Feds: CO ObamaCare exchange misused almost $10 million

Two months ago, Colorado voters broadly rejected a proposal to create a single-payer health-care system in their state. A new report from the Inspector General of HHS shows the wisdom of that decision. Colorado’s state-run ObamaCare exchange blew $10 million of cash on unauthorized purchases, employee bonuses, and undocumented charges — and the feds want the money back:


The federal government wants a $9.7 million refund from Colorado’s Obamacare health care exchange after finding it failed to adequately account for millions it received to help implement the Affordable Care Act in the state.

The report, issued last week by the Department of Health and Human Services’ Office of Inspector General, found – among other things – Connect for Health Colorado failed to properly document how it spent $4.4 million of taxpayer money. It also concluded as much as $4.5 million was spent on services and items that were not permitted under guidelines established by the Centers for Medicare and Medicaid Services.

“These findings were caused by a lack of adequate stewardship of Federal funds,” said the report. “Specifically, the Colorado marketplace had not developed, finalized, and implemented policies and procedures to ensure than it expended and accounted for establishment grand funds in accordance with [government] requirements.”

A spokesperson for Connect for Health told 9NEWS the exchange plans on continuing to contest the findings, but said, in the end, “If they say we owe them money, then we owe them money.” Much of the findings within the report involve payments made before 2014.

That depends on the definition of much. The report itself includes this bullet point:

  • charged the establishment grants $4,504,799 for unallowable hardware and software operational support and maintenance contract costs whose periods of benefit occurred after December 31, 2014

In other words, at least 46% of the misused money was spent after 2014. The report also notes that the IG looked into operations that included the No-Cost Extension (NCE) of federal grant benefits through the end of 2015. It’s unclear where KUSA came up with the notion that “much” of the problems were from two or more years ago, but the report itself suggests something very different.

What else did the report find? Well, Connect for Health executives certainly had their priorities set in one particular direction:

did not efficiently and effectively administer establishment grant funds totaling $463,054 consisting of improperly awarded executive and employee bonuses, overpayments to subgrantees, unallowable promotional giveaway items, excessive and unreasonable tips, vendor rebates that were received but not credited to the establishment grants, and unallowable social activities[.]

Executive bonuses will get the most attention, especially given the general state of ObamaCare exchanges. What performance milestones did they meet? Since the IG notes that they were “improperly awarded,” the assumption is that they were handed out pro forma. And according to the details of the report, that’s exactly what happened — without any formal evaluation, in most cases:


On top of that, the exchange paid a “signing bonus” and ten “retention” bonuses to executives despite having no statutory authority to do so. That added another $40,000 in costs to the federal government’s tab. In addition, the exchange overpaid three subgrantees by $164,170 without any documentation that the subgrantees had even asked for extra payments.


Plus, there’s this mysterious line item:

$279 to the establishment grants for unallowable social activities.

Later in the report, the IG explains that this was spent on a holiday party, with “cake, punch, holiday cards, and decorations.” Why the Colorado exchange felt it necessary to charge the federal government for those expenses will be one of the more interesting explanations we’ll hear … if we ever do hear it. At any rate, such expenses are explicitly prohibited from federal grants, as the IG points out in the report.

The whole report is damning for the arrogance of the bureaucracy when it came to spending federal grant money, especially on a flop like ObamaCare. One has to wonder just how many other states have used their federal grant money in such a cavalier manner, and for little purpose in the end.

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