Some Might Call It a Scandal

Jeffrey Anderson has a story which, if true, should prompt congressional hearings and the resignation in disgrace of Health and Human Services Secretary Kathleen Sebelius. According to Anderson:

. . . HHS has contracted with a subsidiary of a private health care company to help build and police the very exchanges in which that company will be competing for business. The person who ran the government entity that awarded that contract has since accepted a position with a different subsidiary of that same company. An insurance industry insider (speaking on the condition of anonymity) says that HHS, in an attempt to hide this unseemly contract from public view until after the election, encouraged the company to hide the transaction from the Securities and Exchange Commission.

According to my source (the basis for most of this account), in January, HHS awarded Quality Software Services, Inc. (QSSI) what the Hill describes as “a large contract to build a federal data services hub to help run the complex federal health insurance exchange.” At that time, the director of Obamacare’s newly established Center for Consumer Information and Insurance Oversight (CCIIO) — which the Hill describes as “the office tasked with crafting rules for the national exchange” — was Steve Larsen. Larsen had been the insurance commissioner for Maryland when Obama’s HHS secretary, Kathleen Sebelius, was the insurance commissioner for Kansas, and the two are reportedly close. The CCIIO awarded the Obamacare exchange contract to QSSI while Larsen was the CCIIO’s director, and he played a central role in planning the construction of the exchanges — although it’s not known whether he made the decision to award the contract to QSSI or not.

Under the contract that it signed with HHS, QSSI’s power would be substantial — as QSSI would shape, run, and affect companies’ ability to compete to sell insurance through Obamacare’s federal exchanges. The Hill writes, “A draft statement of work for the contract awarded to QSSI states the contractor should provide services necessary to acquire, certify and decertify health plans offered on a federal exchange.” Moreover, “It stipulates the contractor should monitor agreements with health plans, ensure compliance with federal standards and” — somewhat strikingly — “take corrective action when necessary.”

QSSI, apparently realizing what a valuable asset it had in the contract, started shopping itself around. Meanwhile, Larsen left the CCIIO and took a highly paid position with Optum, a subsidiary of UnitedHealth Group, in June. Sometime this summer, UnitedHealth Group bought QSSI.

The Hill writes that the “quiet nature of the transaction, which was not disclosed to the Securities and Exchange Commission (SEC), has fueled suspicion among industry insiders that UnitedHealth Group may be gaining an advantage for its subsidiary, UnitedHealthcare.” The Hill adds, “One critic familiar with the business rivalries of the insurance industry compared UnitedHealth Group’s purchase of QSSI to the New York Yankees hiring the American League’s umpires.” In other words, UnitedHealth Group, through QSSI, would be able to police the same field in which it would be a competitor.

Anderson goes on to note that because of the transaction, QSSI “would have access to valuable data,” which would “rais[e] extraordinary privacy concerns.” To call this arrangement unseemly would be to understate matters dramatically.

I would like to think that Anderson’s story is untrue. But if Anderson is mistaken in his allegations, then it would be nice if the Administration shows why, instead of simply ignoring the story. And if the Administration fails to offer a good explanation for why Anderson might be all wet, Congress should get those investigative hearings started.

  1. DocJay

    UnitedHealthCare has a track record in my life of being ruthless and evil. It is only fitting they should dominate our health care as decreed by Obama. Look at the bank accounts of all involved and you will see some very wealthy people recently. How will this be covered up?

  2. ConservativeWanderer
    DocJay: UnitedHealthCare has a track record in my life of being ruthless and evil. It is only fitting they should dominate our health care as decreed by Obama. Look at the bank accounts of all involved and you will see some very wealthy people recently. How will this be covered up? · 4 minutes ago

    The same way Benghazi is being covered up.

    The leftistmedia just won’t report on it.

  3. Nick Stuart

    But the 1%, Twinkies, lady parts, Bush and Rove!!!!

    Nothing to see here, move along folks.

  4. ConservativeWanderer
    Nick Stuart: But the 1%, Twinkies, lady parts, Bush and Rove!!!!

    Nothing to see here, move along folks. · 1 minute ago

    Don’t forget binders of women.

  5. DocJay

    Oh that’s how. What a great country.

  6. Percival

    Some might call it scandal.

    In Chicago, they call it “doing business.”

    Now, if we started the rumor that Bain Capital was heavily invested in UHC…

  7. Goldgeller

    I’d have to read more, and hope that the story unfolds a bit more before I can really say anything. Usually such foul play isn’t so obvious. And that’s why part of me doesn’t see any malicious intent. I just think we are at the point where the government is so big now that such basic concepts of fairness get choked out– just by sheer chance, anything the government does will have on party gaining some sort of unfair advantage over the other party. 

  8. John Hanson

    I heard about this story a while ago, before the election (by about 10 days or so) but forget where I read it.  It went plop in the night, and nothing happened, and I suspect it will fade away again.  Shouldn’t but likely will.

  9. Eeyore

    [Warning: knowledge-free and fact-free opinion ahead]

    If it ends up Kathleen Sebelius and Steve Larsen are having or have had an affair, that HHS decisions were made by Sebelius on that basis, that the relationship destroyed both their families, that the insider decision-making raised healthcare costs and made both Larsen and Sebelius billionaires – it doesn’t matter. Evil insurance companies will be driven out of private business and into the clutches of Obamacare, and Obama will declare that healthcare is now more “fair.”

    Oh…then nothing to see – move along.

  10. George Rapp

    In theory, there is a way to manage this sort of organizational conflict of interest within a company. It would require that firewall be created between the QSSI rulemakers and the rest of UnitedHealth Group – nobody in QSSI may reveal insider information to anyone else within the company. 

    In practice, companies usually stay far, far away from this sort of OCI, as it can preclude companies who make rules or help write statements of work from bidding on that work later.

  11. John Grant
    C

    This sort of thing is sadly all too common today. The dominant fact of our economic life is becoming crony capitalism–fortunes made or broken depending on connections to political power.

    Aside from the privacy issue (which is an aggravating evil), isn’t this just like TARP, Solyndra, and the auto bail-outs?

    The list could go on and on.

  12. Mothership_Greg

    Stuff like this happens all the time with enormous bureaucracies, unscrupulously or not.  Thankfully, Obamacare will consolidate these various bureaucracies into one enormous bureaucracy, and the blessed miracle of Medicare-for-all will introduce “economies of scale” which will magically make very expensive chemotherapy drugs incredibly cheap, by which I mean “not medically necessary”.