Covered CA blames cronyism on Obamacare scramble

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.