Feeds:
Posts
Comments

Archive for April, 2010

Captive.com, the leading source for news involving the captive insurance industry, is covering Insurance Commissioner Karen Weldin Stewart and her department. The links include stories by CRI and other sources.

Advertisements

Read Full Post »

Delaware’s unprofitable captive insurance bureau will continue to flounder, unlikely to see any new revenue dollars, unless there are substantive reforms, national experts say.

By Lee Williams and Danny Russell

Reputation is everything within the highly-competitive captive insurance industry.

Firms looking to create a captive insurance company, which is a cost-saving form of self-insurance, are courted by an ever-growing list of potential domiciles – states and countries eagerly seeking their business.

The domiciles want access to the taxes and fees the captives will contribute to their state budgets once they’re operational. Some states with active captive programs can see millions of dollars transferred into their general funds.

The up-front money for a potential captive, which can consist of salary for a captive manager, audits, financial and pre-qualification reports, can sometimes exceed $100,000.

If there’s even a hint of impropriety at a potential domicile, the captive will run away and locate elsewhere. There are nearly a hundred diverse domiciles worldwide who will gladly take their business. It’s a buyer’s market.

When considering a potential domicile, national captive insurance experts say their industry’s wants and needs are simple: efficiency, expertise, and most important – stability.

If Delaware’s captive insurance bureau wants to compete globally, and actually generate revenue for the state instead of losing $100,000 as it did last year, these three specific areas must be addressed and improved.

The bureaus tarnished image must also be cleansed.

“A domicile’s reputation is certainly a significant element of the decision on where to domicile,” said Dennis P. Harwick, president of the Captive Insurance Companies Association (CICA), which is the only domicile-neutral association of captive insurers.

Restore reputation

Christina A. Mancini is a partner and CEO of Captive.com, a Web site that has become required daily reading for the world’s captive insurance industry.

The partnership launched the site in 1995. It is sponsored by some the largest service providers in the industry. Today Captive.com generates more than a half-million “hits” per month from some 40,000 unique visitors. She tracks media reports pertaining to her industry, and sends out regular notifications of newsworthy developments.

Few people are better positioned to track trends within the industry, and fewer still know what the captives are looking for when considering a new domicile.

“Each customer has their own criteria, but by far and large, what they’re looking for is stability, and the expertise that exists within the regulatory staff of a domicile,” Mancini said. “Other issues are the premium tax structure, flexibility in dealing with regulators and capitalization requirements.”

Mancini’s Web site published links to many of the stories written by the Caesar Rodney Institute, as part of CRI’s ongoing series “Delaware Dept. of Insurance: Not in the public interest.”

The series revealed Delaware Insurance Commissioner Karen Weldin Stewart’s proclivity for awarding lucrative no-bid contracts to friends, campaign donors and out-of-state consulting firms – possible violations of Delaware’s procurement and contracting regulations.

CRI revealed how Stewart awarded a $16,000-per-month contract to Steve Kinion, who is currently the director of the captive bureau, although he has had several titles within the insurance department, even though Kinion lives in Springfield, Illinois, where he maintains a thriving law firm.

These issues, Mancini believes, may or may not impact the bureau’s ability to obtain new captives.

“I don’t know how this will play out, but it could have an impact on captives coming into the domicile,” she said. “They’re in an awkward position.”

The insurance commissioner was given the opportunity to defend and clarify some of the issues raised about her stewardship of the insurance department when she testified before the House and Senate insurance committees two weeks ago.

Rep. Michael Ramone, R-Middle Run Valley, said the commissioner’s testimony raised more questions than it answered.

“Quite frankly, I wasn’t comfortable at the end of the process with the answers we got, particularly with the hiring processes and business decisions involving taxpayers’ money,” Ramone said. “She brought in her war-chest of speakers and said now we needed to trust them?”

Stewart refused to be interviewed for this and every other story CRI has published.

Her refusal to comment, Mancini said, is troubling.

“I guess one would have to wonder why,” she said. “I have been bullish about Delaware for several years, and I think I speak for the industry in wishing them success. Openness and transparency are needed to put this situation to rest.

