Audit Finds MNsure Missteps With Marketing Work

MINNEAPOLIS (AP) — Minnesota's health insurance exchange failed to properly authorize over $925,000 in marketing work and didn't update its contract with its vendor to cover it until after the job was done, Legislative Auditor James Nobles reported Tuesday.

He also found that MNsure lacked adequate internal controls over premiums collected from insurance applicants and didn't maintain proper inventories of equipment purchased with federal funds.

MNsure's executive director, Scott Leitz, said his staff has fixed or will soon resolve all the problems the review identified.

"We really did take action on each of these findings and did so as soon as we discovered each of the issues," he said in an interview.

Leitz also said he was encouraged that the audit found that MNsure and the other state agencies involved with creating the exchange generally have adequate internal controls "and that there wasn't any evidence of fraud or abuse."

The audit looked at $155 million in federal grants awarded for developing the exchange. It did not examine MNsure's operational performance. The Office of the Legislative Auditor plans to release a report Nov. 12 on MNsure's ability to determine eligibility for publicly run programs for lower-income people such as Medicaid and MinnesotaCare, and to issue an overall evaluation of MNsure's development and implementation in February.

Leitz said he didn't have any insights on what those reports will show, but that he'll take them seriously and implement any recommended changes.

The audit blamed officials who've since left MNsure for the missteps with the $925,458 for marketing work early last year.

The exchange hired BBDO Proximity to develop a publicity campaign to reach uninsured people. The original contract was for $666,590, but MNsure's marketing director at the time, Mary Sienko, allowed the scope to expand without the required written authorization from the original executive director, April Todd-Malmlov, the report said. It wasn't until last May — six weeks after the contract expired — that MNsure amended it to cover the additional work.

"Without executing a contract amendment before work starts, the extent and cost of the contractor work is subject to possible fraud and abuse," the report said.

MNsure said in its formal response that a new marketing team is in place, along with controls to ensure that contract work doesn't start before proper agreements are signed.

The audit also found MNsure lacked sufficient internal controls to ensure that money coming in from applicants all got deposited and recorded. MNsure took in $8.4 million in first premiums but in some cases did not promptly deposit the money. And MNsure did not reconcile its receipt logs for over $106,000 in cash and checks collected at MNsure offices against deposit records, which it said raised the risk that an employee could have stolen the money.

Leitz said MNsure has stopped collecting premiums and insurance carriers now do their own billing. He said the delayed deposits were only about 1.3 percent of the receipts, and resulted from the need to manually match checks against enrollment records before depositing them.

The audit also said MNsure needs to complete an accurate inventory to safeguard over $5 million worth of equipment including computer hardware. Leitz said MNsure is working on that. He said he was pleased that nothing was missing during a check for a random sample of equipment.

Minnesota Republicans used the audit as more ammunition against MNsure and President Barack Obama's health care overhaul.

"We thank Auditor Nobles for shining a light on the immense consumer frustration with MNsure, and are deeply concerned about MNsure's failure to follow state laws and properly handle insurance payments from Minnesotans," House Republican Leader Kurt Daudt said in a statement.

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