California awarded $184 million in no-bid healthcare contracts

Covered California Executive Director Peter Lee speaks during a press conference regarding the number of new healthcare enrollees through, the health insurance exchange for the state of California, on November 13, 2013 in Sacramento, California.
Covered California Executive Director Peter Lee speaks during a press conference regarding the number of new healthcare enrollees through, the health insurance exchange for the state of California, on November 13, 2013 in Sacramento, California.
Max Whittaker/Getty Images

California's health insurance exchange has awarded $184 million in contracts without the competitive bidding and oversight that is standard practice across state government, including deals that sent millions of dollars to a firm whose employees have long-standing ties to the agency's executive director.

Covered California's no-bid contracts were for a variety of services, ranging from public relations to paying for ergonomic adjustments to work stations, according to an Associated Press review of contracting records obtained through the state Public Records Act.

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 agency Executive Director Peter Lee, while others were awarded to a subsidiary of a health care company he once headed.

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.

Covered California was created in 2010 and given broad authority to award no-bid contracts as a way to meet tight federal deadlines for getting the new health insurance marketplace operational by last year. The same law also exempted it from sections of the state's public records law, a loophole lawmakers closed last year after it was disclosed by the AP.

The agency confirmed some no-bid contracts were awarded to people with previous professional ties to Lee, but emphasized Covered California was under pressure to move fast and needed specialized skills.

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 a statement.

"As this organization matures," he added, "we will rely less on private contractors."

With so much taxpayer money in play, a government watchdog group said more oversight is essential.

Kathay Feng, executive director of California Common Cause, said she recognized the need to free Covered California from cumbersome contracting rules that could have hampered its ability to meet Affordable Care Act deadlines.

But with tens of millions of taxpayer dollars at issue, "some accountability and transparency is needed, whether through audits or an alternative oversight body," she said, adding, "To spend $4.2 million on anything, let alone a contract to a friend and former colleague, raises serious questions."

The no-bid contracts represent nearly $2 of every $10 awarded to outside companies by the agency and were among roughly $1 billion in agreements disclosed to AP that the exchange executed from late 2010 through July, according to the records.

Through its first year of operation, Covered California was funded almost entirely by federal grant money.

The founder of The Tori Group, Leesa Tori, worked under Lee when she was a senior executive at Pacific Health Advantage, a small business insurance exchange that failed in 2006. Lee was a longtime chief executive of Pacific Business Group on Health, which managed Pacific Health Advantage, and Tori also worked with him at the parent company.

Long before it opened its doors to the public last fall, Covered California awarded a small contract to Tori for her advice on designing a program to sell insurance to small companies. The $4,900 agreement in late 2011 was executed without rival bids.

The deal would mark the beginning of a lucrative and far-reaching partnership between the agency and the company Tori formed about two years ago, just as national health care reform took root across the U.S. An initial $150,000 contract with The Tori Group in March 2013 was executed by Lee, but later amendments that increased its value to $4.2 million were approved by Covered California's board, an agency statement indicated.

Nearly three years after her first, small contract went into effect, she and employees at her firm hold senior-level positions and work on issues ranging from enrollment to health plan design at Covered California.

At least five other people who are contracted to work at Covered California have ties to the now-defunct Pacific Health Advantage, four of them at The Tori Group, whose employees are paid through the consulting contracts. In all, nine people listed on the group's website, in addition to Tori, work at the exchange.

Yolanda Richardson, Covered California's chief deputy executive director who reports directly to Lee, was a vice president at Pacific Health Advantage. Before she was hired on staff, she received a 10-month, $176,500 no-bid consulting contract from the agency in 2011, about a month before Lee came on board, according to the records.

Tori is Covered California's director of plan management. The Tori Group's chief financial officer, Kathleen Solorio, is Covered California's operations adviser. Another principal at the firm, Corky Goodwin, is serving as interim director of the small business insurance program; she was a senior manager at Pacific Health Advantage.

Tori said professional credentials qualified her company for the contracts — working in an exchange gave her team experience rare in the industry.