Restore stability

Since Stewart was elected in 2008, the Delaware Department of Insurance has seen a revolving door of deputy commissioners and captive directors – a far cry from the stability Mancini and others say is so necessary if the state hopes to compete globally and build relationships within the industry.

Several people have been appointed second in command, according to Stewart’s e-mail correspondence obtained by CRI through a Freedom of information Act (FOIA) request:

  • “Mr. Steve Kinion, who carries the title of Sr. Advisor to the Commissioner and is, for all practical purposes, the de facto Deputy Commissioner…” according to an e-mail sent April 29, 2009 by Stewart’s chief of staff Elliott Jacobson.
  • “I am appointing Edmond M. Ianni as Deputy Insurance Commissioner…” Stewart wrote in an e-mail May 5, 2009 to Office of Management and Budget director Ann Visalli.
  • “That salary is higher than any cabinet secretary in the state – we will have to discuss tomorrow,” Visalli wrote hours later in her reply.
  • “Under the direction of my Deputy Commissioner Gene Reed, a task force within the department has been meeting to discuss these issues identified by physicians,” Stewart wrote in a press release sent last month, defending her department’s actions in response to an editorial that accused her of not responding to pre-authorization denials.

Changing senior staff and their duties is in direct opposition to the stable working relationship sought by potential captives, which has become standard practice at other domiciles such as Vermont, the largest captive domicile in the United States.

“Vermont has had very little change. People do like that,” Mancini said. “They [captives] know the former and current director. People know the regulatory staff, not only the regulator himself but those who work for him. Now, if insurance commissioner change frequently, and with each change the new commissioner brings in new regulatory staff rather than keeping existing staff, predictability and expertise and relationships will suffer.”

Delaware had one of the industry’s best-known and most-respected captive experts on staff when Stewart was elected, Bill White, whose 25 years of traditional and captive insurance experience dwarfs that of any of Stewart’s expensive appointments.

White was picked by Stewart’s predecessor Lt. Gov. Matt Denn to launch Delaware’s captive bureau, after he successfully created and launched Washington D.C.’s captive program.

“Bill has enormous expertise,” Mancini said. “He did a tremendous job building the regulatory framework in D.C., and then he moved to Delaware and did a remarkable job there too. He is exceptionally bright, a tremendous guy, and a real asset to any domicile where he gets involved.”

Rather than retaining White and his world-class contacts within the captive industry, three months after taking office, Stewart forced him out the door.

Inconsistent testimony

During her testimony before the House and Senate insurance committees, Stewart blamed White’s “sudden” departure from the captive bureau as the reason she awarded no-bid contracts to Kinion, Ianni and her personal friend Mary Jo Lopez.

White left her in the lurch, she told lawmakers.

“I was annoyed when I heard that,” White told the Caesar Rodney Institute. “That was not the case.”

Instead, White vividly recalls a conversation he had with the commissioner in February 2009, on the drive home from Dover, after he and Stewart met with the Joint Finance Committee.

White had already envisioned several goals for the captive bureau. He was looking forward to discussing his ideas with the commissioner and seeing them implemented.

“I asked for her strategic directives, what she wanted for the captive bureau over the next three years. I wanted to establish a presence in the market and establish credibility in the market,” White said. “Different types of captive and known service providers were coming here. I wanted to get to the point where the revenue generated by the premium taxes would break even – our take-off point. We needed clear strategic objectives to align properly. We had those things under Matt Denn.”

White never got any answers.

Instead, he was told to make room for Kinion, Ianni and Lopez.

“She said, ‘Bill you need to come up with a plan that includes these people,’” White recalled.

Stewart was somewhat vague about the roles the three contractors would play within the bureau.

None had any captive experience, although Kinion was a respected regulator on the traditional insurance side.

Stewart said Lopez would become the bureau’s Director of Business Development.

“I made the mistake of asking what we were selling,” White said. “She got ticked-off about that.”

“Ultimately, I decided not to worry about how these people fit in,” he said. “I outlined a plan based on what worked and generated 38 captives.”

Stewart, through her appointees, made it clear she wanted her people in the bureau, not anyone appointed by Denn. White resigned two months later.

