More Than $200M Recouped From State ACA Exchanges, Official Says

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By Sara Hansard

Dec. 8 — The federal government recouped more than $200 million from Affordable Care Act state-run health insurance marketplaces that wasn't spent in accordance with federal guidelines, and it is in discussions with Maryland and two other states to collect more, a federal official told a House panel Dec. 8.

Andy Slavitt, acting administrator at the Centers for Medicare & Medicaid Services (CMS), wouldn't reveal the two unnamed states, saying discussions are under way. He testified to a House subcommittee that five of the state-based marketplaces (SBMs) “have had more significant IT challenges” than the others.

Based on CMS reviews of the state-based marketplaces, all have sufficient funding to run their operations, he said.

Rep. Tim Murphy (R-Pa.), chairman of the House Energy and Commerce oversight subcommittee, said “countless” state marketplaces “are struggling to become self-sustaining” by 2015, as was required under the ACA.

Four states are relying on the federal technology as the backbone of their exchanges while operating other functions of their own marketplaces in 2016 because they were unable to develop their own systems adequately, which will leave just 12 states and the District of Columbia operating as full state-based marketplaces next year.

More than $5.5 billion in federal start-up grants went to ACA marketplaces operated by the states.

Federal Funds Denied

Slavitt testified that the CMS conducts line-item reviews of SBM expenditures and audits to ensure federal money isn't used for operating expenses, which is prohibited under the ACA.

“We maintain control of the purse strings, and 69 times this year we denied use of federal funds,” he said.

Information technology accounted for 30 percent to 50 percent of the expenses to set up the SBMs, he said.

Slavitt acknowledged that the SBMs, like the federally run marketplace, have had their share of operating problems since they opened in 2013, but said they have served their purpose.

“For all the challenges they've had, their ingenuity, their persistence and their commitment to state residents has paid off for millions of Americans,” Slavitt said.

About 2.9 million people have enrolled in private health plans through the SBMs, millions more have accessed Medicaid through them and the uninsured rate in SBM states has declined an average of 47 percent since 2013, more than the decline in states where the federal government operates the marketplaces, he said.

About 9.1 million are expected to be covered in health plans at the end of 2015 through all of the ACA marketplaces, including those in states where the federal government operates the marketplace.

OIG, GAO Reports

A Department of Health and Human Services Office of Inspector General report in April suggested the SBMs may be illegally using federal establishment grants for operating expenses (83 DER 83, 4/30/15).

In September, the Government Accountability Office issued a report that found that not all system functions were complete in the 14 state-based marketplaces operating in 2015, and the GAO was critical of the CMS oversight of the SBMs (See previous story, 09/18/15).

Slavitt said the CMS recovered $32.5 million from the state of Maryland, and it is in the process of collecting about $1 million from the Arkansas SMB. He said the agency expects to recoup all of the SBM expenses that were improperly spent under the ACA.

Slavitt also testified that all of the SBMs have access to sources of funding to be fully self-supporting, as called for under the ACA, either through assessments on health insurers or through state budget appropriations.

The CMS is having discussions with all SBMs about self-sustainability, and the agency is particularly focused on ensuring the viability of plans in small states, he said.

“Sometimes we have to have difficult conversations with states,” which have resulted in changes in the direction of the SBMs, he said. He cited Hawaii's decision to become a federally supported marketplace relying on the technology while continuing to operate other functions at the state level.

The CMS told Rhode Island earlier in the year that its SBM needed to increase its sources of funding, which the state did, he said.

Slavitt defended extensions for use of federal grants after the Jan. 1, 2015, ACA deadline to some states that hadn't finished work on their SBMs.

“These things are taking a little more time to implement than people originally thought,” he said.

To contact the reporter on this story: Sara Hansard in Washington at

To contact the editor responsible for this story: Kendra Casey Plank at

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