AP Exclusive: Calif. exchange granted secrecy


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LOS ANGELES (AP) - A California law that created an agency to oversee national health care reforms granted it broad authority to conceal spending on the contractors that will perform most of its functions, potentially shielding the public from seeing how hundreds of millions of dollars are spent.

The degree of secrecy afforded Covered California appears unique among states attempting to establish their own health insurance exchanges under President Barack Obama's signature health law.

An Associated Press review of the 16 other states that have opted for state-run marketplaces shows the California agency was given powers that are the most restrictive in what information is required to be made public.

In Massachusetts, the state that served as the model for Obama's health overhaul, the Health Connector program is specifically covered by open-records laws. The same is true in Idaho, where its exchange was established as a private, nonprofit corporation, and in New Mexico.

The Maryland Legislature subjected its exchange to the state's public information act, but protected some types of commercial and financial information.

In California, the explicit exclusions from open-records laws may run afoul of the state constitution, said Terry Francke, head of Californians Aware, a group that promotes government transparency.

If the Legislature wants to limit access, the state constitution requires it produce findings that demonstrate the need for shielding information from the public. In the bill that authorized the exchange, the Legislature devoted two sentences to address that issue. It argued the cloaked spending was "necessary" to protect "powers and obligations to negotiate on behalf of the public."

Those provisions are vulnerable to being declared unconstitutional, according to Francke.

He said, in essence, lawmakers are saying they need it because they need it, with no details or evidence to support it. The Legislature should have answered the questions, "Why couldn't the exchange do its job without this secrecy? What's the worst that could happen?" Francke said.

Exchange spokesman Dana Howard said the agency complies with state law but declined to discuss in detail how it determines what is public and what is not.

"I'm not going to go down item by item, about how it is and what kinds of meetings and what was talked about," he said.

It's routine in government to keep bids secret until contracts are awarded, so one vendor does not get an unfair advantage over others. After a bid is awarded, contracts generally become fully public.

In setting up the California exchange, lawmakers gave it the authority to keep all contracts private for a year and the amounts paid secret indefinitely. "Except for the portion of a contract that contains the rates of payment, contracts entered into pursuant to this title shall be open to inspection one year after their effective dates," reads the code specifying what exchange records are exempt from public disclosure.

According to agency documents, Covered California plans to spend nearly $458 million on outside vendors by the end of 2014, covering lawyers, consultants, public relations advisers and other functions.

Other exchange records that are allowed to be kept secret include those that reveal recommendations, research, strategy of the board or its staff, or those that provide instructions, advice or training to employees. Minutes of the board meetings also are exempt from disclosure.

The indefinite ban on releasing rates of pay to companies and individuals receiving contracts also goes beyond exemptions for other state health programs, such as Healthy Families, which withholds rates of pay from disclosure for up to four years, but not permanently.

In response to an AP public records request, the agency released information on a dozen competitively bid contracts issued since early 2011. They included $14 million for a 19-month contract with Ogilvy Public Relations for marketing and other services; $400,000 for Pricewaterhouse Coopers for a four-month deal developing a small business program; and $327 million for a five-year deal with consulting giant Accenture to develop a web portal and enrollment system for those who will seek coverage.

Those contracts also are accessible on the agency's website, along with about two dozen requests for services the agency has published. But it's not clear how many contracts the agency has executed, for how much or with whom. Staff counsel Gabriel Ravel said in an email that the agency "exercised its discretion to waive this exemption" for the contracts it released to AP. However, "all other existing contracts are confidential and privileged," he wrote.

The closeted spending was quietly authorized in a bundle of amendments added to the bill just days before it was passed by the Senate and Assembly during a blitz of activity in August 2010, when California was sprinting to become the first state to embrace the most extensive health care changes since Medicare.

Legislative staffers who worked on the technical language in the bill discussed the possibility of limiting the scope of the records exemption but settled on making it comprehensive after concluding it was not practical to try to determine what should be left out.

No public hearing was held on the provision because legislative leaders did not consider it substantive enough to send the bill back to committee for an airing, according to the office of Assembly Speaker John Perez, D-Los Angeles.

Statements issued to the AP by his office said the bill met the constitutional test and "contains the relevant findings," while striking a practical balance between the need for confidential rate negotiations with medical plans and a board that meets in public and is covered by open-meetings law.

"At the time of the drafting of the bill in 2010, this was a non-controversial, technical provision modeled on the same exemption long provided to successful government health insurance programs, including the state's Healthy Families Program," one statement said.

Perez's account that there was agreement on the confidentiality rules in the Senate Health Committee was disputed by former Sen. Sam Aanestad, a Republican on the panel who said he opposed those blanket privacy rules and the broader bill creating the exchange.

"This is such an untested field, there has to be strict illumination and oversight from day one," said the retired oral surgeon. Empowering bureaucrats to make unilateral decisions on access to contracting records "bodes for disaster."

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Associated Press writers Steve LeBlanc in Boston, Barry Massey in Santa Fe, N.M., John Miller in Boise, Idaho, and Brian Witte in Annapolis, Md., contributed to this report.

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Follow Michael R. Blood at http://twitter.com/MichaelRBloodAP.


(Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)

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