Nevada Misallocated Costs for Establishing a Health Insurance Marketplace to Its Establishment Grants

Nevada did not allocate costs for establishing a health insurance marketplace to its establishment grants in accordance with Federal requirements. As a result, Nevada misallocated $893,000 in costs to the establishment grants instead of the Medicaid program over 3 years.

The marketplace misallocated these costs because it did not have adequate internal controls to ensure the proper allocation of costs. Specifically, the marketplace (1) did not have a written policy that explained how to perform the allocations or explained the necessity to use updated, better data when available and (2) had insufficient staff oversight. The Nevada marketplace, working with its State Medicaid agency, may seek CMS approval to claim a portion of the $893,000 through Medicaid at Federal financial participation rates ranging from 50 percent to 90 percent.

We recommended that the Nevada marketplace (1) refund to CMS $893,000 or work with CMS to resolve the amounts misallocated to the establishment grants; (2) work with CMS to ensure that costs claimed after our audit period are allocated correctly using an updated cost allocation methodology; (3) develop a written policy that explains how to perform cost allocations and emphasizes the necessity to use updated, better data when available; and (4) strengthen staff oversight to ensure (a) application of updated, better data to properly allocate costs and (b) allocation of costs for all allocable project components.

In written comments on our draft report, the Nevada marketplace concurred with our second, third, and fourth recommendations and provided information on actions that it planned to take to address those recommendations. However, it did not concur with our first recommendation and listed assumptions it said we made that were inconsistent with guidance.

After considering the Nevada marketplace's comments, we maintain that our first recommendation is valid.