White is not bitter, and his skills are very much in demand – even more so than when he worked within Delaware’s bureau. He politely declined to discuss recent industry buzz about where he is going to establish a captive program next.

Restore expertise, cooperation

White’s suggestions for fixing Delaware’s captive bureau would still work today. They’re simple, cost-effective and could be implemented overnight.

“Captives want to know your regulatory approach. The statutes are not really that different, one domicile to another,” White explained. “What they are looking for is flexibility – a regulator they can have a discussion with and support in terms of structuring a captive, or feedback on structuring a proposal.”

White describes this vision, which has worked extremely well wherever he’s worked, as a “consultative regulatory approach.”

“They’re looking for a regulatory environment that will assist them in successfully licensing their captive,” White said. “It doesn’t matter whether the domicile is large or small.”

Stewart and her team have been spending vast sums of money traveling the county on “road shows” to market what they call the “Delaware Advantage.”

“They need to articulate a strategic vision, goals and objectives and determine what resources they need to support that,” he explained. “That’s the message that will eventually get out to the marketplace.”

Licensing captives, he said, is a “sophisticated business transaction. You do not sell it like retail. You attract business.”

White has heard from colleagues within the captive industry they have trouble getting someone from within Delaware’s captive bureau to even return phone calls.

“Their concern is they can’t get someone to respond on a timely basis to basic questions – every day maintenance stuff,” he said. “I have no idea what’s happening on the application basis.”

Appoint the commissioner

The Delaware Department of Insurance ranks 47th in the country in terms of efficiency, according to data supplied by the National Association of Insurance Commissioners that was analyzed by CRI.

CLICK FOR FULL SIZE IMAGE

Delaware is one of only 11 states that elect their insurance commissioners. The rest appoint industry experts to the role. Appointed insurance commissioners have consistently higher efficiency ratings than elected commissioners.

The higher the efficiency rating, the more “bang for the buck” the states receive in terms of revenue from their insurance departments.

CLICK FOR FULL SIZE IMAGE

Of the states with elected insurance commissioners, Delaware ranks last in terms of efficiency, budgeting more dollars per employee than the other states.

Shaun Fink is executive vice-president of the Caesar Rodney Institute.

“It’s time for Delaware to reexamine the process it uses to select insurance commissioners,” Fink said. “The Delaware Department of Insurance should function like an ATM for the state, in terms of the revenue it generates that is transferred into the General Fund. Given the issues the Caesar Rodney Institute has raised about our current commissioner and her stewardship of the office, it may be time to consider whether the state would be better off with an appointed commissioner – an industry professional – rather than an elected official from the dominant political party.”

CLICK FOR FULL SIZE IMAGE

CRI research fellow Sara Clark contributed to this report. Contact CRI research fellow Danny Russell at dannyrussell53@gmail.com. Contact investigative reporter Lee Williams at (302) 242-9272 or lee@caesarrodney.org

The Caesar Rodney Institute is a 501(c)(3) non-partisan research and educational organization and is committed to being a catalyst for improved performance, accountability, and efficiency in Delaware government.

© Copyright April 27, 2010 by the Caesar Rodney Institute

Read Full Post »

Vermont’s captive insurance division, which is 800-percent larger than Delaware’s captive bureau, runs leaner, produces more and pays its director and senior staff half as much.

By Lee Williams and Danny Russell

Delaware Insurance Commissioner Karen Weldin Stewart, when defending the contractor she chose to head her captive insurance bureau and his $16,000 monthly salary, cited Vermont as a “state that has successfully groomed a captive industry.”

She’s right.

Vermont first began courting captive insurance companies, which is a form of self-insurance, in 1981.

Since then, it has grown into the largest captive domicile in the United States, and the third largest in the world, behind only Bermuda and the Cayman Islands.

The Green Mountain State boasts that it is home to captive companies created by 42 of the Fortune 100 companies, and 18 of the Dow 30 companies have captives domiciled in Vermont.

Vermont’s 888 captives generated more than $24 million in taxes and fees last year – money that was transferred into the state’s General Fund. According to a 2007 economic study, Vermont’s captive industry has created more than 400 direct jobs and 1,400 indirect jobs.

