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#8 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 Patient Protection and Affordable Care Act. Implementation, operation, and oversight of the Marketplaces were among the most significant challenges for HHS in previous years and continue to present a top management and performance challenge.

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The Marketplaces involve complex regulatory, operational, and technological challenges. Among these are 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-a refundable tax credit that helps eligible individuals and families with low or moderate income afford health insurance purchased through a Marketplace. In addition, the Centers for Medicare & Medicaid Services (CMS) is responsible for ensuring that State Marketplaces comply with Federal requirements and provide complete, accurate, and 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 non-discrimination requirements. CMS must also take appropriate steps to ensure that individuals are enrolled in the correct insurance program (e.g., Medicare, Medicaid, or private insurance) and to prevent the improper influence of individuals when choosing insurance.

Key Components of the Challenge

Payments. Ensuring sound expenditure of taxpayer funds for insurance affordability and other Marketplace purposes poses a substantial management challenge, and OIG found evidence of early deficiencies. For example, CMS's internal controls did not effectively ensure that payments for the advance premium tax credit program were made only for enrollees who paid their monthly premiums. Continued attention is warranted, especially given the introduction of an automated policy-based payment system at the Federal Marketplace and the continued use of interim solutions and manual systems at the State Marketplaces. Effective management of the premium stabilization programs is important because of these programs' impact on the private health insurance market. Attention also must be paid to expenditures of HHS funds used by State Marketplaces for grants and contracts.

Eligibility. Accurate eligibility determinations ensure that only eligible consumers are able to enroll in health plans and receive insurance affordability benefits during open and special enrollment periods. To appropriately determine eligibility, CMS must have effective internal controls and accurately and quickly resolve inconsistencies between applicant-reported information and Government databases. OIG and the Government Accountability Office have found vulnerabilities in CMS's eligibility verification and enrollment processes and resolution of inconsistencies.

Management and Administration. Management and administration of the Federal and State Marketplaces require, among other things, clear leadership, disciplined operations, and effective strategies and communication. An OIG review of the implementation of Healthcare.gov (the website consumers use to apply for insurance through the Federal Marketplace) identified management deficiencies that contributed to the initial breakdown of the website, as well as improved management afterwards. OIG identified lessons learned from this experience that HHS should continue to apply to the operation of the Federal Marketplace, including the automated policy-based payment system and other large-scale projects. OIG has also made recommendations to CMS to improve its acquisition planning and procurement, contract monitoring, and administration of payments for Marketplace contracts. (For further information on contract administration, see TMC #4.) In addition, some Consumer Oriented and Operated Plans (CO-OPs) have ceased operation, posing an additional challenge for HHS.

Security. Protecting the confidentiality and ensuring the integrity of consumers' 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. HHS must vigilantly guard against intrusions and continuously assess and improve the security of Marketplace-related systems, including, among others, the Data Services Hub, a conduit through which a Marketplace sends and receives electronic data from multiple Federal agencies, and the Multidimensional Insurance Data Analytics System, a data warehouse and repository. (For more discussion of information privacy and security, see TMC #3.)

Progress in Addressing the Challenge

CMS implemented several core management principles identified in OIG's review that enabled the organization to improve the HealthCare.gov website as well as agency management and culture. In addition, CMS has reported progress in Marketplace operations, including implementing automated policy-based payments for the Federal Marketplace in May 2016; 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 a strategy to improve Marketplace program integrity. As part of its strategy to improve program integrity, CMS has established standards for terminating or suspending agreements between agents and brokers and the Federal Marketplace in cases of fraud or conduct that may cause consumer harm. CMS is also developing outreach and education campaigns designed to inform consumers, agents, and brokers about the dangers of identity theft. CMS reports that it has taken steps to tighten eligibility standards and processes for special enrollment periods.

Additionally, CMS has coordinated with entities across and beyond HHS to improve the accuracy of eligibility and payment data. CMS reported that it updated its Standard Operating Procedures with additional directives to ensure that its Federal Marketplace eligibility support workers can resolve applicant inconsistencies of all types. Further, CMS has developed additional tools to help States report on their eligibility and enrollment processes and to oversee States' plans for addressing unresolved applicant inconsistencies. CMS also reported having regular communications with the IRS and the Department of the Treasury to validate payment information, conduct improper payment risk assessments to determine areas that might affect the accuracy of financial assistance payments, and provide technical and other support to the State Marketplaces. CMS also issued a request for information seeking public comment on concerns that some providers and organizations may be steering people eligible for Medicare and/or Medicaid into QHPs to obtain higher reimbursement rates.

What Needs To Be Done

HHS should continue to apply core management principles-including designating clear leadership, integrating policy and technology work, and continuously learning-to improve its operations and oversight of the Federal Marketplace, particularly the eligibility, administrative, and financial management functions. CMS should also address OIG recommendations to improve internal controls. Vulnerabilities in CMS's business processes must be addressed to ensure accurate and timely initial payments and reconciliations of payments. Additionally, CMS must focus on effective management and integrity of the premium stabilization programs. This includes validating information received from issuers to ensure that it is complete, accurate, and timely for payment purposes.

CMS must ensure that all pathways for enrollment operate with integrity, consumers are not improperly influenced in their selection of insurance, and consumers' personal information is secure. Vigilant monitoring and testing of systems and rapid mitigation of identified vulnerabilities are essential. CMS must also focus attention on the sound operation of financial assistance programs for beneficiaries. Consumers and issuers must 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 also continue to work with States to improve State Marketplace operations, including payment systems, and to ensure compliance with Federal requirements for Marketplaces and health plans. HHS must continue to pay attention to the financial and operational challenges faced by CO-OPs. CMS must monitor for and address fraud, waste, and abuse risks in Marketplace programs. CMS must respond quickly and effectively to credible allegations of fraud, working with QHPs and with partners at the Federal and State level to hold those involved accountable.

Key OIG Resources

  • For links to OIG's portfolio of reports on the Federal and State Marketplaces, as well as OIG's Health Reform Oversight Plan, please see the Patient Protection and Affordable Care Act Reviews section on OIG's website: https://oig.hhs.gov/reports-and-publications/aca/.
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