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Think Tank

Should Covered California Be Allowed To Keep Secrets?

Three years ago when legislation was written to create California’s health insurance exchange, lawmakers thought it would be a good idea to let the new exchange board keep a few competitive secrets.

Now some legislators aren’t so sure.

Covered California, as the exchange is now known, has the authority to keep all contracts confidential for a year and the health plan rates concealed indefinitely. The exchange can keep other secrets as well — dealing with negotiations, some meeting minutes, training programs and other facets. California’s exchange has more options to keep secrets than any other state-run exchange, according to the Associated Press.

National legislators are jumping into the debate as well. Five Republican U.S. senators sent a letter asking HHS Secretary Kathleen Sebelius to investigate California’s exchange policies on concealing information.

An Associated Press review of the 16 other states building state-run exchanges found the California agency has the most leeway for secrecy and that some specific exclusions from open-records laws might run afoul of the state constitution.

State officials estimate Covered California will spend more than $450 million on contractors by the end of next year.

We asked legislators and stakeholders to explain the advantages and disadvantages of allowing Covered California to keep secrets.

Need To Continue To Strike a Balance on Transparency

The Affordable Care Act can, in some ways, be thought of as a wedding between the private and public sectors. For the marriage to work out, the private sector will have to continue to adapt to the higher level of regulatory structure and public scrutiny that come as a part of the law. 

The public sector, for its part, will need to act quickly to keep pace with the innovation in the private market. The current piece of legislation requiring Covered California to be more transparent in its contracting may not have any noticeable impact as it appears to align with existing policy. 

However, the push to make Covered California more open about all of its interactions touches on a deeper issue. What kind of an agency is Covered California going to be and will it be able to move rapidly enough to keep up with the private market? 

In 2010, when the state was debating its own exchange law, I wrote an op-ed that articulated a number of reasons why the governor should sign the bill. Among them was that, “the legislation gives it an independent, empowered board so that it can adapt and innovate.” 

During the start-up period since the passage of this California legislation, the board and staff of Covered California have moved extremely rapidly, adapting as necessary, to set up this new portal to health coverage. They have done so while being remarkably open to the public as they are required to be by state laws such as the Bagley-Keene Open Meeting Act. They have also reached out for a great deal of stakeholder interaction and have held town meetings that were not legally required. This openness to public participation has come with some consequences, such as the occasional deferral of critical issues to subsequent board meetings due to extensive public comment sessions.

Further, the ongoing question about whether information will be kept confidential is part of the uncertainty that may have led certain players in the industry to choose not to participate at least in the first year of implementation. 

As we move forward with health reform, it will continue to be important to balance the requirement that Covered California be open and transparent in its dealings with the need for it to be able to adapt and innovate in real time. The people pushing for ever more transparency should acknowledge that there is a public benefit to not having every deliberation occur in public, to not having every document become a matter of public record.

On the other hand, the public has to have confidence that decisions are being made in its best interest and to have the opportunity to weigh in on issues of critical importance. Striking the right balance on this issue will be one of the critical challenges to making this marriage, and the law, work.

Transparency Helps Build Trust

California’s health system needs all the help it can get, so we should rightly be proud of our state’s leadership not just implementing but improving upon the Affordable Care Act to bring those benefits home.

In one example of our leadership, California was not just the first state in the nation to set up an exchange, or insurance marketplace under the Affordable Care Act, but was one of the few to give it the ability to actively bargain for the best price and value. Covered California has used this power not just to negotiate the competitive rates announced in the last few weeks, but to standardize benefit packages and to help consumers make apples-to-apples comparisons.

In contrast, many of the other state exchanges will simply list the products of any willing insurer — a model that for some represents the unfettered free market but can be more like a flea market, with a “let the buyer beware” ethos.

Because our exchange, Covered California, has this “active purchaser” model, it also has some of the toughest conflict-of-interest provisions in the country, prohibiting any representative of the health industry from serving on the board. If Covered California is going to negotiate, it stands that the health industry shouldn’t be on both sides of the bargaining table. That’s a marked contrast with exchanges in other states that put industry on their boards.

But the ability of Covered California to selectively contract with health plans also means it needs some ability to negotiate behind closed doors, in order to get the best outcome for consumers. This is not uncommon in other state programs that negotiate with plans, from CalPERS to Healthy Families. The key is the transparency of process and accountability of results. The AP comparison of exchanges in other states in not an apples-to-apples comparison. After all, if many of the other exchanges are simply listing insurance products like a phone book, there’s no negotiation to keep private in the first place.

That said, the AP review is a welcome opportunity to see how California can and should do better, especially on such core values as transparency and accountability. For example, there’s less rationale for the ability of the exchange to cloak in secrecy vendor contracts, with the consultants who are conducting key elements of Covered California’s work. In fact, Covered California has for some time waived its ability to keep contracts private. It is the appropriate role of the Legislature to set those parameters for the future.

There’s a balance, but consumer advocates prefer to err on the side of transparency and the accountability that comes with that. We want individuals, families, and small employers to have trust in Covered California, that they finally have someone on their side when selecting and securing health insurance. Transparency helps build the trust that is essential for the success of Covered California.

For these reasons, Health Access California supports SB 332 to further increase transparency in Covered California, while facilitating its important ability to get the best deal possible for the California consumer.

SB 332 Ensures Transparency

California has the distinction of being the first state to pass legislation enacting the health benefit exchange, known as Covered California, in order to comply with the federal Patient Protection and Affordable Care Act. This was done in anticipation of the exchange opening its marketplace this October for Californians to purchase health insurance, as required by the ACA.

As it turns out, there was an omission in the original legislation as California moved to become the first state to set up the exchange. It recently came to our attention that current law grants Covered California broad exemptions from the California Public Records Act, limiting the public’s right to access information. 

In May an Associated Press article highlighted how current law allows Covered California to keep all contracts private for a year and the rates of payment to companies and individuals receiving contracts secret indefinitely. This lack of transparency is unique in comparison to other state agencies and among other states that have established their health insurance exchanges.

To rectify this oversight in state law, we introduced SB 332 to ensure that Covered California is subject to the Public Records Act. This bill requires that non-health plan contracts entered into with the exchange — such as those for consulting, marketing, and other professional services — as well as the payments for those contracts be accessible to the public immediately, just as they would be with any other state agency.  

As for health plan contracts, the bill specifies that the general terms of those contracts are open to the public after one year, and the associated rates are available to the public within four years. This practice is similar to public disclosure of other health plan contracts. Also, in an effort to guarantee transparency, SB 332 restores the Joint Legislative Audit Committee’s authority to audit the exchange, should it ever be necessary.

While this measure is good public policy, it is our understanding that Covered California’s current leadership already discloses the information this bill seeks to cover under the Public Records Act. In fact, we have been assured that so far they have complied with the public’s request for information. This bill simply seeks to specify the exchange’s current practice in law and to ensure that, in the future, the public’s interest in sunshine is protected. At the end of the day, it is always in the public’s best interest to have an open and transparent government.