By comparison, Delaware’s captive bureau, which has 53 captives, lost money last year, operating more than $100,000 in the red, partially due to the six-figure salaries paid to it’s top three staffers, all of whom were hand-picked by Stewart.

“In the 1980s, Delaware had the opportunity to be what Vermont is today when captive legislation was signed into law,” Stewart wrote in a guest column published April 8 by The News Journal. She was not willing to be interviewed for this story.

As Stewart pointed out, Vermont can serve as an example of what her department could be. However, when the two are compared, it becomes clear Vermont can also serve as an example of what the Delaware Department of insurance and its captive bureau should be.

An examination of business practices at the Vermont Captive Insurance Division, and its insurance department, revealed its success is only partially due to the 30-year head start it had in the highly-competitive industry. Both Vermont’s insurance department and its captive division run leaner and produce more because they have successfully avoided many of the management mistakes and missteps still plaguing the Delaware Department of Insurance.

David Provost, Vermont’s Deputy Commissioner for Captive Insurance credits a number of factors for his division’s success.

“We formed a domicile here based on an industry push – industry came to us,” Provost told the Caesar Rodney Institute. “They wanted a viable on-shore option.”

Vermont’s small size, like Delaware’s, also played a significant role in luring the businesses.

“It’s different here because we’re small. You can walk into the State House, raise your hand and sit down with a state official,” he said. “It’s very easy to get things done.”

Long-term backing from both lawmakers and industry, Provost explained, is vital to Vermont’s success.

“We’ve had continued support of the legislature and each successive governor. Everyone got behind us,” he said. “We also have a very active captive association. It’s really been not just an industry, but a partner with government.”

Some of the differences between the two states include the following:

  • Vermont pays its top three captive officials less than half of the hefty salaries received by Delaware’s captive officials. Provost earns $90,272 per year. His Director of Captives makes $75,213 and the division’s Director of Financial Examinations makes $72,758 per year, according to Gov. Jim Douglas’ proposed budget for fiscal year 2011.
  • By comparison, Delaware’s captive bureau director Steve Kinion is paid $192,000 annually. Edmund Ianni, Delaware’s Director of Strategic Development makes $195,996 and Director of Business Development Mary Jo Lopez makes $168,000.
  • Kinion, Ianni and Lopez are contractors. None are actually state employees. Kinion lives and works in Springfield, Illinois, where he’s a principal at a successful law firm. Lopez lives in New Jersey. By comparison, all of the top staff and employees working in Vermont are actually state employees, who live within the state’s boundaries.
  • Vermont’s insurance commissioner is appointed. Delaware’s insurance commissioner is elected. According to data from the National Association of Insurance Commissioners (NAIC), insurance departments with appointed commissioners are more efficient. Stewart is one of only 12 elected commissioners in the country.
  • Vermont’s captive division is totally transparent, posting its earnings, profit and loss statements, and a 120-page annual report online. There is very little public data available regarding Delaware’s captive bureau.
  • The Vermont Department of Insurance operates far more efficiently. It keeps 10-cents of every revenue dollar brought into the department. Delaware keeps 20-cents of every revenue dollar. . In other words, Vermont’s Insurance Department contributes 90 cents out of every revenue dollar to Vermont’s General Fund whereas Delaware’s Department of Insurance contributes only 80 cents out of every revenue dollar to the General Fund. Finally, Vermont brings in 9.9-times more revenue than it spends. Delaware brings is 4.8-times more revenue than is spends.
  • According to their budgets, the Delaware Department of Insurance allocates $200,000 more per individual employee than Vermont: $310,000 per employee in Delaware, compared to $110,000 per employee in Vermont.
  • When he testified before a joint session of the House and Senate insurance committees last week about problems within his captive bureau, Kinion said the reason the bureau lost $100,000 last year was because “2009 was a very difficult year, in terms of captives throughout the year. There was a lack of available credit.”
  • Vermont, by comparison, had a much different experience. “2009 was a very good year,” Provost said. “We formed 39 captives, which was the sixth best year in our 30-year history. Our average has been 25 new captives per year.”
  • Stewart has been criticized for awarding no-bid contracts to out-of-state law firms, including several who donated to her campaign. Vermont’s Department of Insurance does not utilize outside counsel. “We have our own internal legal staff,” Provost said.

