California senator investigates millions in Obamacare exchange contracts

By Tori Richards | Watchdog.org

California’s beleaguered Obamacare exchange is once again in the crosshairs of a state senator who is demanding answers following reports that millions in contracts never went out to bid and instead were awarded to friends of the agency’s director.

Sen. Ted Gaines, who is also the GOP candidate for state insurance commissioner on the November ballot, fired off a letter to Covered California Director Peter Lee, asking how the agency “fulfills the public trust when it comes to spending taxpayer dollars.”

This latest calamity of nearly $4.4 million in non-bid contracts comes on the heels of a $1.37 million infomercial showing exercise guru Richard Simmons writhing on the floor to promote signups for Covered California in January. Gaines asked for justification of the spending, but when he received what he called a “lackluster” response, he sued for access to records two months later.

The Associated Press released the findings of its investigation over the weekend, reporting that nearly $2 out of every $10 spent went without bids, according to released data covering the time period 2010 through July.

A total of $4.2 million went to a consulting firm, the Tori Group, whose director Leesa Tori worked under Lee at Pacific Health Advantage, a now-defunct insurance exchange business. Nine former Pacific Health Advantage employees, including Tori, work for Covered California. Other no-bid contracts include consultant Yolanda Richardson at $176,500 and $525,000 for a subsidiary of Lee’s former job, Pacific Business Group on Health Negotiating Alliance, the AP reported.

In his letter to Lee, Gaines called this news “part of a pattern of irresponsible spending” and “are at the very least unseemly and reek of the kind of cronyism that all public servants should be interested in eliminating. Even the appearance of well-connected consultants and personal friends of decision makers getting bid-free contracts should not be tolerated.”

Gaines also included a series of questions aimed at determining how the contracts were awarded. He finished with, “In light of Covered California’s highly questionable spending history and shaky financial footing, it’s imperative that the public get a full understanding of the Exchange’s contracting practices and awards.”

The Bureau of State Audits has labeled Covered California a high-risk entity as it faces a deficit of $78 million in the next fiscal year because federal grants will be eliminated. An agency spokesperson has said in the past that Covered California is a new state agency and as such, is on track to becoming self-sufficient. Spokesperson Lizelda Lopez could not be reached for comment for this article.

Gaines is challenging a first-term Democratic opponent for insurance commissioner. It’s an uphill battle, but if Gaines wins the state Legislature’s most vocal Obamacare opponent will likely make Lee’s life a hellish existence by shining a greater spotlight on the inner workings of Covered California.