One of the nation’s premier business groups whose mission is employee health promotion is embroiled in a controversy involving $184 million in contracts awarded by Covered California without competitive bidding.

Consumer Watchdog, which supports a health insurance rate-control measure on next month’s ballot known as Proposition 45, asked state attorney general Kamala Harris to investigate links between the state’s public health insurance exchange and the insurance industry.

The list includes the Pacific Business Group on Health, which Covered California executive director Peter Lee once led. A PBGH subsidiary, the Pacific Business Group on Health Negotiating Alliance, was awarded two no-bid contracts totaling $525,000.

Also see: NAHU working to defeat California’s controversial Proposition 45

Another $4.2 million in contracts went to The Tori Group, whose founder, Lessa Tori, had reported to Lee when she was a senior executive at Pacific Health Advantage. She is reportedly among nine individuals who are doing work for the exchange.

Lee noted in a statement that the state’s public HIX “is reviewed by the federal government in terms of all of our practices and reviewed by the Bureau of State Audits and when we look back at what we’ve done we’ve operated within the bounds of state law.

“Everything we’ve done has been approved by our board which is a close eagle eye on what we do,” he continued, “and what we’ve done has been about getting the right people, the right organization to get the job done. We’ll continue doing that. We welcome scrutiny but we think we’ve had a lot of independent oversight looking over our shoulder.”

While competitive bidding is designed to save taxpayers money and avoid conflicts of interest, a report published by The San Diego Union-Tribune suggested that no-bid contracts typically are pursued in emergencies or when there’s no known competition.

Covered California was given the authority to award no-bid contracts to meet deadlines for the first HIX open enrollment period. These agreements, which the Associated Press traced to a number of services from public relations and ergonomic adjustments to work stations, are said to represent about $2 of every $10 awarded to outside agencies.

Lee told The San Diego Union-Tribune that “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.”

But Kathay Feng, executive director of California Common Cause, has expressed concern about the issue. “To spend $4.2 million on anything, let alone a contract to a friend and former colleague, raises serious questions,” she was quoted as saying, adding that “some accountability and transparency is needed, whether through audits or an alternative oversight body.”

Shutan is a Los Angeles-based freelance writer.

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