Provost offers one bit of advice when he speaks to officials from other states seeking to create or grow a captive insurance program.

Said Provost: “You’ve got to be in this for the long run. You need to have a long-term plan, a long-term solution, so you can’t have a short-term domicile.”

Contact CRI research fellow Danny Russell at dannyrussell53@gmail.com. Contact investigative reporter Lee Williams at (302) 242-9272 or lee@caesarrodney.org

The Caesar Rodney Institute is a 501(c)(3) non-partisan research and educational organization and is committed to being a catalyst for improved performance, accountability, and efficiency in Delaware government.

© Copyright April 19, 2010 by the Caesar Rodney Institute

Read Full Post »

By Lee Williams

Delaware Insurance Commissioner Karen Weldin Stewart and her staff testified for more than two hours Tuesday before a joint hearing of the House and Senate insurance committees about problems and concerns within the Department of Insurance – including many issues that were raised by the Caesar Rodney Institute as part of its ongoing investigation of the DOI.

In the nine months spent researching its special report titled “Delaware Dept. of Insurance: Not in the Public Interest,” CRI became very familiar with the operations of the insurance department, including the functions of its Captive Insurance Bureau, which became the topic of discussion during the joint hearing.

Some of the comments made Tuesday, CRI has learned, require clarification for the lawmakers and members of the public who are rightfully concerned that the DOI may not be functioning as efficiently as possible, since every dollar the department doesn’t spend is required by law to be transferred into the state’s General Fund.

What was said: Several committee members were outraged at the salaries paid to the top three officials of the captive bureau, who were all hand-picked by Stewart. Steve Kinion and Edmund Ianni each receive $16,000 per month. Mary Jo Lopez is paid $14,000 per month. Stewart and Kinion defended the exorbitant salaries, describing them as “all in,” in that the three top staffers do not receive any additional public monies or reimbursements for travel or expenses.

What CRI has learned: This statement is only partially true. Neither Kinion nor Ianni appear to be receiving reimbursements. Lopez, however, has received more than $5,000 in travel reimbursements, according to the state’s online checkbook. Lopez, through her corporation Affinitee Group, LLC, of which she is the only officer, first began receiving travel reimbursements in April of last year.

From the state’s online checkbook for Affinitee Group, LLC:

OTHER ELECTIVE OFFICES            INSURANCE COMMISSIONER            TRAVEL REIMB. NON STATE EMP.            12/10/2009            $786.67

OTHER ELECTIVE OFFICES            INSURANCE COMMISSIONER            TRAVEL REIMB. NON STATE EMP.            1/13/2010            $405.27

OTHER ELECTIVE OFFICES            INSURANCE COMMISSIONER            TRAVEL REIMB. NON STATE EMP.            7/17/2009            $1,308.96

OTHER ELECTIVE OFFICES            INSURANCE COMMISSIONER            TRAVEL REIMB. NON STATE EMP.            8/20/2009            $487.57

OTHER ELECTIVE OFFICES            INSURANCE COMMISSIONER            TRAVEL REIMB. NON STATE EMP.            9/11/2009            $1,014.16

OTHER ELECTIVE OFFICES            INSURANCE COMMISSIONER            TRAVEL REIMB. NON STATE EMP.            4/21/2009            $512.73

OTHER ELECTIVE OFFICES            INSURANCE COMMISSIONER            TRAVEL REIMB. NON STATE EMP.            5/22/2009            $547.6

*        *        *

What was said: Stewart defended her penchant for issuing lucrative no-bid contracts for professional services, a practice that has drawn the ire of the Office of Management and Budget, by telling lawmakers she is not required to solicit competitive bids.

“As a statewide elected official, according to Title 18, section 307 of Delaware Code, I have the authority to hire experts as they’re warranted,” she told the lawmakers.

