Watchdog Finds Insurance Marketplaces Still Vulnerable to Fraud

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By Sara Hansard

Sept. 12 — It is easy to cheat and get subsidies to pay for health insurance on the Obamacare marketplaces, a government watchdog group found for the third year in a row through undercover testing.

The federal health insurance marketplace or selected state marketplaces approved each of 10 fictitious applications the Government Accountability Office made for subsidized health plans, the GAO said in a report on the 2015 marketplaces (GAO-16-792). A separate report on findings from 2016 found that the marketplaces' eligibility determination and enrollment processes “remain vulnerable to fraud.”

This is the third year the GAO has found through undercover testing using fictitious applications for federal subsidies for marketplace coverage that it would be easy to cheat and get subsidies for which people may not be eligible. Republicans and ACA detractors point to the findings as evidence that the marketplaces don't operate well and are subject to fraud. A joint hearing is scheduled by two House Energy and Commerce subcommittees on the issue Sept. 14 at which acting Centers for Medicare & Medicaid Services Administrator Andy Slavitt and GAO officials will testify.

Marketplaces Supposed to Verify Eligibility

The ACA marketplaces are supposed to verify eligibility for enrollment and subsidies. About 85 percent of the 11.1 million ACA marketplace consumers in 2016 are receiving the subsidies, the CMS said in a June 30 report.

The Congressional Budget Office estimates subsidies and related spending under the ACA at $56 billion for fiscal year 2017, the GAO report on 2016 testing said (GAO-16-784).

In that report, the GAO said the marketplaces initially approved coverage and subsidies for all 15 of GAO's fictitious applications, including for applications not associated with filed tax returns. However, three applicants were unable to put their policies in force because their initial payments were not successfully processed, it said.

The 2016 coverage year was the first year in which verification was required of whether applicants who previously received subsidies under the law filed federal tax returns, the GAO said.

“The results, while illustrative, cannot be generalized to the full population of enrollees,” the GAO said.

The GAO has made eight recommendations to CMS to strengthen its oversight of the federal marketplace. The CMS concurred with the recommendations, and implementation is pending.

2016 First Year Tax Returns Required

The Department of Health and Human Services provided comments included in the report describing the process used for verifying eligibility.

“Some of GAO’s application outcomes could be explained by decisions to extend document filing deadlines,” the 2016 GAO report said.

The HHS “is implementing a number of initiatives to enhance operations with a focus on program integrity,” the agency said in the comments from Jim Esquea, assistant secretary for legislation. People who file fraudulent applications are subject to fines of up to $250,000, the HHS said.

Open enrollment for 2017 begins Nov. 1, and 2017 appears to be the most challenging for the marketplaces. Several major insurers, including UnitedHealthcare, Aetna, Humana and some Blue Cross Blue Shield plans, are pulling back on their marketplace offerings because of losses on the plans, and in many parts of the country only one plan is being offered on the marketplaces.

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

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

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.

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