The Pacific Business Group on Health Negotiating Alliance, a subsidiary of the company Lee previously led, received two no-bid contracts worth a total of $525,000. Spokeswoman Emma Hoo said the work covers "unique and in-depth assessment of plan operations."

John Vigna, spokesman for former Assembly Speaker John Perez, who spearheaded legislation that established the exchange, said Perez was confident that enough checks and balances remained in effect, including oversight by the federal government and a state law that outlines rules for avoiding conflicts of interest.

Data: No bid contracts

California's health insurance exchange executed more than 300 contracts with vendors worth roughly $1 billion from late 2010 through July, according to agency records obtained by The Associated Press. Those figures do not include the value of competitively awarded contracts with large health providers, such as MetLife and Kaiser Permanente, which are temporarily shielded from public disclosure by state law.

Contracts with state and government agencies, such as the California Department of Health Care Services, tallied nearly $370 million, and did not require competitive bids. The non-government contracts that were not competitively bid are listed below, along with the time period the contract was in effect and a description of the work to be done, as provided by Covered California.

Bid type Company Amount Date Ending Notes
Non-CompetitiveBid Weber Shandwick $98.7 million 5/1/2013 4/30/2015 Implement statewide outreach, education and marketing strategies for insurance affordability programs. Includes additional qualitative research to identify market segments, creative productions, paid and earned media, public relations and digital/social media. Resources include the direct media purchase expenses and are subject to ongoing approval processes.
Non-CompetitiveBid Richard Heath Associates $44.3 million 8/1/2013 12/31/2014 Contractor will manage and oversee the outreach and education grant program (including training), the In-Person Assistance Program (including training), and the Navigator program.
Non-CompetitiveBid Pinnacle Claims Management, Inc. $14.8 million 4/1/2013 9/30/2016 Amendment is needed for PCMI to support agents assisting enrollees in the individual market including individual agent call center support, sales support and product training for the individual market, sales cycle updates and reporting, and a lead management system. This amendment also includes additional staff for PCMI for manual processing of SHOP applications.
Non-CompetitiveBid The Tori Group $4.2 million 3/4/2013 1/31/2015 Consultants to assist with the implementation of SHOP policy and operations.
Non-CompetitiveBid Robert Half International, Inc. $3.7 million 5/1/2013 12/31/2014 The consultant will provide technical assistance to develop, design, and implement the Exchange's premium accounting and reconciliation area which includes compensating assisters and developing and implementing the accounting and cash processes to compensate assisters, and establish proper controls and fraud prevention that will be associated with the implementation of the exchange.
Non-CompetitiveBid National Opinion Research Center $3.6 million 8/1/2013 6/30/2015 The contractor will continue and expand research services for the exchange. This research will include qualitative research for small businesses, quantitative research for consumers and ad-hoc research projects as needed to inform the policy decisions of the exchange.
Non-CompetitiveBid Health Consumer Alliance/Legal Aid Society of San Diego $3.4 million 5/1/2013 12/31/2014 Health consumer alliance for consumer assistance.
Non-CompetitiveBid MAXIMUS, Inc. $1 million 2/3/2014 6/30/2014 The Contractor will provide interim staffing support to perform key data entry work to process paper applications for the exchange's marketplace into theCalifornia Healthcare Eligibility and Enrollment Retention System to ensure applicants are enrolled to receive their benefits. This interim staffing will be retained during open enrollment to assist with any immediate key data entry needs, and for three months after open enrollment ends to provide support of back office duties.
Non-CompetitiveBid Robert Half International, Inc. $950,000 7/20/2012 6/30/2013 The consultant will provide technical assistance to develop, design, and implement the exchange's premium accounting and reconciliation area which includes compensating assisters and developing and implementing the accounting and cash processes to compensate assisters, and establish proper controls and fraud prevention that will be associated with the implementation of the exchange.
