Documents Show Colorado Health Exchange Wasn’t Audited by Feds, Despite Official Claims

May 6, 2014

Patty Fontneau, executive director of Connect for Health Colorado

Patty Fontneau, executive director of Connect for Health Colorado

A Republican bill to audit Colorado’s health exchange was killed after its top official assured state lawmakers the oversight was not necessary because it had already undergone federal audits, but that’s not entirely accurate.

Documents obtained from Connect for Health Colorado show the federal government has not conducted audits on the award of $177 million in U.S. taxpayer dollars since the exchange was created in the wake of the Affordable Care Act.

The reports were obtained by The Observer in two separate requests to Connect for Health Colorado under the Colorado Open Records Act (CORA), based on statements from Executive Director Patty Fontneau to state lawmakers that the agency had gone through several federal audits.

There is an important distinction between an audit performed by the federal government, and self-reporting forms filed with a federal agency or independent audits, Colorado Auditor Dianne Ray told The Observer.

“In our office, we’re really clear on what an audit is — an audit involves independence and an audit involves signing an opinion if it’s a financial audit — if it’s a performance audit you are following certain standards,” Ray said.

“Now when Patty gave her testimony at the committee, she may not have been as clear what an audit is, and so I don’t want to say, ‘well, she’s wrong,’ because she may have felt like these were audits in a certain sense, because they were looking at certain information,” Ray said.

Fontneau told the House Health Insurance and Environment Committee on Feb. 27 her agency had participated in verification and validation audits, quarterly grant reviews and independent audits conducted by a Denver firm.

“In addition to that, we also go through federal audits and reviews,” Fontneau said during the hearing.

Documents released to The Observer identified as “federal audits and reports” were reports created by the exchange, as well as financial statements completed by the independent auditors that were conducted according to federal Office of Management and Budget (OMB) standards.

The documents did not include audits conducted by the IRS, Government Accountability Office (GAO), or the inspector general office of the Health and Human Services (HHS) Department.

According to a May 2013 GAO report on HHS grant administration, federal oversight of exchanges is primarily based on information provided by the states, independent audits, and some limited independent verification.

Fontneau told lawmakers during the February hearing that federal authorities have been conducting on-site visits, with another scheduled for early spring.

“We have had a lot of review, we continue to have a lot of review, the feds have come in, the different representative from different federal agencies are coming out to meet with us again,” Fontneau said.

However, the GAO report noted that the “use of site visits has been limited.”

Linda Kanamine, communication director for the health exchange, maintained that their independent auditor complied with standards outlined by the OMB in a federal circular for single audits of federal funds, which they said is a federal audit.

“The U.S. Department of Health and Humans Services (HHS) has been performing readiness reviews (blueprint) and operational reviews with all state marketplaces, including Connect for Health Colorado,” Kanamine said in a statement.

“Further, HHS directs how their federal audits will be performed. HHS requires that federal audits of Connect for Health Colorado be performed in line with the U.S. OMB Circular A-133 audit requirements for single federal audits, and always done by independent audit firms,” Kanamine said.

Rep. Dan Nordberg, R-Colorado Springs, sponsored the House bill requiring an audit that passed on a 60-1 vote. However, the Senate Health and Human Services Committee killed the bill on a 4-3 party line vote in March.

Republicans argued that an audit would provide transparency, but Senate Democrats maintained it was too soon for an audit of the fledgling agency.

Based on Fontneau’s testimony to lawmakers, Nordberg said it was his understanding the request for a state audit was duplicative because federal audits had already occurred.

“I just didn’t feel like the whole story was being told,” Nordberg told The Observer after learning of its findings. “It just became evident that there was more to this story than what was being said.”

“At the end of the day, it amounted to a lot of lobbying and pressure applied to kill this audit,” Nordberg said. “It was very unique.”

Health News Colorado reported March 27 that the exchange used taxpayer dollars to pay legal fees as high as $575 an hour that included research on the proposed audit and testimony by one lawyer in front of the Senate panel that ultimately killed the audit bill.

