In an effort to test whether federal and state-based Patient Protection and Affordable Care Act (ACA) marketplaces were requiring application information during Special Enrollment Periods (SAPs), which allow applicants to obtain subsidized coverage outside of the general enrollment period, a GAO undercover operation discovered information collection practices that could make the ACA vulnerable to fraud. Information collection for SAPs is believed to be needed to prevent individuals who otherwise refused to sign up from improperly gaining access to subsidized insurance coverage only when they became sick (GAO Report, GAO-17-78. November 2016).
Background. The ACA generally requires collection and verification of application information to determine enrollment eligibility. The information, which includes citizenship, immigration status, and income, is gathered to determine not just reenrollment eligibility but also eligibility for other benefits such as subsidies. The ACA, of course, has a defined open enrollment period during which applicants are required to sign up. The ACA, however, also contains provisions allowing applicants in special situations to sign up outside of the enrollment period. Called Special Enrollment Periods, these exceptions allow individuals to sign up within 60 days of any of the following triggering events: (1) losing essential health coverage, (2) gaining a dependent or becoming a dependent through marriage, birth, or adoption, (3) gaining access to new qualified health plans through a permanent move, (4) failing to sign up during the enrollment period due to misinformation by a state-based marketplace or some other significant event, such as a long-term illness, (5) applying for Medicaid during the open enrollment period but later being determined ineligible, and (6) determining that the individual meets any "exceptional circumstance" that the marketplace may permit.
The ACA, on the other hand, contains no specific requirements for events that trigger an SEP, either for requesting the documents or for verifying their authenticity. In February 2016, CMS announced plans for a Special Enrollment Confirmation Process, which would require the federal marketplace to request documentation for (1) loss of minimum coverage, (2) permanent move, (3) birth, (4) adoption, or (5) marriage. This new rule went into effect on June 17, 2016. State-based marketplaces, which are not required to participate, could adopt the special process, use one of their own, or accept an applicant’s attestation of the SEP triggering event without any further verification.
Undercover operation. GAO’s undercover operation sent 12 false applications claiming a SEP-triggering event, six to the federal marketplace and six to two state-based marketplaces: California and the District of Columbia. The California marketplace, called Covered California, accepts self-attestation and requests supporting documentation for a random sample of applicants for (1) loss of coverage and (2) permanent move to California. The DC marketplace, called DC Health Benefit Exchange Authority, accepts self-attestation for three of the six SEP events.
Of the 12 fake applications for subsidized coverage, nine were approved and three were rejected. Those nine "applicants" received subsidies of about $1,580 per month. All three who were denied had applied under the SEP event involving a failure to sign up during the open enrollment period due to misinformation or some other exceptional event.
Three of the six fictitious applicants to the federal marketplace applied for reasons that, under the Special Enrollment Confirmation Process, should have required documentation. In all three cases, the marketplace did request the documents. All three applicants, however, received coverage despite the fact that two of the three applicants never provided the requested documentation and the other one provided fake documentation. Of the three who applied for reasons that did not require documentation, one obtained subsidized coverage. The federal marketplace has an enroll-applicants first, verify-documents-later policy.
Of the six fictitious applicants to the state-based marketplaces, two were asked for supporting documentation. One of those who was asked supplied fake documentation and was enrolled in subsidized coverage. Of the four who were not asked for documentation, two were able to enroll in a subsidized health plan.
Recommendations. The GAO report concluded that the risk of fraud through SEP access to subsidized insurance is real. GAO is not making any specific recommendations beyond the eight recommendations it made in February 2016 to strengthen ACA reenrollment controls, which included having HHS conduct a fraud risk assessment of the federal marketplace. All eight recommendations are still considered open. Also, requiring documents to support claims is different from requiring verification of their authenticity, which is a much more onerous, time-consuming, and expensive process. Under current rules, while documentation is sometimes required for SEP events, verification is not.
Responses. The federal marketplace is considering changing its enroll-applicants first, verify-documents-later policy to deny coverage to those who either do not provide documentation or who provide insufficient documentation. HHS, which operates the federal marketplace, has also stated that it intends to undertake the fraud risk assessment that GAO recommended in February.
Covered California intends to work to ensure that SEP applicants have actually had a qualifying event, but it also noted that any effort to require state-based marketplaces to authenticate documents would impose serious burdens on marketplaces, consumers, and document sources. DC Health Benefit Exchange Authority disputed several aspects of the undercover operation, including GAO’s methodology and whether the DC marketplace was representative of state-based marketplaces. It also noted that the age of SEP applicants attempting to gain SEP coverage in its marketplace implied that applicants were not waiting until they were sick to apply. DC also cited the same marketplace burden on document verification that Covered California noted, and it claimed that its practices were consistent with best practices for fraud prevention.
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