Billions of dollars in ACA exchange subsidies are at risk of being miscalculated and misappropriated, and it seems some already have been.
A new investigation by the Office of the Inspector General at the Department of Health and Human Services concludes that the agency needs to improve its management of public exchange plan subsidies, including cost-sharing reductions.
The Centers for Medicare & Medicaid Services runs the exchange program, and as in other aspects of the Affordable Care Act's implementation, there have been some snafus, delays and workarounds. Insurers selling exchange plans cannot receive financial assistance payments unless CMS certifies them, so CMS can access Department of the Treasury systems to transmit the payments to the plans.
But under an interim process, CMS required health plans to submit "attestation agreements" while expecting to implement a permanent, automated process for payment later this year.
Whether or not that is to blame, OIG investigators found that CMS's internal controls "did not effectively ensure the accuracy of nearly $2.8 billion in aggregate financial assistance payments made to insurance companies under the Affordable Care Act during the first 4 months that these payments were made," in 2014.
CMS relied on insurer attestations "that did not ensure that advance (cost-sharing reductions) payment rates identified a s outliers were appropriate," the OIG found. CMS did not have systems in place to make sure financial assistance payments were made for the correct beneficiaries and in the correct amounts, nor did the federal agency ensure that state-based exchanges ensure this accuracy.
"The internal control deficiencies that we identified limited CMS's ability to make accurate payments to QHP issuers," the watchdog agency wrote.
For cost-sharing reduction payments, the OIG found both trouble in both directions--overpayments and underpayments. For the premium tax credits, CMS can only obtain data from insurers on an aggregate basis and cannot ensure that payment amounts were appropriately applied. "Further, CMS's lack of (advanced premium tax credit) payment data on an enrollee-by-enrollee basis affected our ability in this review to identify any potential overpayments and underpayments related to APTC," the OIG wrote.
The OIG gave CMS five recommendations. First, the Office of the Actuary should review and validate insurers' support for their index rates that are used to identify outliers. Second, CMS needs to have a computerized system to maintain enrollee and payment information, to "not have to rely on QHP issuers' attestation." Third, CMS needs a system for state exchanges to submit enrollee eligibility data. Fourth, CMS needs to follow its guidance for calculating estimated advance CSR payments. And fifth, it should develop "interim reconciliation procedures to address potentially inappropriate CSR payments."
CMS generally concurred with those ideas, although the agency noted that it did conduct an internal controls review with financial reporting and found not major problems and that an independent accounting firm also found no significant issues.
CMS also said that for 2015, marketplaces calculate the advance CSR payment
amount for a specific health plan based on the the total monthly premium for that policy and a CSR plan "variation multiplier."
The OIG did not explicitly state that CMS should try to clawback payments, but did note that CMS has the authority to require insurers to restate enrollment totals and payment amounts to reflect prior inaccuracies and "recoup these payments by offsetting them against future payments or other means."
Because CMS does not have systems "to obtain enrollment and payment information on an enrollee-by-enrollee basis, CMS can not verify the accuracy of the nearly $2.8 billion it authorized for financial assistance payments during our audit period," the OIG wrote. "We plan to conduct an additional review that will address financial assistance payments on an enrollee-by-enrollee basis. The planned review will include the audit period covered by this review and collect information necessary to determine payment accuracy."