MNsure mishandled marketing money, audit finds

By Doug Belden / St. Paul Pioneer Press MNsure's marketing department approved more than $925,000 in contract work without first obtaining required authorization, according to a financial audit released Tuesday by the state Office of the Legislat...

By Doug Belden / St. Paul Pioneer Press 

MNsure’s marketing department approved more than $925,000 in contract work without first obtaining required authorization, according to a financial audit released Tuesday by the state Office of the Legislative Auditor.

The money was available and planned for in the budget, MNsure officials said, but they have since brought in a new marketing team and reorganized internal oversight to prevent similar situations from occurring again.

In the first of several examinations of MNsure after Minnesota’s health insurance exchange got off to a rocky start last year, the auditor’s office found, overall, that state agencies involved in setting it up had “generally adequate” internal controls and generally complied with most laws related to spending public money.

But MNsure lacked proper control over the marketing costs and over the collection of receipts from applicants, auditors found, and in some cases violated its board policy and state statute.


MNsure didn’t properly monitor employee access to the state accounting system to ensure separation of duties among workers, the audit found, and the Commerce Department and MNsure failed to keep accurate records of equipment bought for the exchange.

The report reviewed the administration of federal grants awarded to Minnesota to set up its exchange from July 1, 2011, to Dec. 31, 2013. The federal government awarded the exchange $155 million in grants, including $60 million spent in the period studied.

Auditors did not do a comprehensive review of the agencies involved, nor did they assess MNsure’s operations or any insurance plans or rates.

MNsure CEO Scott Leitz said in a news release that he was pleased the audit found no fraud or abuse. He said the exchange has resolved or is in the process of resolving the issues raised by the audit.

As for the marketing work, there was a contract in place with BBDO Proximity for $666,590, but the former marketing director allowed the scope of work to grow without written approval from management, according to the report.

MNsure officials subsequently authorized a contract amendment to account for the additional $925,458 in services, which had already been performed.

Minnesota launched MNsure last year to implement the federal Affordable Care Act, which requires most Americans to have health coverage or pay a tax penalty. It got off to a rocky start.

Website problems frustrated thousands of consumers trying to obtain coverage, and many customers endured long waits seeking help from an overwhelmed call center. Processing backlogs tied up workers, and some customers got wrong information on their coverage.


MNsure officials hired a contractor to help deal with the computer issues and said recently they expect a much smoother enrollment process this year.

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

“We thank Auditor (James) 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.

The auditor’s office plans to release a review of MNsure’s ability to make eligibility determinations for public health care programs Nov. 12 and an overall assessment of MNsure’s development and implementation in early February.

The Pioneer Press is a media partnner with Forum News Service.

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