What CRI has learned:  This statement is only partially true. Title 18, § 307 of Delaware Code, does give the insurance commissioner the authority to hire and appoint “examiners, clerks, technical and professional personnel, and other necessary assistants,” as she sees fit. However, the statute cited by Stewart does not grant the insurance commissioner the authority to circumvent the state’s procurement and contracting regulations contained in Title 29 of the state’s code, according to several attorneys consulted by CRI.

*        *        *

What was said: During her presentation, Stewart was accompanied by several members of her staff, including John Tinsley, whom she introduced as her “special deputy for examinations.”

What CRI has learned:  This statement is only partially true. Stewart may have granted  “special deputy” status and powers to Tinsley, however, he is a vendor not a state employee. Tinsley is a “principal” in two firms doing big business with the DOI – Regulatory Insurance Services and its sister firm INS Consultants Inc. For FY-09 and the first three quarters of FY-10, the two firms have received more than $24 million from the insurance department. Tinsley’s corporate bio describes him as “a former Special Deputy and former Chief Examiner for the Delaware Department of Insurance.”

Contact investigative reporter Lee Williams at (302) 242-9272 or lee@caesarrodney.org

The Caesar Rodney Institute is a 501(c)(3) non-partisan research and educational organization and is committed to being a catalyst for improved performance, accountability, and efficiency in Delaware government.

© Copyright April 14, 2010 by the Caesar Rodney Institute

Read Full Post »

By Lee Williams

The Delaware Department of Insurance’s highly-touted Captive Insurance bureau lost $100,000 last year, despite the more than $500,000 in combined salary paid to its top three appointees.

“We’ve always been in the hole,” said Steve Kinion, an attorney who lives and works in Illinois, who was appointed director of the captive bureau last year by Delaware Insurance Commissioner Karen Weldin Stewart.

Kinion’s revelation was made during a joint hearing of the House and Senate insurance committees, held Tuesday afternoon in the House Majority conference room, which was filled to capacity with the media and members of the insurance and medical communities. Legislative staffers needed to bring extra chairs.

Stewart appeared before the committees accompanied by Kinion and three members of her department. She answered every question the lawmakers asked.

Rep. Bryon Short, D-Highland Woods, who chairs the House insurance committee, observed that Stewart had requested the meeting. His Senate counterpart, Sen. Patricia Blevins, D-Elsmere, pointed out that the committees do not have oversight authority, as Stewart is an elected official.

All of the lawmakers were perplexed that Sen. Jay Rockefeller, D-WV, had launched hearings into pre-authorization denials by a Delaware firm.

Stewart said she had met with Rockefeller’s staffers Tuesday morning.

“What triggered Sen. Rockefeller’s interest?” Short asked the commissioner.

“He didn’t say,” Stewart said. “He is the former governor of West Virginia. I knew him. I visited them in their home in West Virginia. West Virginia has an appointed [insurance] commissioner. It’s hard to find people. It gave the governor a bit of frustration as to how the office was running. Elected commissioners are a lot different. We respond differently to the public. It was this frustration, not knowing Delaware had an elected commissioner that was the root of the trouble, the way he leads his life.”

The bulk of the questioning during the two-hour hearing focused on Kinion’s bureau, home to 53 captive firms, and his hiring, which like that of his colleagues was done without competitive bidding.

Rep. Michael Ramone, R-Middle Run Valley, told Kinion, “I need to follow the money.”

Like most lawmakers at the hearing table, Ramone was not aware the captive bureau was operating in the red. Kinion admitted the bureau takes in $600,000 in revenue, but has operating costs in excess of $700,000 – the majority of which is the $550,000 in combined salary paid to Kinion and his two colleagues.

“It would take us at least four years, if we fire everybody tomorrow and keep all those companies, just to break even,” Ramone said.

“2009 was a very difficult year, in terms of captives throughout the year,” Kinion said. “There was a lack of available credit.”

Kinion reacted to a story published by the Caesar Rodney Institute, after the institute visited his bureau and reported finding empty offices with little sign of use.

“You may have read about multiple boxes being stacked. It’s true, the captive industry is not a consumer industry,” Kinion said. “Those who come in our office are usually dropping off documents.”

