CHA disclosed the loss a short time later to industry analysts, business partners and state insurance regulators - but not to the Finance and Administration Cabinet, the agency handling the bidding.

Finance Cabinet officials and CHA executives said news of the losses would have made little difference.

If the Lexington company had disclosed its losses along with its bid, it probably still would have won exclusive rights to insure teachers and state employees in 33 counties in Eastern Kentucky, they said.

"It wasn't relevant," said CHA chief executive Teresa Kline.

But Rep. Charles Geveden, D-Wickliffe, said CHA had a responsibility to correct an outdated financial picture supplied with its bid.

"I find this troubling, because I believe they should have been fully open with their records," Geveden said.

On Friday, Geveden, chairman of the House State Government Committee, concluded hearings into what role Mark Birdwhistell played in creating the governor's health plan. Birdwhistell, who was CHA's chief executive until January, advised the governor on the plan. Birdwhistell was exonerated of any conflicts of interest.

In an interview Saturday, Geveden questioned why CHA - which placed its bid on the June 1 deadline - waited until June 10 to reveal its huge 2003 loss to state regulators.

Finance Cabinet purchasing director Mike Burnside said he was never told of CHA's losses. Burnside said that once the bidding deadline passed, the cabinet would not have been interested in knowing about it, anyway.

"We don't accept anything after the bid-closing date," Burnside said. "It's a snapshot in time."

Its original 2003 annual report, filed Feb. 25 at the state Insurance Department, showed a $3.4 million profit. CHA executives specifically boasted of having $40 million in capital, "far in excess of" the $24 million minimum required by Kentucky for insurance companies of CHA's size.

The company didn't include that report in its bid for the 2005 state contract. It did include reports for 2001 and 2002, both better years.

Days after bidding on the 2005 state contract, CHA filed a revised 2003 report with regulators. This time, it showed a $12.9 million loss; the company's capital shrank to $25 million. The reason: unexpectedly heavy medical claims by public employees it already covered.

Immediately, the nation's top insurance-industry analyst, A.M. Best Co., downgraded CHA's rating for financial strength and dropped its future outlook from "stable" to "negative."