Official warned about health care contract problem before it happened
SPRINGFIELD — Weeks before the Quinn administration signed off on an error-filled set of health care contracts for state employees last year, a staff member with the Illinois Executive Ethics Commission suggested that the flawed process be restarted.
It wasn't, leading to a mass outpouring of protests from state employees, dependents and retirees, a lawsuit, the reversal of the decision and, most recently, a scathing management audit by the state auditor general's office.
A year ago, the state awarded health insurance contracts to Blue Cross Blue Shield for HMO coverage, and open-access plans to HealthLink and PersonalCare.
The recent state audit, which included 15 separate findings and recommendations, was the subject of an abbreviated hearing Thursday. Because lawmakers had so many questions and concerns, the hearing was continued to a future, undetermined date.
But one focus of Thursday's meeting was a March 22, 2011, email from Stephen Rotello, the executive ethics commissions' chief procurement compliance monitor, to Matt Brown, the state's chief procurement officer. In it, Rotello recounts a conversation among four procurement officers about the upcoming contract for health insurance coverage.
"At the meeting I heard two statements from Brett (Cox, a Healthcare and Family Services department purchasing officer) that stuck with me: (1) the decision is being made on the basis of factors not included in the RFP (for health care insurance) and (2) the specifications were so poorly written that someone will have a basis to protest no matter how it is done. The first is clearly inappropriate, as you acknowledged at the meeting. I have looked at the HMO RFP and I must agree that the RFP was not well-written ..."
Later, he concludes, "The obvious solution is to do it over, which is what Brett, Justin and I talked about last week."
But in testimony Thursday, various state officials, including Rotello, said the process was too far along to stop it.
"Both the chief procurement compliance monitor and I both agreed that it was not prudent to take this transaction back to the drawing board and start over," Brown told the audit commission Thursday. "It wasn't feasible with the amount of time that we had left."
Added Rotello: "The obvious solution was to do it over, which is always the obvious solution to a problem.
"That would certainly solve the problems. But I understood there were other considerations, not the least of which was the expiration of the insurance contracts at the end of the 10-year period without the possibility of renewal, and the fact that we had been told by the department that the state stood to lose over $60 million if the award was not to be made in the next week."
Holland, though, responded that the Legislature "wanted the executive ethics commission to be something more than a hood ornament to the procurement code. It would be a brake. It would be there to stop this before it got too far. What I hear is that nobody wanted to be a brake in this process."
Sen. Bill Brady, R-Bloomington, a member of the audit commission and the Republican candidate for governor in 2010, said after the hearing, "there is no question that that's a damning email that he sent, telling them to stop.
"Clearly, there was poor judgment, incompetence ... so far we haven't found any corruption, but it appears this cost the state a considerable amount of money, and the people who were in the system a great deal of hardship."
Rep. Rich Brauer, R-Petersburg, another member of the audit commission, also mentioned the number of state employees and retirees who were upset last spring about the suggested changes in health care insurers.
"I can't tell you how many emotional encounters I had with people. That, to me, is the real cost to this," he said.
But Julie Hamos, director of the Department of Healthcare and Family Services, said the agency is "well on the way to changing our procedures and incorporating all of the suggestions that came out of this audit."
She called it "a blueprint for moving us forward and to making the necessary changes to strengthen our agency."
She said the health insurance contract procurement — which at one time shut out Urbana-based Health Alliance which serves thousands of downstate employees and retirees — "complex and involving a number of issues. We had legitimate differences along the way. But there was no nefarious motive. There was no politicking. There was no bias. There was no steering. This was just a fair process that produced this result."
Holland, though, said the audit found "several deficiencies" that should have been detected by the department and/or the ethics commission.
Added Brady, "It would take them days to explain all the things they did wrong."
The state is rebidding a portion of the downstate health insurance contract this year and Brady said lawmakers will be vigilant.
"I think that they know we are watching them very closely," he said. "I'm more comfortable since we told them we're watching them, and the fact that we're asking for another (audit commission) meeting."