Non-CompetitiveBid Milliman, Inc. $826,500 1/1/2012 9/30/2013 Review, analyze, assess and provide recommendations on actuarial requirements for the essential health benefits.
Non-CompetitiveBid Rideout Advisors, LLC $822,720 7/1/2013 6/30/2015 Under the general direction of the executive director, the contractor will provide a consultant to perform the duties of the exchange's senior medical adviser until the position can be permanently filled. The consultant will provide consultation and advice regarding the design of policies affecting how the exchange's policy can best promote wellness and value. The consultant will develop, plan, and advise on implementation of policies that advance and improve the health of Californians and strengthen the health care delivery system.
Non-CompetitiveBid Kenneth F. Wood $618,000 12/6/2012 4/29/2014 To provide the exchange with an interim director of product development and sales until that position can be filled.
Non-CompetitiveBid Manatt, Phelps & Phillips, LLP $580,000 8/1/2012 12/31/2014 Lead and support internal working meetings of state and exchange staff in affected agencies to identify common issues, options, and possible approaches to coordination with existing state programs, including Medicaid, Healthy Families and Other Applicable State Health Programs and with state health insurance regulating agencies.
Non-CompetitiveBid Christopher M. Kelly & Associates $450,000 7/1/2012 8/31/2013 Provide technical consulting services in marketing and developing partnership programs with the exchange in order to optimize the marketing budget and achieve enrollment objectives.
Non-CompetitiveBid National Opinion Research Center $350,000 8/1/2012 6/30/2014 To design, develop and implement the exchange's evaluation plan. Services include data collection, analysis and reporting.
Non-CompetitiveBid Pacific Business Group on Health Negotiating Alliance $335,000 10/1/2012 10/31/2013 The contractor will provide eValue8 tool to manage eRFP responses and provide training to Exchange staff.
Non-CompetitiveBid Pricewaterhouse Coopers, LLP $300,000 11/1/2012 9/30/2013 To provide specialized consulting services in the area of health plan design, actuarial analysis of plan design, development of dental plan designs to meet the pediatric dental essential health benefit requirements.
Non-CompetitiveBid Leah C. Morris $250,000 3/1/2013 8/31/2014 Consulting services to assist in the review of QHP bidder responses and advise staff during final QHP plan selection process.
Non-CompetitiveBid Ted Von Glahn $249,506 11/1/2013 12/31/2014 To provide QRS consulting services to the exchange's senior medical adviser.
Non-CompetitiveBid Wakely Consulting Group $241,000 1/18/2013 6/30/2014 Provide technical consulting services to assist the exchange in the development of a financial analysis, in order to support requests on-going federal funding and also make recommendations on the exchange's financial infrastructure to ensure that the exchange is a self-sustainable organization.
Non-CompetitiveBid Ana J. Matosantos $240,000 1/15/2014 12/31/2014 Senior strategy adviser to advise the exchange on the impact and long-term success of the exchange in the areas of financial sustainability, heath care cost containment and evaluations of outcomes and analytics.
Non-CompetitiveBid Taylor Feldman Group $210,000 7/1/2014 7/1/2015 Covered Californiahas requested assistance from The Taylor Feldman Group, LLC to provide health analytics consulting services. TFG will assist CC to develop an analytic agenda, build a health care analytic unit, procure and implement necessary warehousing and tools (Enterprise Analytic Solution), and conduct analyses vital to the CC business objectives during the next two years. This work will jump start the CC analytic capabilities and lay the foundation of knowledge, techniques, tools and data for data-driven decision-making.
Non-CompetitiveBid ClearBest, Inc. $200,000 3/17/2012 6/30/2012 Post-award evaluation consulting services.
Non-CompetitiveBid Pacific Business Group on Health Negotiating Alliance $190,000 7/1/2014 6/30/2015 The purpose of this contract is to support the exchange's QHP selection, oversight and management activities
