position, is that it would be appropriate for you to call a pig a pig, and take a position against Prop. 45.”

Although the Covered California board has sought to stay above the political fray, it has found itself mired in it anyway. Consumer Watchdog, which is leading the campaign for Prop. 45, on Monday sent a letter to Attorney General Kamala Harris seeking an investigation of the agency’s no-bid contracts and suggesting Covered California is in collusion with insurance companies against Prop. 45:

“Covered California has refused for months to release information requested by Consumer Watchdog under the Public Records Act concerning the agency’s communications with insurance industry executives about Prop. 45 …. Californians deserve to know the truth about hundreds of millions of dollars in no-bid contracts and industry influence at Covered California before they vote November 4th.”

Dooley responded to criticism at the September Covered California meeting. “I … am deeply troubled by the politicization of the work that we’ve done and the suggestions that necessarily come up in a political campaign,” she said. “And the characterizations that have been made and may continue to be made that we are not a sufficient steward of consumers.

“I kind of take personal offense at that because I’m here because of my consumer commitment. And I think we have established a reputation of openness and evidence of consumer protection.”

Covered CA problems

In other action at the meeting, Lee told the board that many Californians who called Covered California in the previous month were put on hold for as long as 40 minutes while those whose citizenship was in question were moved to the front of the call line.

The number of suspected illegal residents, who were in danger of losing their insurance eligibility, had grown to 148,000. Prioritizing their cases reduced that to just 10,474 clients whose legal residency is still in question, according to a press release.

Lee told the board that, although the law requires illegal residents be dropped from coverage after 90 days, Covered California has extended their coverage “well beyond that.”

This article was originally published on CalWatchdog.com.

In an embarrassing new black eye for Covered California, the state’s implementation of Obamacare, the health exchange, has admitted it violated accepted practice by awarding $184 million in so-called “no-bid” contracts, according to a new report by the Associated Press.

State governments routinely consider competing bids for work. It’s a process designed to prevent corruption and the appearance of impropriety.

In the past, government contracting that skirts the process has been a target of prominent Democrats. During Republican President George W. Bush’s 2004 run for re-election, Democratic rivals Sen. John Kerry and Sen. John Edwards campaigned against the energy company Halliburton’s no-bid government contracts in Iraq. Republican Vice President Dick Cheney had been the head of Halliburton.

Now officials with close ties to the Obama administration have come under scrutiny for the practice.

During the Halliburton controversy, the Bush administration’s defenders appealed to one of the few established excuses for no-bid contracts, arguing that no other company was capable of doing the necessary work in the time available. Similarly, Covered California has responded to the current revelations by invoking a state of emergency.

In a statement, executive director Peter Lee explained Covered California “needed experienced individuals who could go toe-to-toe with health plans and bring to our consumers the best possible insurance value.”

Cozy ties

Among those individuals, it turned out, were members of The Tori Group, a contractor whose founder, Leesa Tori, had worked closely with Lee in the early 2000s. Amid the scramble to get Covered California up and running, the exchange’s board approved a grant increasing The Tori Group’s contract to $4.2 million.

“Contractors like The Tori Group,” Lee continued in his statement, “possess unique and deep health care experience to help make that happen and get the job done on a tight deadline.”

Covered California’s relationship with The Tori Group, however, was not a one-time affair. Leesa Tori became Covered California’s director of plan management — one of nine Tori Group personnel with current positions at Covered California.

Lee’s close relations with Tori mirrored those he has maintained with the White House. In the Obama administration, he was a deputy director at the Centers for Medicare and Medicaid Services, after working on national policy with HHS Secretary Kathleen Sebelius.

A case of emergency

Although Covered California has not necessarily broken any laws in its no-bid contracting, the impropriety of Lee’s intimate professional ties with The Tori Group underscored the risk the exchange was willing to run to succeed in their race to establish viability. Without moving quickly enough to implement the health-care system made possible under Obamacare, officials worried Covered California would befall the same fate as such failed state exchanges as neighboring Oregon’s.

In addition to the political humiliation visited on officials whose state exchanges failed, policymakers feared an excess of failures and a shortfall in enrollments would cause the state exchange system itself to collapse. That, in turn, would place a burden on the federal government which could make Obamacare implementation prohibitively costly and complex.

Through Lee’s efforts, however, Covered California survived. Those efforts, as the no-bid revelations have confirmed, blurred the line between appropriate and inappropriate action.

‘Death spiral’

To stave off a so-called “death spiral” of under-enrollment, for instance, Lee oversaw the inclusion of hundreds of thousands of Covered California applicants with missing or suspect identification. Those numbers helped give Obamacare the critical mass of enrollees it needed for political and policy purposes.

Alone, Covered California was responsible for over one-eighth of individual enrollments in Obamacare, even though California has only one-twelfth of America’s population.

In sum, the story that has emerged about Covered California’s success has captured the weakness of Obamacare implementation. While supporters of the health care law insisted it faced only a few bureaucratic bumps in the road, the reality was different.

Without a successful state exchange in California, the future of the Affordable Care Act would be in doubt. The stakes were high for Peter Lee, and he delivered — netting him a five-figure bonus this year.

This article was originally published on CalWatchdog.com

Covered CA Dissects Prop. 45, Doesn’t Oppose It