ACA Marketplaces Failed to Fix Inconsistencies in Applicants' Data, OIG Says

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By Alex Ruoff  

The federal health insurance marketplace and several state insurance marketplaces were unable to resolve applicants' inconsistencies in data in areas such as citizenship and income when they first opened last fall, according to a report released July 1 by the Department of Health and Human Services Office of Inspector General.

The report and an associated audit from the OIG are the first from the office to look at the operation of insurance marketplaces under the Affordable Care Act. Republican lawmakers responded to the findings by saying the marketplace mishandled calculations for federal insurance subsidies. Democrats responded with a call to look forward to the 2015 enrollment period, which starts in November, not back on the initially rocky period for 2014 enrollment.

The OIG report analyzed data from the federal ACA marketplace and nearly all state marketplaces from October to December 2013. The OIG said the federal marketplace was unable at that time to resolve 2.6 million of 2.9 million application inconsistencies because the eligibility system wasn't fully operational. These inconsistencies pertained to citizenship, income and status of employer-sponsored minimum essential coverage.

The OIG's audit, a review of internal controls in place on the federal marketplace and the marketplaces created by California and Connecticut, similarly found that the two states and the federal marketplace failed to enact controls to flag the use of inaccurate or fraudulent information on applicants for enrollment in qualified health plans.

The OIG in the report and audit called for the Centers for Medicare & Medicaid Services to develop and make public a plan for resolving the inconsistencies and to improve controls for identifying false information on applications.

More than 2 million application inconsistencies remained unresolved as of May, a spokesman for the CMS told Bloomberg BNA July 1.

Congressional Response

The OIG also sent a letter to Congress, noting that these “are the first two reports in a series relating to operations of the marketplaces.”

The OIG's letter also noted that it plans to test the marketplaces' procedures for determining applicants' eligibility for insurance affordability programs and the amounts of advance premium tax credits and cost-sharing reductions.

The report and the audit, the OIG said in its letter to Congress, were in response to a mandate of the Continuing Appropriations Act of 2014—the funding agreement that ended the government shutdown of 2013.

House Republicans in May called for an investigation on how the Internal Revenue Service verified the income of applicants from the federal marketplace and demanded that Treasury Secretary Jacob Lew halt unverified insurance coverage subsidy payments under the ACA.

In a July 1 statement, Sen. Lamar Alexander (R-Tenn.), the ranking member of the Senate Committee on Health, Education, Labor and Pensions, said the report “tells us that the administration was more concerned with appearances than getting anything in Obamacare done right.”

“They've allowed millions of Americans to enroll in a system that may be handing them the wrong subsidies—too much or too little—and they've left taxpayers vulnerable to fraud,” he said.

House Ways and Means Chairman Dave Camp (R-Mich.) said in a statement that the Obama administration “sent billions of taxpayer dollars out the door knowing that the administration will not be able to fully recuperate the money sent in error.”

Sen. Tom Harkin (D-Iowa), chairman of the HELP Committee, said in a July 1 statement that although the marketplace suffered from technical errors when it first opened, the HHS has since repaired them. “With the administration already improving marketplace operations, now is the time to look ahead,” Harkin said. “Marketplace open enrollment for 2015 begins in November, so we should focus on ways to get even more Americans covered by quality, affordable health care this fall.”

IRS Data

When it began collecting data for the report, the OIG said in its letter to Congress it requested access to income verification information provided to the federal and state marketplaces by the Internal Revenue Service to determine whether subsidies were ever granted unfairly. However, “a question arose as to whether this federal taxpayer information could be disclosed to us under the Internal Revenue Code provision that protects the privacy of taxpayer information,” the OIG said.

The IRS granted the OIG permission to examine the income verification information only after the OIG had concluded its report. The OIG said it is “planning additional audit work” to examine the IRS information.

The OIG is also examining the accuracy of payments made to qualified health plans, information technology security at the marketplaces and contracting and management issues related to the federal marketplace and states' use of federal establishment grants, Katherine Harris, an OIG spokeswoman, told Bloomberg BNA in an e-mail July 1.

Report Findings

Neither the report nor the audit explicitly stated that subsidies were ever granted to applicants who didn't deserve them or that subsidies were miscalculated as a result of application errors. However, both the report and the audit reported that the marketplaces processed insurance applications containing possible errors and inconsistencies that have yet to be resolved.

The OIG's report, “Marketplaces Faced Early Challenges Resolving Inconsistencies with Applicant Data” (OEI-01-14-00180), found that the federal marketplace was unable to resolve most of the inconsistencies found on applications, which most commonly related to citizenship status and income.

Inconsistencies occurred, the report said, when the marketplaces were unable to verify self-attested applicant information with the data received through the federal data hub—the connection between the marketplaces and various federal databases, including those maintained by the IRS and the Department of Homeland Security—and other sources. Inconsistencies, the report said, don't necessarily indicate that an applicant provided inaccurate information or was enrolled in a plan or received financial assistance inappropriately.