Fontneau objected to a state audit claiming that it would be a waste of tax dollars to repeat audits already conducted by the federal government as well as the exchange’s independent audits, and said the burden on her staffers would prevent them from their primary job of registering consumers for health insurance.

The exchange initially said that 124,000 health insurance plans had been sold by the March deadline, but it now projects that cancellations and other issues will push that number back to less than 100,000 participants in the first year.

“Here’s my concern, we have over 335,000 Coloradans who have lost their health insurance through no fault of their own, the state’s in receipt of $80 million with access to millions more in federal funds, and the question begs, why are we not being fully transparent on this issue?” Nordberg said.

With the legislature set to adjourn Wednesday, it’s too late for Nordberg to revive his bill during this legislative session.

“It’s an issue I’m not going to give up on until there is full transparency with the health insurance exchange, and in light of a continuing stream of new information on the lack of transparency from the health insurance exchange, it’s an issue I’m going to continue to push in the next session of the legislature,” Nordberg said.

Auditor Ray testified in support of Nordberg’s bill that would have given her the authority to conduct a more extensive performance audit as well as a financial accounting of the $80 million in federal grant funding already spent. The state audit would also allow Ray’s office to determine if the exchange was on the path to be financially self-sustaining by January when federal funding is no longer available.

“I think one of the big things are their projections and how they plan to get to the self-sustainability — we can’t look at that,” Ray said. “Our authority allows us to look at monies that are received by the board, and so it’s dollars in, dollars out.”

“I think that there could be a lot of benefit in doing a full performance audit to both the citizens of Colorado and the legislators, because we could provide confirmation on all of the information that’s coming out of there,” Ray said.

The exchange has already signaled that it intends to create a new fee that every Coloradan with health insurance would be forced to pay, regardless of whether they participate in the health exchange, and that another fee increase on exchange users is likely in order for the agency to continue operations without federal funding.

The exchange released a total of 18 reports to The Observer in response to the CORA requests on April 16 and April 23; consistent with the number of reviews Fontneau told lawmakers had been conducted.

The Observer requested “copies of all federal audits and reports, quarterly grant reviews, blueprint review, and all other federal audits cited by Connect for Health Colorado Executive Director Patty Fontneau in front of the House Health, Insurance and Environmental Committee on Feb. 27, 2014.”

The reports were federal forms filled out by the exchange and submitted to the Health and Human Services Centers for Medicare and Medicaid Services, or to Consumer Information and Insurance Oversight, an agency also within the Health and Human Services Department.

The documents included performance progress reports, federal financial reports, monthly budget supplementals, and quarterly financial progress reports.

Comments made by visitors are not representative of The Colorado Observer staff.

9 Responses to Documents Show Colorado Health Exchange Wasn’t Audited by Feds, Despite Official Claims

  1. Bob Terry
    May 6, 2014 at 11:38 am

    Clear or unclear …this is going to work whether it does or not. This is scrambling and how convenient, that the legislative session is or has ended. This is an out of control law,on the state and federal level. But no worries, it’s only our tax dollars. Yeah we’re stupid, as long as we show them we are stupid. Dollars in and dollars out, yeah right, right out of our pockets. Hey maybe Fontneau does need a raise, a raise out of her position to the unemployment line.

  2. PeterP
    May 6, 2014 at 5:18 pm

    “The exchange has already signaled that it intends to create a new fee that every Coloradan with health insurance would be forced to pay, regardless of whether they participate in the health exchange, and that another fee increase on exchange users is likely in order for the agency to continue operations without federal funding.”

    isn’t it cleaver that we no longer have to bother voting for tax increases. This agency “intends to create a new fee” on Coloradoans to continue their income stream. Dump every single Democrat possible so we can shut down these tax extortionists.

  3. Val
    May 6, 2014 at 6:31 pm

    The Colorado exchange precisely duplicates the federal exchange. How many more bureaucracies do we need to do the same thing?

    • bob simons
      May 6, 2014 at 9:12 pm

      I think we need a new government, both federal and state.


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