Kinion said he and his colleagues are required to travel extensively.

“We are on the road most of the month,” he said. “I do not subscribe to sitting in the office waiting for the phone to ring.”

Ramone and Sen. Catherine Cloutier, R-Heatherbrooke, questioned Stewart on why she chose Kinion, who still lives in Illinois, and statements she had made about her inability to find a qualified candidate for the job in Delaware.

“I fully understand the need to search for the best person for the job, but often, after I give them the salary, they come to my state to live,” Ramone said. “Normally, eventually, having that person live in Delaware would be a goal of mine.”

Rep. Greg Lavelle, R- Sharpley, still had unanswered questions after the hearing.

“What struck me was the volume of contractual work done in the commissioner’s office, apparently not done with open and competitive bidding,” Lavelle said. “I tried, but I really couldn’t get an answer on that.”

Contact investigative reporter Lee Williams at (302) 242-9272 or lee@caesarrodney.org

The Caesar Rodney Institute is a 501(c)(3) non-partisan research and educational organization and is committed to being a catalyst for improved performance, accountability, and efficiency in Delaware government.

© Copyright April 13, 2010 by the Caesar Rodney Institute

Read Full Post »

After weeks of public criticism that her department was too slow in reacting to pre-authorization denials in cardiac and other imaging tests by a local insurer, Delaware Insurance Commissioner Karen Weldin Stewart produced a handful of experts to tell the public that the criticism of her agency was not warranted.

The testimony came at a public meeting Stewart hosted Tuesday morning at the Department of Insurance (DOI) offices in Dover – the first of two public hearings she faces today.

Stewart spoke extemporaneously very little during the hearing, reading welcoming remarks, a list of ground rules for the meeting and a timeline she said proved her agency reacted quickly once allegations about the pre-authorization denials were raised.

She did not take questions.

“This has received a good deal of attention,” she said. “Unfortunately, some of what we have read and heard is creating anxiety on an already complex topic.”

Several physicians, an insurance carrier and a lawyer said conditions were improving – fewer patients were being denied tests. Citing federal privacy laws, none addressed individual cases that had been described in the media.

Titled: “Presentation before Meeting of the Stakeholders: Relative to Medical Procedures and Pre-Authorization,” the real audience seemed to be the two lawmakers in the room, Sen. Harris McDowell, D-Wilmington North and Rep. Michael Ramone, R-Middle Run Valley, who will question her later in the day.

Originally, Stewart had invited only lawmakers to the morning meeting, until this was revealed by the Caesar Rodney Institute.

After learning about problems within Stewart’s department chronicled in CRI’s special report titled: “Delaware Dept. of Insurance: Not in the public Interest,” the chairs of the House and Senate insurance committees invited Stewart to testify before joint hearings of their committees, to examine issues raised by CRI and the pre-authorization denials.

CRI will provide twitter coverage of the afternoon hearing at  www.twitter.com/caesarrodneyinst, as well as analysis and commentary.

.

Read Full Post »

The Delaware Office of Management and Budget has chastised the Department of Insurance for writing purchase orders – after the fact – for no-bid contracts worth more than a half-million taxpayer dollars.

By Lee Williams

Delaware Insurance Commissioner Karen Weldin Stewart awarded a professional services contract last August worth up to $700,000 to a New Mexico firm without seeking competitive bids, an action experts say may violate Delaware’s procurement and contracting regulations.

An ongoing investigation by the Caesar Rodney Institute has revealed this is one of many no-bid contracts awarded by the DOI, and then paid for by an after-the-fact purchase order begrudgingly approved by the Office of Management and Budget (OMB).

The recipient of the insurance department’s most recent no-bid contract, Regulatory Consultants, Inc. (RCI), was incorporated in 2003 by Nestor J. Romero, who is listed as the firm’s president, director and treasurer.

According to the New Mexico Secretary of State’s office, RCI is one of four Limited Liability Corporations created by Romero. None, including RCI, are corporations “in good standing” with the State of New Mexico.

All four corporations share the same address.