However, the OIG said in the report, the marketplaces “must resolve inconsistencies to ensure that eligibility determinations for enrollment in QHPs [qualified health plans] and for insurance affordability programs are accurate. This will help ensure that only eligible applicants are enrolling in QHPs.”

“Moreover, because applicants' eligibility for insurance affordability programs is based primarily on income, inconsistencies with income must be resolved to protect taxpayer funds,” the OIG said.

The CMS told the OIG it is manually resolving the remaining inconsistencies and plans to have an automated system for resolving inconsistencies in place “later this summer.”

The federal marketplace was unable to resolve 2.6 million of the 2.9 million—or roughly 89 percent—inconsistencies it found by January, the OIG said in the report. Nearly 1.3 million of those unresolved inconsistencies were related to applicants' citizen status, and more than 960,000 were related to applicants' income. Another 355,000 related to employer-sponsored minimum essential coverage.

The CMS told the OIG it is manually resolving the remaining inconsistencies and plans to have an automated system for resolving inconsistencies in place “later this summer.”

CMS Reducing Inconsistencies

CMS spokesman Aaron Albright told Bloomberg BNA in an e-mail July 1 that, as of the end of May, more than 2.1 million unresolved application inconsistencies remained. Roughly 1.2 million of those unresolved inconsistencies are related to applicants' income and roughly 461,000 were related to citizenship status, he said. Another 500,000 have “immigration inconsistencies,” he said.

In a statement, Albright said the “CMS is working expeditiously to resolve inconsistencies to make sure individuals and families get the tax credits and coverage they deserve and that no one receives a benefit they shouldn't.”

He added, “We are actively reaching out to consumers to provide additional information that supports their application for coverage and verifying their information every day.”

Applicants with inconsistencies are contacted via e-mail, mail and phone, the CMS said. The CMS can terminate an enrollment, if necessary.

The CMS said that a data inconsistency doesn't mean there's a problem with enrollment and typically means the applicant's information is more up-to-date than the information on federal databases.

Early Snapshot on Internal Controls

The OIG audit, “Not All Internal Controls Implemented By The Federal, California, And Connecticut Marketplaces Were Effective In Ensuring That Individuals Were Enrolled In Qualified Health Plans According To Federal Requirements” (A-19-04-01000), provided “an early snapshot” of the effectiveness of the marketplaces' internal controls for determining the eligibility of applicants for enrollment in QHPs.

The audit found that not all internal controls implemented by the federal marketplace, or in the marketplaces in California and Connecticut, were effective at verifying applicant's eligibility for enrollment. Specifically, the controls for validating Social Security numbers, citizenship status and minimum essential coverage through non-employer-sponsored insurance were found be ineffective, the audit said.

The federal marketplace in particular was deficient in establishing processes for validating Social Security numbers and resolving data inconsistencies on enrollment applications, the audit said.

The OIG in the audit said that the presence of deficiencies in controls for verification doesn't mean that applicants were unfairly granted enrollment in QHPs or that subsidies were granted for applications incorrectly.


The OIG, in the audit, recommended that the CMS and the agencies that oversee the California and Connecticut marketplaces, Covered California and Access Health CT, take immediate action to improve internal controls related to verifying the identity of applicants and determining applicants' eligibility for enrollment in QHPs and insurance affordability programs, such as Medicaid.

The OIG recommended that the CMS install an “identity proofing” system for all applicants and develop a system for enrollees to report when their application information changes. However, the CMS, in its response to the OIG audit, disagreed with this recommendation.

The CMS said it does verify the identity of applications against various federal databases and validates Social Security numbers and other pertinent data when determining an applicant's eligibility for federal subsidies or affordability programs, such as Medicaid.

“Identity verification is used to provide assurance that application filers are who they say they are for purposes of applying for enrollment in a QHP through the Marketplace and for insurance affordability programs, and for obtaining and using eligibility data from third-party data sources,” the CMS said in its response to the OIG audit. “It is important to note that identity proofing is distinct from the eligibility verification process for determining eligibility for enrollment in a QHP through the Marketplace or for insurance affordability programs.”

In the report, the OIG recommended that the CMS develop and make public a plan to resolve its backlog of application inconsistencies. The report also recommended that CMS conduct additional oversight of state marketplaces to ensure that they are resolving their own application inconsistencies.

Although four states—Massachusetts, Nevada, Oregon and Vermont—reported having unresolved application inconsistencies of their own to the OIG, data on unresolved inconsistencies among state marketplaces are limited, the OIG said in the report.

To contact the reporter on this story: Alex Ruoff in Washington at

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

Text of the report, the audit and the letter to Congress is available in HealthDocs™.

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