Non-CompetitiveBid Bank of America $184,978 12/9/2013 6/30/2015 Contractor shall provide lockbox services to process the premium monies generated by the Small Business Health Options Program (SHOP) for the California Health Benefit Exchange.
Non-CompetitiveBid Yolanda R. Richardson $176,500 7/1/2011 4/30/2012 Provide technical consulting services in the design, development, and implementation of eligibility and enrollment processes and functions.
Non-CompetitiveBid Powers & Associates $162,650 5/1/2011 12/31/2011 Acting Administrative Officer
Non-CompetitiveBid Bertko Actuarial Associates, LLC $153,600 2/1/2014 1/31/2015 The contractor shall act as the exchange's interim chief actuary/director of research to advise on the impact and long-term success of the exchange in the areas of financial sustainability, health care cost containment and evaluations of outcomes and analytics. The chief actuary/director of research for the exchange will be under the general direction of the executive director and will manage the collection and analysis of data, trend reporting, and market study information needed for the Exchange's policy development and health plan, population health costs, and risk assessment. The director will be a strategic thinker, team-builder, innovator, and collaborator with an entrepreneurial mindset and strong verbal and written communication skills, who works effectively with diverse stakeholders and fosters diversity, is composed and calm under pressure, and has a passion for the Exchange's mission.
Non-CompetitiveBid McQueen Consulting, LLC $150,000 7/24/2012 12/31/2012 The contractor shall provide four technical consultants in the field of small group segment health care who will assist the exchange's SHOP exchange director with the following: 1) defining business requirements for the SHOP program; 2) negotiating with carriers to solicit their participation in the program; 3) developing detailed eligibility and enrollment processes for SHOP; and 4) representing the exchange in strategy meetings for the CalHEERS and potentially other projects.
Non-CompetitiveBid The TriZetto Group, Inc. $150,000 12/19/2012 6/18/2013 To provide the exchange with the services of a senior medical adviser until the exempt assignment can be filled.
Non-CompetitiveBid Helmsman Advisors $150,000 3/25/2013 9/30/2013 Leadership services for the exchanges various contracts, assisting to stand up three service center sites.
Non-CompetitiveBid Milliman, Inc. $150,000 11/1/2013 9/30/2014 The contractor shall provide interim actuarial and analytical support services to assist the exchange in the analysis and response to the president's recommendation to extend the deadline for health insurance companies to discontinue health plans that don't meet basic standards and evaluate the financial and operational impact to the exchange of proposed changes in federal and/or state policy, regulation or guidance.
Non-CompetitiveBid MAXIMUS, Inc. $150,000 12/23/2013 1/31/2014 MAXIMUS will provide the exchange with interim staffing of key data operators to enter paper applications into CalHEERS
Non-CompetitiveBid Casey J. Morrigan Associates $148,000 9/1/2012 6/30/2014 The contractor will provide policy analysis and research expertise to the exchange to identify issues that require analysis, research, and resolution by either the exchange staff or its board.
Non-CompetitiveBid Sacramento News and Review (Chico Community Publishing, Inc.) $145,091 4/25/2013 12/31/2013 The contractor shall write, design, print and ship to four exchange locations — two in Los Angeles, one in the Bay Area and one in Sacramento — 50,000 copies of an eight-page tabloid newsprint publication, plus provide a media plan and PDF and/or flipbook version. The contractor shall provide one English version and one Spanish version of this publication.
Non-CompetitiveBid Pacific Health Consulting Group $140,000 1/1/2012 12/31/2012 Develop a stakeholder process that provides stakeholders the opportunity to engage and provide feedback on critical policy decisions.
Non-CompetitiveBid Pricewaterhouse Coopers, LLP $120,000 12/3/2012 3/31/2013 Prepare the solicitation document to obtain the services of a vendor to provide supplemental benefits for the SHOP Exchange. (Dental & Vision)
Non-CompetitiveBid Lincoln Crow, LLC $108,000 2/1/2014 5/31/2014 Planning, coordination, reporting for field. To expedite startup and geographic focus, we propose hiring outside two-person consulting team to manage the external coordination and work with internal staff to coordinate CoveredCalifornia's efforts.
