Report 2013-602 Recommendation 4 Responses

Report 2013-602: New High Risk Entity: Covered California Appears Ready to Operate California's First Statewide Health Insurance Exchange, but Critical Work and Some Concerns Remain (Release Date: July 2013)

Recommendation #4 To: Covered California

This recommendation has been superseded by a recommendation from a subsequent report. See 2015-605 #1 and #2.

To ensure financial sustainability, Covered California should conduct regular reviews of enrollment, costs, and revenue and make prompt adjustments to its financial sustainability plan as necessary.

Agency Response*

Covered California updated this 1-year response (originally submitted on July 11, 2014) as designated by the California State Auditor's instructions.

  • Response Type†: 1-Year
  • Estimated Completion Date: March 2015
  • Response Date: October 2014

California State Auditor's Assessment of Status: See 2015-605 #1 and #2 for the most current assessment

Covered California provided enrollment data but refused to provide information on costs and revenue. Therefore, we could not conclude that Covered California has fully implemented our recommendation. Given that we designated Covered California as high-risk, we will follow up on the financial sustainability issue in our upcoming update of this high risk issue.


Agency Response*

Covered California has updated the 1-year response (originally submitted on July 11, 2014) as designated by the California State Auditor's instructions. Covered California will continue with its plans on implementing the enrollment and forecasting model as well as updating the sustainability plan as necessary. Additional supporting documents will be available during March 2015, after the end of the upcoming open enrollment period which runs from November 15, 2014 to February 15, 2015. The results of the second open enrollment will provide a better indication of how far Covered California is progressing toward implementing its sustainability plan.

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: March 2015
  • Response Date: October 2014

California State Auditor's Assessment of Status: Not Fully Implemented


Agency Response*

Covered California's Economic Analysis and Sustainability Assistant Director has defined an analytical approach for developing enrollment and revenue projections, which included defining data needs and identifying subject matter experts who can lend their expertise to the revenue forecasting process. In addition to monitoring enrollment data, the Director is also part of Covered California's Analytics Work Group—an interdisciplinary group focused on evaluating health plan enrollment data from a variety of standpoints throughout the organization. The Director also works closely with Covered California budget staff on many budget issues and has developed a sustainability model that can evaluate the long run impact of enrollment, per member per month assessment rates, and expenditure plans. This model will be used in Covered California's 2014-15 budget development and approval process during which the PMPM fee rates will be established for 2015. Plan enrollment through December 2013 was consistent with the uppermost enrollment trend anticipated, which begins to mitigate to some degree, the risks associated with financial sustainability.

In addition, the Board adopted Financial Guiding Principles to steer its financial management policies and take a flexible financial planning approach which allows both adaptation of operational approaches and cost adjustments to match service demands. This approach includes monthly budget reporting and planning meetings involving all organizational units, monthly reconciliations of expenditures, and regular independent audits. Board meetings will include annual budget presentations, quarterly expenditure reports, midyear budget adjustments as needed, and audit results.

  • Response Type†: 6-Month
  • Estimated Completion Date: January 2015
  • Response Date: January 2014

California State Auditor's Assessment of Status: Partially Implemented


Agency Response*

Covered California established a position and in July 2013 hired an Assistant Director, Economic Analysis and Sustainability, within Financial Management devoted to developing fiscal models and research methodologies needed to ensure a sound basis for fiscal and financial sustainability. The Director will closely monitor, and develop projections of enrollment, premiums, and expenditures taking into account trends in the health insurance market, changes in Federal and/or State laws, and other regulations or policies impacting Exchange operations. This information will be used in Covered California's budget development and approval process during which changes to PMPM fee rates and program expenditures will be considered.

In addition, the Board adopted Financial Guiding Principles to steer its financial management policies and take a flexible financial planning approach which allows both adaptation of operational approaches and cost adjustments to match service demands. This approach includes monthly budget reporting and planning meetings involving all organizational units, monthly reconciliations of expenditures, and regular independent audits. Board meetings will include annual budget presentations, quarterly expenditure reports, and audit results.

  • Response Type†: 60-Day
  • Estimated Completion Date: December 18, 2013
  • Response Date: September 2013

California State Auditor's Assessment of Status: Pending


All Recommendations in 2013-602

†Response Type refers to the interval in which the auditee is providing the State Auditor with their status in implementing recommendations made in an audit report. Auditees must submit a response regarding their progress in implementing recommendations from our reports at three intervals from the release of the report: 60 days, six months, and one year or subsequent to one year.

*Agency responses received after June 2013 are posted verbatim.


Report type

Report type
















© 2013, California State Auditor | Privacy Policy | Conditions of Use | Download Adobe PDF Reader