Romero said he first met Stewart at an insurance industry convention in 2003. Obtaining the no-bid contract from her was relatively easy – something he was able to do without competitive bidding.

“There wasn’t any RFP. We put a proposal together, submitted the proposal to the department. The proposal went to Karen Weldin Stewart, to Elliott Jacobson and others, and we got the contract,” Romero told the Caesar Rodney Institute.

Romero said RCI was contracted to perform premium tax audits of 24 foreign insurance companies – insurance firms doing business in Delaware that are domiciled in other states. Industry experts say several Delaware firms could have performed the work.

According to the contract, obtained by CRI through a Freedom of Information Act (FOIA) request, Romero’s firm is to be paid up to $25,000 for each of the 24 audits, plus expenses.

RCI has already received more than $72,000 in payments, according to Delaware’s online checkbook, but Romero said the contract is capped much higher.

“The total not-to-exceed number, a rough estimate, is $700,000,” he said.

This amount exceeds the limit on no-bid professional services contracts set by Delaware’s Purchasing and Contracting Advisory Council, and codified into state law.

“Any contract over $50,000 should be bid out,” said Delaware Auditor of Accounts R. Thomas Wagner.

The Delaware Department of Insurance is subject to the state’s procurement laws, including the need for competitive bids, Wagner said.

“The only way around it is to sole-source it, or get a governor’s proclamation, which is usually done only in time of emergency,” Wagner said.

Because there are several qualified firms in Delaware that could have provided the service, Wagner explained, the DOI would have been precluded from sole-sourcing the contract.

Documents obtained by the Caesar Rodney Institute through Delaware’s Freedom of Information Act (FOIA) show Romero met with DOI officials three times last year: once at a conference in San Diego, then twice at the insurance department’s offices in Dover.

Stewart did not respond to numerous e-mails or phone messages left with her personal assistant and chief of staff seeking comment for this story.

OMB Warnings

The contract between the insurance department and RCI states it is “subject to the approval of a purchase order by the Delaware Office of Management and Budget.”

The Caesar Rodney Institute has obtained five memos from OMB Director Ann S. Visalli to Stewart’s chief of staff Elliott Jacobson concerning purchase orders for five other vendors, which were submitted by the DOI for payment from OMB.

All five memos were sent June 11, 2009. All were titled: “AFTER-THE-FACT PURCHASE ORDERS.”

The wording of the memos is identical. Only the names of the vendors were changed.

“Our offices are in receipt of your request for a waiver from the State accounting policy that requires a purchase order for any obligation over $2,500, prior to the purchase of a good and/or service.  As you know, the State is not liable for goods or services unless and until proper compliance of accounting procedure has been met. To avoid the loss of a good faith vendor, and per your written request dated May 14, 2009, the After-the-Fact Purchase order 2000581 for $96,000 to Zack Stamp Consulting is hereby approved,” one of the e-mail states.

CLICK ON IMAGE FOR LARGER VIEW

Visalli wrote that submitting purchase orders after contracts have been signed places a burden on her office and the DOI, “so your future compliance is strongly encouraged.”

“In the event of non-compliance, the vendor may look for payment to the employee who wrongfully purported to obligate the State,” Visalli wrote.

Added together, the five purchase orders cost Delaware taxpayers more than a half-million dollars in payments.

Visalli was not willing to be interviewed for this story.

Delaware Code requires a formal bidding process for any professional services contract that exceeds $50,000. It also prohibits an agency from subdividing or “fragmenting” a contract into chunks in order to stay below the cap.

State law assigns penalties for violating the procurement and contracting regulations. The maximum penalty for a first offense is a $2,000 fine and six months imprisonment.

Visalli copied her memos to the Auditor of Accounts, the director of the Division of Accounting, and to Attorney General Beau Biden.

Contact investigative reporter Lee Williams at (302) 242-9272 or lee@caesarrodney.org

The Caesar Rodney Institute is a 501(c)(3) non-partisan research and educational organization and is committed to being a catalyst for improved performance, accountability, and efficiency in Delaware government.

© Copyright April 13, 2010 by the Caesar Rodney Institute

Read Full Post »

Older Posts »