Legislative auditor: MNsure oversight, accountability 'top priority'

Legislative Auditor Jim Nobles has laid out his plans for investigating the state's new online health insurance marketplace.

In testimony to the MNsure Legislative Oversight Committee on Thursday, Nobles said he plans at least two investigations into MNsure, and a third if the Legislature will let him.

"This year is going to be the year of ... oversight and accountability (for MNsure)," he said. "We'll be doing a lot of other things as well. But it is the top priority."

This week, Nobles launched his first investigation, an audit that is required because the state used federal dollars to build MNsure.

The inquiry will examine whether the state adequately managed contracts with IBM Curam, Maximus and other vendors, and whether the contractors delivered what they said they would.

A recent letter from Gov. Mark Dayton to the CEO of IBM detailed the failures of $3.9 million in software raised serious concerns. Problems with the site infuriated users, preventing people from obtaining insurance. They also kept MNsure from meeting a deadline related to determining an individual's eligibility for Medicaid.

Nobles said the investigation will expand the requirements of the federal audit, looking at the last 18 months of MNsure's existence rather than just fiscal year 2013.

He also wants his office to do a thorough evaluation of MNsure later in the year, looking at the organization's governance structures and whether it did enough to sign people up for health care.

Leaders of Minnesota's health exchange said Thursday that they might need additional funding if insurance premiums stay low, enrollment lags below expectations and continues to tip toward public rather than private insurance programs.

Lawmakers on an oversight panel zeroed in on possible budget shortfalls for MNsure by as early as next year. MNsure's creation and operations so far have largely been funded by federal grants, but ongoing operations are supposed to be covered by a 1.5 percent premium tax on private insurance sold on the exchange. MNsure's 2014 budget, set last August, is $58.1 million.

"Structurally, the way that this budget has been put together is that the vast majority of resources goes to public program enrollees while the vast majority of revenue comes from the premium withhold," said Brian Beutner, the chairman of MNsure's board of directors. "That comes to the forefront in 2015, and it's on our list as to how we handle that."

The board does have the option to raise the premium withholding to as much as 3.5 percent in 2015. Minnesota has the lowest insurance premiums in the country under the new federal law, which has turned out to be a double-edged sword in terms of raising the money to operate MNsure.

MNsure's struggles to get people enrolled in the weeks leading up to the Jan. 1 start of coverage are adding to the budget pressure. Right now, enrollment in MNsure is only at 85 percent of the lowest projections used to set its budget - meaning less money raised by the premium tax than expected. In addition, the well-publicized problems with the MNsure website and long wait times at its helpline are adding costs as the agency adds staff and pays overtime to existing workers.

Scott Leitz, MNsure's interim CEO, said the agency is expecting its largest enrollment spike yet in the weeks leading up to the March 31 end of open enrollment. After that date, people who don't have health insurance will face tax penalties under the federal law.

"We will have to make decisions as we move forward around resource allocation, particularly in terms of where we have to improve our budgetary situation," Leitz said.

State Rep. Diane Loeffler, DFL-Minneapolis, suggested that MNsure consider reducing a $9 million marketing campaign. Loeffler said she didn't believe broadcast, print and online ads featuring Paul Bunyan were turning out to be the most effective in reaching the uninsured or under-insured people who most need MNsure's services.

"I think as we're looking at cost overruns, I think this is an area you can cut back and rethink and find some ways to get at the audience we need to get to," Loeffler said. "Your resources to me have not been deployed effectively."

Beutner indicated he thought the MNsure board could address budget shortfalls, possibly including new revenue sources, without further action by the Legislature. That didn't sit well with some lawmakers.

"Just because he doesn't intend to the Legislature doesn't mean he shouldn't," Sen. Michelle Benson, R-Ham Lake, said in response to Beutner's comments. "This organization has been given unprecedented latitude, and it hasn't worked out very well. It might be good, if you need something - come to us."

The Associated Press contributed to this report.