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Management Challenge 7: Implementing, Operating, and Overseeing the Health Insurance Marketplaces

Why This Is a Challenge

The health insurance marketplaces (marketplaces), also known as health insurance exchanges, are critical components of the health care reforms enacted through the Affordable Care Act. Implementation, operation, and oversight of the marketplaces were among the most significant challenges for the Department in FYs 2014 and 2015 and will continue to present a top management and performance challenge in FY 2016.

The Department must ensure effective communication and coordination between and among all internal and external parties with marketplace responsibilities, including within HHS and with contractors, issuers, and partners in state and federal government. Effective coordination with the Internal Revenue Service (IRS) is particularly important for sound administration of the premium tax credit program. In addition, CMS needs to ensure that state marketplaces comply with federal requirements and provide accurate, timely data used for federal payments. Further, CMS must take appropriate steps to promote compliance by Qualified Health Plans (QHP) with federal requirements, including network adequacy and nondiscrimination requirements. Key focus areas for the federal and state marketplaces include:

Payments. Ensuring sound expenditure of taxpayer funds for insurance affordability and other marketplace purposes poses a substantial management challenge, especially given the continued use of interim solutions and manual systems. For example, CMS's internal controls did not effectively ensure the accuracy of nearly $2.8 billion in advance premium tax credits and cost-sharing reductions. CMS must improve its financial systems to ensure accurate and timely initial payments and reconciliations of these payments. CMS must also prioritize effective management of the risk corridor, reinsurance, and risk adjustment programs. CMS must validate information received from issuers to ensure that it is timely, complete, and accurate for payment purposes. In addition, CMS must ensure the correct use of federal establishment grant funds by state marketplaces. (For general information about challenges associated with grants management and contract administration, see Management Challenge 4.)

Eligibility. Accurate eligibility determinations are critical. During the first open enrollment period, not all internal controls at certain marketplaces were effective in ensuring that individuals were properly determined eligible for QHPs, advance premium tax credits, and cost-sharing reductions. CMS reported a large number of unresolved inconsistencies in which applicants' self-reported data did not match other data sources. Effective internal controls and timely and accurate resolution of inconsistencies are critical to ensure that eligible consumers receive appropriate benefits and that ineligible individuals are not enrolled.

Management and Administration. Management and administration of the marketplaces requires, among other things, clear leadership, disciplined operations, and effective strategies and communication. OIG has raised concerns with, among other issues, CMS's acquisition planning and procurement, contract monitoring, and administration of payments for marketplace contracts. The Department also must ensure, to the greatest extent possible, that the government obtains specified products and services from its contractors on time and within budget.

Security. Protecting and ensuring the confidentiality and integrity of consumers' sensitive personal information and marketplace information systems is paramount. Effective operation of the marketplaces requires rapid, accurate, and secure integration of data from numerous federal and state sources, issuers, and consumers. The Department must vigilantly guard against intrusions and continuously assess and improve the security of marketplace-related systems, including, among others, the Data Services Hub and the Multidimensional Insurance Data Analytics System (MIDAS), a data warehouse and repository. (For more information on privacy and security, see Management challenge 3.)

Progress in Addressing the Challenge

The Department has reported improvement in the operations of the federal marketplace. Following the initial launch of, CMS implemented several core management principles that enabled the organization to recover the Web site and improve agency management and culture. In addition, CMS has reported progress in marketplace operations, including publishing additional guidance regarding the use of federal establishment grant funds, implementing parallel processing and multiple levels of review of financial assistance payments information, working to develop a strategic and unified view of marketplace procurement and costs, and developing of a strategy to improve marketplace program integrity. CMS has also reported regular communications with the IRS to validate payment information and the provision of technical and other support to the state marketplaces.

What Needs To Be Done

The Department must continue to improve the federal marketplace, particularly the eligibility, administrative, and financial management functions. CMS must ensure that all pathways for enrollment operate with integrity and that consumers' personal information is secure. Vigilant monitoring and testing and rapid mitigation of identified vulnerabilities are essential. Attention must be paid to sound operation of financial assistance and the risk corridor, reinsurance, and risk-adjustment programs. CMS must ensure that consumers and issuers receive accurate marketplace information, including information relevant for tax purposes, such as Form 1095A tax forms. Furthermore, marketplaces must continue to protect personally identifiable information and strengthen security controls.

CMS must continue to work with its state partners to improve state marketplace operations and to ensure compliance with federal requirements for marketplaces and QHPs. CMS must monitor for and address fraud, waste, and abuse risks in marketplace programs. CMS must respond quickly and effectively to fraud that is detected, working with partners at the federal and state level to hold those involved accountable.

Key OIG Resources

  • OIG has a broad portfolio of reviews examining various aspects of marketplace operations. For a complete list of these OIG reports, as well as OIG's Health Reform Oversight Plan, please see the Affordable Care Act Reviews section on the OIG Web site.

Management Challenge 8: Reforming Delivery and Payment in Health Care Programs

Office of Inspector General, U.S. Department of Health and Human Services | 330 Independence Avenue, SW, Washington, DC 20201