By Robert B. Barnett Jr., J.D.
CMS has generally failed to ensure that state health insurance marketplaces are properly verifying individuals’ eligibility under the Affordable Care Act, a report from the HHS Office of Inspector General (OIG) has found. Whereas a previous report had discovered that the states themselves were doing a poor job of verifying eligibility, this new report found that CMS was not fulfilling its oversight role to ensure that states had systems in place, and were using them, to determine eligibility (OIG Report, A-09-16-01002, September 25, 2017).
Background. The Patient Protection and Affordable Care Act (ACA) (P.L. No. 111-148) established health insurance marketplaces in all 50 states and the District of Columbia. The ACA gave CMS responsibility for overseeing implementation of the ACA provisions and for helping states establish their marketplaces. Certain qualifying individuals are eligible under the ACA for premium tax credits and for cost-sharing reductions. Eligibility for cost-sharing reductions depends on annual household income and family size. Marketplaces use multiple electronic data sources to verify the information that applicants submit to determine eligibility. As of March 31, 2016, about 9.4 million individuals were receiving the cost-sharing reductions, of which 2.1 million were enrolled through the state marketplaces. A previous OIG review of seven state marketplaces from 2014 found that the not all of the internal controls the states used were effective in ensuring that individuals’ eligibility for benefits under the ACA were working.
Oversight. The OIG reviewed CMS’s performance for the 2014 through 2016 coverage years to determine how well CMS was performing its oversight responsibilities. CMS requires that states submit various reports, including reports that identify eligibility determination errors. The rules requiring those reports, however, do not include any specific enforcement mechanisms for CMS to force compliance. About all that CMS could do would be to withhold establishment grant funds that are awarded to state marketplaces. Once those grants ran out, it was powerless to enforce compliance. In April 2015, CMS published a manual for employees that oversee and monitor state marketplaces. During open enrollment periods, CMS provides technical assistance to state marketplaces related to eligibility determinations. After open enrollment ends, CMS conducts open enrollment readiness reviews and state marketplace annual reporting tool (SMART) reviews. SMART is a document that state marketplaces submit annually to CMS to demonstrate that they meet program integrity standards.
Findings. OIG found that, while CMS provided technical assistance to state marketplaces and performed readiness and SMART reviews, it failed to ensure that the marketplaces (1) had in place systems that could properly verify applicants’ eligibility and resolve inconsistencies and (2) had or used the system functionality to verify what is known as the FTR process, which checks to ensure that the applicant filed a tax return that matched the application information. This oversight occurred, the OIG concluded, because CMS failed to set firm deadlines for the marketplaces to develop the functionality. Where marketplaces failed to develop the functionality, CMS provided technical assistance but never took any enforcement actions.
Each state marketplace is required to submit to CMS an annual audit of its processes and procedures designed to prevent improper eligibility determinations and enrollment transaction. OIG found that CMS failed to ensure that all state marketplaces completed their required independent programmatic audits. In addition, OIG identified weaknesses in CMS’s SMART reviews. For example, OIG found that CMS failed to complete its review of SMART documentation before the next open enrollment period. Also, it failed to ensure that marketplaces submitted complete eligibility and enrollment data to allow CMS to identify weaknesses in marketplaces’ eligibility determination processes.
Recommendations. As a result of OIG’s conclusion that CMS failed to provide effective oversight, OIG made the following recommendations to CMS:
- Set firm deadlines for marketplaces to develop full system functionality for verifying applicants’ eligibility and resolving inconsistencies
- Monitor the state marketplaces’ progress in developing the system functionality
- Ensure that the state marketplaces complete the annual independent program audits.
To improve the SMART reviews, OIG recommended that CMS:
- Complete its reviews before the next enrollment period
- Continue to work with state marketplaces to develop the reporting capability to ensure that all reports are submitted
- Require state marketplaces to submit additional data elements related to resolving inconsistencies.
CMS response. CMS disagreed with the first recommendation but concurred with recommendations two through six. Regarding the first recommendation—firm deadlines for full system functionality—CMS noted the statutory limitations that existed with regard to enforcement mechanisms. "Within the parameters of its oversight authority," CMS said, it would help state marketplaces achieve full system functionality. As a result of this response. OIG modified its first recommendation to suggest that CMS assess potential enforcement mechanisms that would ensure compliance and to recommend that CMS seek legislative authority to establish those mechanisms.
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