Non-CompetitiveBid Center for Healthcare Decisions $106,359 3/1/2012 6/30/2012 Conduct 10 consumer focus groups, plus one pilot. The focus groups will gauge consumer reaction to different approaches to cost-sharing structures in benefit plan design.
Non-CompetitiveBid Kelch & Associates $101,702 12/1/2011 7/31/2012 Provide consulting services and assist the exchange in developing solicitation and contractual requirements, vendor selection, and Level II application grant application process.
Non-CompetitiveBid Wakely Consulting Group $100,000 3/21/2012 12/31/2012 Research and feasibility analysis to ensure financial self-sufficiency and sustainability of the exchange.
Non-CompetitiveBid Kirstin C. Appelt $100,000 10/8/2012 5/31/2013 The contractor will provide technical consulting services in the area ofusability and qualified health plan evaluation for the CalHEERS project.
Non-CompetitiveBid Weber Shandwick $100,000 3/11/2013 4/30/2013 Consultant services for the exchange's communications campaign strategy and planning, advertising creative development and production, paid media planning and placement, social media strategy and communications, and collateral material development and production. The contractor shall create and develop an integrated transition campaign plan for CoveredCalifornia'smarketing program to compliment the work of Ogilvy PR.
Non-CompetitiveBid Proposal Technologies Network, Inc. $93,000 10/1/2012 6/30/2013 Use ProposalLink Software to prepare reports about the QHP eRFPs.
Non-CompetitiveBid National Association of Insurance Commissioners $84,451 3/10/2014 The exchange requires a license from NAIC to access the System for Electronic Rate and Form Filing, which is the electronic rate filing system used by state insurance companies across the U.S. The exchange is expecting the submission of rates from qualified health plans and standalone dental plans for 2015. This license will streamline the process for rate submission for both the exchange and the issuers.
Non-CompetitiveBid Lesley S. Cummings $81,440 8/1/2011 12/31/2011 Assist with policy analysis, provide expertise in specialized areas, and coordinate theCalifornia Health Benefit's Exchange formal review and response on federal regulations.
Non-CompetitiveBid Kelch & Associates $80,000 9/19/2012 6/30/2013 The contractor will provide an outside technical consultant to review and draft the grant 2.0 application and documents for review and approval by the federal government.
Non-CompetitiveBid Leah C. Morris $78,000 3/1/2012 2/28/2013 The contractor shall assist the exchange in the development of Qualified Health Plan (QHP) certification standards, strategy for health plan solicitation, and final plan selection process. The Contractor will provide timely policy analysis, research, identify issues, make recommendations, and prepare reports and develop an issue matrix, as requested.
Non-CompetitiveBid KPMG $64,000 1/21/2014 4/30/2014 The single audit encompasses an audit of California'sfinancial statements, review of internal controls over financial reporting and compliance with federal program requirements, and additional tests of compliance with federal and state laws and regulations at the entity level and at the major federal program level. California'ssingle audit is performed in accordance with the Single Audit Act, provisions of OMB Circular A-133, the Government Accountability Office's Generally Accepted Government Auditing Standards, and the American Institute of Certified Public Accountant's Statements on Auditing Standards. In order for the exchange to meet federal compliance standards, the audited financial statements (Comprehensive Annual Financial Report (CAFR)) and the single audit on compliance per A-133 must be submitted. In order to complete the audits in such a short time frame, the exchange proposes to engage the contractor to complete the compliance audit, and to perform the financial statement audit.
Non-CompetitiveBid JDJM Group. LLC $64,000 3/10/2014 7/31/2014 Senior budget and finance adviser to advise the exchange on the impact and long-term success of the exchange in the areas of financial sustainability, health care cost containment and evaluations of outcomes and analytics. The contractor will act as the interim chief financial officer until that position can be filled on a permanent basis.
Non-Competitive Tower Watson Delaware, Inc. $61,622 12/1/2010 12/31/2011 Salary survey for executive positions.
