Group calls for probe of California's no-bid health contracts, senator calls 'outrageous'

Markets Associated Press

California's health insurance exchange faced calls Monday for a state investigation of its contracting practices, while a state senator urged the agency to account for deals that steered millions of dollars to a firm whose employees have long-standing ties to the agency's executive director.

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The no-bid deals "reek of the kind of cronyism that all public servants should be interested in eliminating," Sen. Ted Gaines, a Republican running for state insurance commissioner, said in a letter to Covered California Executive Director Peter Lee.

"Even the appearance of well-connected consultants and personal friends of decision-makers getting bid-free contracts should not be tolerated," added Gaines, who has been critical of the agency's marketing spending.

An Associated Press report Sunday revealed that Covered California awarded dozens of contracts without competitive bidding and oversight that is standard practice across state government from late 2010 through July. Several of those contracts worth a total of $4.2 million went to a consulting firm, The Tori Group, whose founder has strong professional ties to Lee.

A consumer advocacy group, Consumer Watchdog, called on the state attorney general to investigate whether taxpayer dollars were misused in the deal. The group, which is behind a ballot proposition to increase the state insurance commissioner's power in setting health coverage rates, said a probe should determine if Covered California consultants hired under the no-bid deals used their positions to advance insurance industry interests.

Attorney General Kamala Harris' office was aware of the request but had not made a decision on whether to launch a review.

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Awarding no-bid contracts is unusual in state government, where rules promote "open and fair competition" to give taxpayers the best deal and avoid ethical conflicts. The practice is generally reserved for emergencies or when no known competition exists.

The Legislature gave Covered California broad authority to award no-bid contracts to meet federal deadlines to get the agency running.

The agency emphasized in a statement Friday to AP that Covered California was under pressure to move fast and needed specialized skills, and the deals were executed under guidelines it modeled after state contracting rules.

The fledgling exchange "needed experienced individuals who could go toe-to-toe with health plans and bring to our consumers the best possible insurance value. Contractors like The Tori Group possess unique and deep health care experience to help make that happen and get the job done on a tight deadline," Lee said in the statement.

Leesa Tori, who founded the Tori Group, told AP that professional credentials qualified her company for the contracts.

In a telephone interview, Gaines said the rules permitting broad use of no-bid contracting at the exchange must change and called the contracts "outrageous."

Covered California was launched with about $1 billion in federal grants.

A pair of Covered California bills intended to increase accountability and oversight at the agency stalled this year in the Democratic-controlled Assembly Health Committee.

GOP lawmakers proposed the changes, which would have barred the exchange from increasing charges on health plans without lawmakers enacting the increase into law, and required a more rigorous review of Covered California's annual budget.

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Associated Press Writer Don Thompson in Sacramento contributed to this report.