Federal marketplace may have wrongly issued subsidies

Federal marketplace may have wrongly issued subsidies

The federal health insurance marketplace may have issued subsides to persons not eligible to receive them during the first open enrollment period, a new report from the Department of Health and Human Services’ Office of the Inspector General has found.

To verify the information of an applicant’s eligibility for a qualified health plan and potential affordability programs, such as a premium tax credit, the federal marketplace uses the Federal Data Services Hub, which includes information from HHS, the Social Security Administration, Department of Homeland Security, Internal Revenue Service and others.

If information provided by an applicant cannot be verified within the Data Hub, the marketplace must attempt to resolve this inconsistency. If unable, the applicant is contacted and given 90 days to submit satisfactory documentation to resolve an inconsistency. However, the inspector general found that in a few cases, the marketplace failed to:

  • Verify applicants Social Security numbers through the SSA;
  • verify citizenship;
  • verify household income; and
  • correctly determine family size.

The review was conducted January 1 through April 19, 2014, during the first open enrollment period.

“Without properly verifying an applicant’s eligibility and properly resolving and expiring inconsistencies, the federal marketplaces cannot ensure the applicant meets eligibility requirements,” the report states.

However, the report notes these deficiencies do not necessarily mean someone incorrectly received coverage and/or a subsidy.

These findings are not a total surprise, says Katherine Hempstead, a director at the Robert Wood Johnson Foundation. “It was pretty clear from the coverage of the technical difficulties of the first open enrollment period and their sequalae [those that followed] that the reconciliation of inconsistent information stood out as a particularly tough challenge,” she says. “There have been many improvements to the system since then, so I would anticipate that the next audit will find fewer problems.”

HHS Spokeswoman Meaghan Smith says CMS follows standard processes established by the Affordable Care Act for verifying consumers’ information and working with them to resolve inconsistencies.

“These practices ensure we provide coverage to eligible consumers while protecting taxpayer funds,” she says. “As a result of the multiple safeguards the marketplace has in place to verify eligibility, including checking an applicant’s eligibility in real time, CMS has ended coverage for approximately 226,000 individuals because they failed to properly verify their citizenship or immigration status, and adjusted the tax credits of hundreds of thousands of others whose income could not be sufficiently verified.”


In the report, the HHS Inspector General recommended the Centers for Medicare and Medicaid Services take action to improve the marketplace’s internal controls related to verifying applicants’ eligibility and resolving and expiring inconsistencies. CMS says in the report it agrees with the recommendations and has taken or plans to take action to address the recommendations.

In fact, the agency has already rectified some issues outlined in the report. “This report examined the first open enrollment, the early days of the program,” Smith says. “Since then, CMS has strengthened the marketplace’s eligibility processes, including through enhanced technology and consumer education. CMS was aware of the majority of the technology issues and had corrected them prior to the OIG’s report as part of our work to continuously improve operations.”

Hempstead says despite the fact that there have been improvements, these types of audits should be ongoing.

“Clearly the integrity and functionality of eligibility determination systems in public programs is critically important,” she explains. “To borrow from the medical test lingo, the system should be both sensitive and specific — i.e. admit those who are eligible and exclude those who are not.”

“There is clearly a tradeoff between the two, so it is a challenge to design a system that is good at accomplishing both in a timely manner,” she adds. “These systems need to be continually challenged so that they can keep improving, and I have no doubt that will continue to happen with the federal and state exchanges.”