Non-CompetitiveBid Daniel Chavez $58,000 2/1/2014 5/31/2014 Enrollment organizer will be responsible for the on-the-ground execution of the field plan through a combination of metrics-based program evaluation, coordination of internal and external resources, and relationship building. Organizer will assist matrixed team tasked with outreach to consumers to encourage them to take advantage of the coverage options available to them under the ACA. Organizer will report to the deputy director external affairs. Organizer will coordinate the efforts of a network of community based groups who are providing enrollment assistance and community education to targeted health care consumers on the ACA.
Non-CompetitiveBid Kelch & Associates $53,750 9/16/2013 12/31/2014 The contractor is an independent health policy research and consulting firm with expertise in commenting and reviewing health care regulations. The contractor will conduct an independent and unbiased review of the exchange's regulations in order to obtain a different, outside perspective on what the agency creates.
Non-CompetitiveBid Rehabilitation and Occupational Consultants $50,000 7/1/2014 6/30/2015 Contractor will provide ergonomic evaluations that will identify significant risk factors, adjust workstations to ergonomic standards and comfort including task chair, keyboard platforms, and desktop equipment.
Non-CompetitiveBid Tower Watson Delaware, Inc. $48,268 2/1/2012 8/31/2012 Salary survey, executive level positions
Non-CompetitiveBid Aanko Technologies, Inc. $43,105 10/4/2013 6/30/2014 To provide additional funds for the contractor to prepare a security/assessment, threat analysis, emergency preparedness information and security/safety committee for the new exchange's headquarters.
Non-CompetitiveBid Proposal Technologies Network, Inc. $43,000 2/1/2014 6/30/2015 The exchange will require the technical support services of the contractor as it collects the submission of individual product offerings for both the individual and small group markets from QHP and SADP issuers starting May 2014. The contractor shall work closely with exchange staff to provide technical consulting services to assist with loading the renewal and new entrant applications, scoring, and plan designs. Other tasks will include linkage to the eValue8 2014 data for key respondents to reuse responses, allowing plans to have linkage to the NBCH-hosted eValue8 2013 data for key respondents (when available) to reuse responses, and manage RFP responses.\n
Non-CompetitiveBid National Committee for Quality Assurance $40,460 6/1/2013 12/31/2014 Data license agreement for QHP to access the Healthcare Effectiveness Data and Information Set (HEDIS).
Non-CompetitiveBid Robert Seastrom $35,000 4/1/2013 9/30/2013 Provide the exchange with graphic design support.
Non-CompetitiveBid Evolve Partner Group, LLC $34,800 3/8/2013 12/31/2013 Provide organization functional efficiency, compensation structure development, executive meeting analysis, and other organizational development consulting as needed.
Non-CompetitiveBid Sjoberg-Evashenk $15,000 9/1/2013 12/31/2013 The contractor shall provide to theCalifornia Health Benefit Exchange additional reports related to the salary survey conducted pursuant to the mandates outlined in AB 1602 (Perez, Chapter 655, Statutes of 2010) that enacts theCalifornia Patient Protection and Affordable Care Act.
Non-CompetitiveBid Sjoberg-Evashenk $15,000 1/1/2014 6/30/2014 The contractor shall provide to theCalifornia Health Benefit Exchange additional reports related to the salary survey conducted pursuant to the mandates outlined in AB 1602 (Perez, Chapter 655, Statutes of 2010) that enacts theCalifornia Patient Protection and Affordable Care Act.
Non-CompetitiveBid Secure Screening Solutions dba Capital Live Scan $14,000 6/1/2014 5/30/2015 Federal guidance requires that state exchanges, like theCalifornia Health Benefit Exchange, protect and safeguard customers from unauthorized and illegal access to, or disclosure of, their sensitive information. The contractor will provide the exchange with background checks of CalHEERS contractors.
Non-CompetitiveBid Pacific Health Consulting Group $11,000 8/1/2011 10/31/2011 Engage the board, staff and stakeholders in setting the vision and goals of theCalifornia Health Benefit Exchange.
Non-CompetitiveBid The Tori Group $4,900 12/1/2011 6/30/2012 Provide consulting services to the exchange in order to assist the exchange in its initial design and development of the SHOP program.