Comptroller suspends more than $5.7 million in payments to state contractor
Toronto-based Morneau Shepell built problem-plagued employee benefits system
By PETER HANCOCK
Capitol News Illinois
SPRINGFIELD – Illinois State Comptroller Susana Mendoza announced Monday that her office has suspended more than $5.7 million in payments to a company that designed a web portal that manages state employee benefits.
Mendoza made that announcement following the release of an audit in late March that outlined numerous problems with the state’s MyBenefits Marketplace system, which was designed and built by a Toronto-based company, Morneau Shepell.
The system serves an estimated 450,000 state employees and retirees to use when they sign up for health insurance, flexible spending accounts and other employee benefits. Launched in 2016, it replaced a system in which those benefits were administered by the Department of Central Management Services and staff in all of the various state agencies.
From the outset, though, the MyBenefits system was plagued with problems that directly affected employees and retirees, according to the audit. Those have included payroll errors, difficulty for people accessing their flexible spending accounts, people being charged incorrect amounts, and people having their insurance benefits incorrectly canceled.
“At a time when our state could least afford it, MyBenefits was an unnecessary fiasco,” Mendoza said in a news release. “Former Governor Bruce Rauner replaced a system that had functioned for decades with a broken one.”
The audit came about after the Illinois House passed a resolution in 2017 calling for a probe into how the Morneau Shepell contract was awarded and how it had been administered.
The audit puts much of the responsibility on the Rauner administration for rushing through the purchasing process in a way that resulted in only one company, Morneau Sheppel, submitting a proposal. The company was awarded a five-year contract, with an option for another five-year renewal, with a total 10-year cost to the state of $94 million.
The idea for the new web portal developed during labor negotiations with the Rauner administration. Initially, the plan was to establish an online exchange, similar to the ones people use to buy insurance through the Affordable Care Act. It even called for establishing a multi-tiered system of health plans, “platinum, gold, silver and bronze” categories, that are used in the ACA plans.
Those new health plans, combined with changes in premiums, deductibles and copayments, were supposed to help save an estimated $500 million a year in state health care costs.
As yet, however, the state has not implemented any of the new health plans, the audit noted. Instead, it has outsourced the job of administering employee benefits to Morneau Shepell, which operates the new web portal and a customer call center in Atlanta.
To date, according to the comptroller’s office, the company has been paid about $20 million.
The audit faults the Rauner administration for rushing to get the new system into place, and for side-stepping routine policies that encourage contracting with firms owned by minorities, women and people with disabilities, and policies requiring everyone involved in the contract to submit conflict-of-interest disclosure forms.
It also faulted the administration for not restarting the bidding process after it received only one response from the initial solicitation, and for executing a contract that essentially relies on the vendor to report on whether it is meeting required deadlines and performance benchmarks.
In addition, auditors said they found 24 instances in which Morneau Shepell failed to meet specified performance benchmarks for three consecutive months, which would normally constitute a breach of contract. However, they noted, the final contract did not contain any language regarding breach of contract.
In addition to suspending payments to the company pending further review of the contract, Mendoza said her office will implement new reporting standards for all information technology contracts over $5 million in order to, “prevent future spending and procurement abuses” like those found in the Morneau Shepell audit.
A spokeswoman for the comptroller’s office said that is expected to affect about 25 IT contracts in the current fiscal year.
Officials at Morneau Sheppel did not respond to telephone and email requests for comment.