Legislative auditor: 'We think MNsure performed badly'

An expansive new study that chronicles MNsure's troubled debut concludes that failures outweighed achievements in the health insurance exchange's first year.

The report that Legislative Auditor James Nobles delivered Tuesday is the most thorough government review to date of MNsure's initial shortcomings. It documents issues with MNsure's online enrollment system and customer service, plus a lack of testing before the system debuted in October 2013.

It also undercuts one of MNsure's few celebratory points in early 2014, when exchange officials claimed success in beating its enrollment projection.

Going forward, the auditor's report recommends changes in state law to improve the exchange, and argues that "an agency with MNsure's impact and visibility should be directly accountable to the governor."

A tight timeline from the federal government for launching exchanges across the country contributed to problems, Nobles found. But the report concluded that MNsure staff withheld information about problems from its board of directors and other key ­officials, including the governor, before the enrollment website was launched.

"We think MNsure performed poorly," Nobles said during a House committee meeting Tuesday.

Joel Alter, evaluation manager for the auditor's office, added: "MNsure overpromised and it underperformed."

"Since October 1, 2013, the uninsured rate in Minnesota has dropped by 40 percent to less than 5 percent," wrote MNsure chief executive Scott Leitz. "Now, 95 percent of Minnesotans have comprehensive, affordable health insurance coverage."

Nobles doled some blame to the Legislature that gave MNsure more autonomy and less oversight than other state agencies. He told lawmakers to change state law so the governor appoints MNsure's chief executive, not the MNsure board, and to consider relegating the board to an advisory role. Currently, the exchange is governed by a board of directors, and there's talk at the Capitol about eliminating it.

Sen. Tony Lourey, the DFLer from Kerrick who carried MNsure legislation in 2013, took the report as an endorsement for his bill to scrap the board and make the exchange a traditional state government department. Republicans found support in the report for ideas they've floated for MNsure changes, too, such as adding insurance industry experts to the board.

But when the 150-page report was presented during a House committee hearing Tuesday, the focus was more on MNsure's past than its future.

MNsure launched with serious technical problems. Health exchange officials failed to perform adequate tests of the information technology system, and the few tests that were conducted suggested serious problems.

"It's a little bit like we're continuing to put together the airplane while it's up in the air," Nobles said. "But that's the reality we are in."

Investigators found that "red flags" were evident well before the exchange went live, Alter said, but weren't fully disclosed by exchange executives.

About 28 percent of MNsure enrollees said they were uninsured immediately before enrolling, according to the report, and many who bought insurance through MNsure have been satisfied.

But MNsure's enrollment target for its first year of operation was "seriously flawed," the report concluded.

Toward the end of open enrollment in 2014, MNsure officials boasted the exchange had exceeded its target for signing up people across private and public insurance programs. But the target estimated about 12,000 people would sign up for Medicaid when the report found a more realistic estimate would have been at least 100,000 sign-ups.

Gov. Mark Dayton told reporters Tuesday that the audit was focused on well-identified problems during the first year of MNsure, which the state launched to implement the federal Affordable Care Act. Dayton said the exchange is working better now.

"We'll look forward to reading it and seeing what we can learn to keep improving MNsure," Dayton said.

But Sen. Michelle Benson, R-Ham Lake, said in an interview that problems persist at MNsure, and in some cases are even worse.

"This isn't the end," Benson said. "As we roll forward, these problems continue and they haven't been solved."

In the House committee, Rep. Diane Loeffler, DFL-Minneapolis, said that despite problems, the successes of MNsure should be acknowledged. Loeffler was particularly impressed by survey data in the report showing that many MNsure users who picked private health plans had been uninsured for five or more years.

"Every single day they're stumbling over the roadblocks put in place by this system," he said.

Some Republicans dismissed the individual fixes in the report and asked whether Minnesota should follow the lead of other states and not operate its own exchange.

Rep. Glenn Gruenhagen, R-Glencoe, questioned how MNsure could be financially sustainable with so many of its enrollees being on public programs rather than private health plans. The agency is funded partly by a tax on private plan premiums.

"Do you think we should put good money after bad, or cut bait and fish someplace else?" he asked.

Leitz replied that technical improvements will make MNsure sustainable. Rep. Tina Liebling, DFL-Rochester, said lawmakers need to remember what existed before MNsure — a system where people in need of private health insurance could be denied it on the open individual market.

"We should have done better," he said.

Reporter Patrick Condon contributed to this article. Christopher Snowbeck • 612-673-4744

Jeremy Olson • 612-673-7744