An audit released Wednesday found that a plan to save $500 million a year on state employee health insurance was so ill-conceived and poorly executed that it's costing taxpayers $10 million extra annually without delivering the service promised.
Auditor General Frank Mautino reported that former Gov. Bruce Rauner's administration, which originally proposed a private health insurance exchange, switched gears to an online custom-benefit portal that officials said could have been created in house. It replaced a paper-based health care program for 450,000 workers and retirees, but the promised cost-saving marketplace still isn't in place, Mautino said.
"There's the old adage that if you don't know where you want to go, any road will take you there," Mautino said. "That's what happened here."
State lawmakers ordered the review of the $94 million, 10-year contract with Georgia-based Morneau Shepell after an Associated Press report in June 2017 found that Morneau Shepell was the only company to respond to a November 2015 solicitation by Rauner's Department of Central Management Services, that CMS was instructed to skip state guidelines for ensuring minority business participation, and that customers complained of system glitches.
Since then, Morneau Shepell repeatedly failed to meet performance guarantees and was allowed to revise them when reporting performance goals to CMS, the audit said. A breach of contract provision outlined in the solicitation never made it into the contract.
The audit also said no one asked the Rauner-created Department of Innovation and Technology about the project. The agency told auditors it could have created the platform, and one department official noted that as early as 2012, CMS computer experts demonstrated an in-house online enrollment system like the Morneau Shepell product.
"A cost-benefit analysis wasn't done to determine if we needed it (the project) in the first place," Mautino said. "The same people who were doing the job before are doing the same job now and we are hiring someone for $94 million for a procedure we may have been able to do on our own."
Mautino said he found no evidence of criminal behavior.
CMS spokesman Mike Deering said the current administration is resolving the issues raised, "with correction actions put in place since the audit was initiated." The audit included a letter from Morneau Shepell in which senior vice president Carey McKenzie wrote that, "while there are minor clarifications and difference of opinion, we acknowledge the report and its contents as final." A company spokesman did not immediately respond to a request for comment Wednesday.
The audit said CMS could not produce any documentation showing how the project would save $500 million a year. But officials told auditors that Rauner envisioned four tiers of insurance benefits — from "platinum" to "bronze" — from which customers could choose coverage and pay premiums, deductibles and co-pays accordingly. None of that has been implemented.
Auditors found CMS skirted a state requirement calling for would-be contractors to submit plans ensuring 20 percent participation by minority- or women-owned subcontractors because they feared it would slow down the project. Even before the contract award in January 2016, CMS determined that having the system ready for the May enrollment period was impossible, yet pushed forward, said Mike Maziars, the audit manager. Meanwhile, Morneau Shepell told auditors it has minority participation arrangements on contracts it has with other governments.
There also is no record that two dozen officials involved in choosing Morneau Shepell for the contract had completed required conflict-of-interest disclosures, including staff from Rauner's office, the Executive Ethics Commission and CMS.