Audit finds connector unsustainable with lack of oversight, questionable costs


High operating costs, lack of strategic plan and misuse of authority made the Hawaii Health Connector unsustainable.

That’s according to a new report by the state Office of the Auditor.

“The early times for the connector were very rough-going,” said Jan Yamane, acting state auditor.

Yamane says there were two big findings in the Hawaii Health Connector’s first audit. The first was inadequate planning. The state says the agency didn’t have a sustainable or strategic plan.

The second was improper procurement. The connector received about $204 million in federal grants to support the planning and creation of Hawaii’s state-based health insurance exchange.

“In many cases we found that the former executive director misused her authority, selected a procurement process that was more for expediency, flexibility,” Yamane said.

Yamane said this likely resulted in the connector paying more for the contracted services it received.

For example, the connector signed information technology consultant Mansha to a couple of contracts, which started at $56,000. The contracts were amended four times and finalized for $21.9 million, a 39,000-percent increase.

Even after that, the audit found “the software that Mansha was hired to implement does not work and would be difficult to fix.”

“It’s not a very good situation when you’re trying to kick off an agency or organization and have a clear picture of where you want to go and what you want to be. They never got to that point of deciding that,” Yamane said. “Generally speaking, if you don’t work well with your board, your agency is not going to get off to a good start.”

Numerous questionable travel and entertainment costs were noted, as well as unsupported severance pay.

The state auditor says the federal government could take action by keeping a closer eye on the health connector, taking away some funds or asking the connector to repay some.Read the full report here.

In response, executive director Jeffrey Kissel, who assumed the position last October, released the following statement:

“The audit acknowledges the Connector’s pivotal role in protecting Hawaii’s regulatory control over its own health care policies in lieu of a federal system.

The audit findings detailed many of the challenges the Connector encountered during its first year of business. They included deficiencies in the planning process, procurement, and governance. The recommendations are reasonable and have been addressed.

The Management and Board of the Connector are working with the Auditor to make certain that the organization operates in a manner that assures compliance with applicable statutory and regulatory guidelines, and is transparent and efficient as it continues to develop this important resource for the community.

In its response to the Audit, the Connector noted that since the State Auditor began working on its report in January 2014, numerous changes have been made to address the concerns contained in the audit. The Connector has completed a Strategic and Sustainability Plan focused on a specific mission, vision, and value proposition of “harmonizing the Affordable Care Act with the provisions of Hawaii’s Prepaid Health Care Act of 1974,” which was submitted to the Legislature on December 31, 2014, and made public on the Connector’s website.

Strict controls on the procurement process are in place, and the relationship with certain contractors and service providers has either been terminated or revised. The Connector is also working closely with its Legislative Oversight Committee to ensure that it continues to improve its operations as enrollment increases and costs are reduced.

The Hawaii Health Connector continues to enroll residents across the state in high quality, low cost health coverage. More than 16,500 residents have enrolled for health insurance through the Connector since October 2013. Open enrollment for individuals ends on February 15, 2015 for health coverage this year.”

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