BOOM: California State Senator Sues State Exchange for Cancellation of 1 Million Policies

Guest post by Tori Richards

A California senator has sued his state’s Obamacare exchange for causing the cancellation of more than a million policies and spending tax dollars in an “irrational, unreasonable and abusive” way, such as a lurid Richard Simmons video.

The lawsuit against Covered California and its director, Peter Lee, was filed late Tuesday by Sen. Ted Gaines, the Legislature’s most vocal critic of Obamacare. Gaines has sparred recently with Lee by demanding an accounting of $1.37 million spent to promote a campaign featuring a gyrating dance-off with Simmons.

“We saw a million people impacted who had insurance and then saw those plans canceled based on a decision of Covered California,” Gaines told Watchdog. “We want to stop that in its tracks to take a look as to whether this is the right path for insurance coverage in California and across the nation.”

Gaines said he has run into red tape trying to get a remedy in the Legislature and hopes the courts will have an effect. He filed the lawsuit as a private citizen and as the owner of a family insurance agency.

According to the lawsuit, insurance companies that wanted to participate in the exchange were required to sign the Qualified Health Plan Contract for 2014, which called for the cancellations of policies that did not meet its requirements. And even though President Obama declared that grandfathered plans could remain intact, Lee and Covered California continue to “exceed their authority by preventing health plans from renewing California’s grandfathered plans” and by barring plans from the exchange that don’t enact cancellations.

“Lee and Covered California will continue to enforce and administer state and federal law in a haphazard manner and in excess of their statutory jurisdiction, denying all Californians … the benefits and rights provided for under state and federal law,” the lawsuit says.

Gaines said he hopes the lawsuit could prevent millions of future cancellations that likely will occur leading up to the Jan. 1, 2016, requirement that businesses with more than 50 employees provide health insurance. Many employers meet this expense by having no-frills policies that would not meet today’s standards absent the grandfathering clause.

The senator has been Covered California’s biggest nemesis, as he has requested a state audit of the agency’s marketing expenses and complained about the cancellation issue to the Senate Health Committee. This comes on the heels of a Jan. 18 letter he fired off to Lee, inquiring about the cost of a recent eight-hour web stream featuring a gyrating Richard Simmons pleading with consumers to sign up for Obamacare.

Gaines learned the answer to his cost question through a Watchdog story that disclosed it was part of a $1.37 million marketing campaign “Tell a Friend, Get Covered.” The agency faces a $78 million deficit in 2016, when federal dollars will no longer fund state exchanges.

In the lawsuit, Gaines criticized that expenditure along with others, calling them “irrational, unreasonable and abusive.” He listed the additional expenses:

• $10 million on a contract with public relations firm Weber Shandwick “with no discernible results or success;”
• Spending $102.6 million of a $399.7 million budget on outreach that has “failed to obtain significant enrollment or a demographically … diverse enrollment and failing to sign up more Californians than were canceled;”
• Spending untold funds on a contract with Ogilvy Public Relations for media relations with “no discernible results or success” related to the Affordable Care Act
• Spending untold funds on outreach and marketing efforts, which resulted in the enrollment of Californians who already had insurance instead of the uninsured population.

A remedy from the judge could include declaring the Qualified Health Plan Contract for 2014 unenforceable and ruling that Covered California violated a state law that says regulations must be “clear, necessary and legally valid.”

Covered California spokeswoman Anne Gonzales said the agency has not seen the lawsuit and therefore cannot comment. In a previous statement she said the agency is doing its best and faces hurdles as a new entity.

“We always anticipated a high level of media scrutiny, and we just hope that all the good work we’re doing doesn’t get lost in the noise,” Gonzales said. “Amidst all the debate, we are staying focused on the fact that despite all our challenges, hundreds of thousands of people are trying to sign up for coverage, which reaffirms our mission and boosts our potential financial sustainability for the future.”

But none of this matters to the average citizen victimized by cancellations and increasing costs, Gaines said.

“There are nightmare scenarios as far as people trying to retain their same doctors and hospitals for services,” he said. “We need to stop the cancellation process and figure out the right path for people who have health care.”

 
Contact Tori Richards at tori@watchdog.org and on twitter @newswriter2