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Early Alert: Without Clearer Guidance, Marketplaces Might Use Federal Funding Assistance for Operational Costs When Prohibited by Law

The Patient Protection and Affordable Care Act establishes a clear prohibition that marketplaces cannot use grant funds to support ongoing operations after January 1, 2015. We have concerns that, without more detailed guidance from CMS, State-based marketplaces (SBMs) might have used, and might continue to use, establishment grant funds for operating expenses after January 1, 2015, contrary to law. In media reports and during our review of SBMs' budget information, we have observed that some SBMs face uncertain operating revenues in 2015 and future years. Because operating revenues are uncertain, there is a risk that SBMs might use establishment grant funds to cover operational costs.

We encourage CMS to consider developing and publishing clear guidance on what constitutes (1) operational costs and (2) design, development, and implementation costs to minimize the marketplaces' improper use of establishment grant funding for operational expenses after January 1, 2015. We further encourage CMS, in developing this guidance, to review SBM plans for using establishment grant funds to ensure that the guidance addresses real-world examples, such as call centers, in-person assisters, bank fees, and printing and postage expenses. We also encourage CMS to monitor SBMs' use or potential use of establishment grant funds for operational costs and take appropriate action.