Testimony of:  
Kay Daly 
Assistant Inspector General, Office of Audit Services 
and 
Joyce Greenleaf 
Regional Inspector General, Office of Evaluation and Inspections 
Office of Inspector General 
U.S. Department of Health and Human Services 
 
 
Hearing Title:   
Failure To Verify: Concerns Regarding PPACAs Eligibility 
System 
 
House Committee on Energy and Commerce 
Subcommittee on Health 
 
July 16, 2014 
2322 Rayburn House Office Building 
10:15 a.m. 
 
 
 
 
 
 
 
 
   
 
Testimony of: 
Kay Daly, Assistant Inspector General, Office of Audit Services 
Joyce Greenleaf, Regional Inspector General, Office of Evaluation and Inspections 
Office of Inspector General 
U.S. Department of Health and Human Services 
Hearing Title: Failure To Verify: Concerns Regarding PPACAs Eligibility System 
House Committee on Energy and Commerce 
Subcommittee on Health 
 
 
Good morning, Mr. Chairman and other distinguished Members of the Committee.  Thank you 
for the opportunity to testify about the Department of Health and Human Services (HHS) Office 
of Inspector Generals (OIG) recently released reports related to the new health insurance 
marketplaces established under the Patient Protection and Affordable Care Act (ACA).    
 
OIG provides oversight of HHS programs to fight fraud, waste, and abuse and ensure efficiency, 
economy, and effectiveness.  Because of the size and scope of HHS programs and outlays 
(almost $1 trillion in 2014), in essence, we are responsible for overseeing 25 cents of every 
Federal dollar and programs that touch the lives of virtually all Americans.   
 
The new health insurance marketplaces are among those important programs.  Our two new 
reports provide a first look at a critical component of marketplace operations:  verification of 
enrollee eligibility.  One report (mandated report) responded to a congressional mandate to 
examine the effectiveness of enrollment procedures and safeguards;1 the second report 
(companion report) addressed a specific risk area  the inconsistency resolution process  that we 
identified as meriting additional attention.2   
 
Specifically, the Continuing Appropriations Act of 2014, Pub. L. No. 113-46, directed HHS OIG 
to examine and report to Congress by July 1, 2014, regarding: 
 
...the effectiveness of procedures and safeguards provided under the Patient Protection 
and Affordable Care Act (ACA) for preventing the submission of inaccurate or fraudulent 
information by applicants for enrollment in a qualified health plan offered through an 
American Health Benefit Exchange (marketplace).   
 
Our mandated work examined and directly tested internal controls in place from October 1 
through December 31, 2013, at the Federal, California, and Connecticut marketplaces with 
                                                           
1 Not All Internal Controls Implemented by the Federal, California, and Connecticut Marketplaces Were Effective in 
Ensuring That Individuals Were Enrolled in Qualified Health Plans According to Federal Requirements, OAS-09-
14-01000, issued July 2014.  Available online at http://oig.hhs.gov/oas/reports/region9/91401000.pdf.  
 
2 Marketplaces Faced Early Challenges Resolving Inconsistencies With Applicant Data, OEI-01-14-00180, issued 
July 2014.  Available online at http://oig.hhs.gov/oei/reports/oei-01-14-00180.pdf.  
1  House Committee on Energy and Commerce, Subcommittee on Health 
July 16, 2014 
  respect to (1) verifying the identity of applicants and entering application information, (2) 
determining eligibility of applicants for enrollment in a Qualified Health Plan (QHP) and for 
receipt of the advance premium tax credits and cost-sharing reductions, and (3) maintaining and 
updating enrollment data. 
 
We concluded that the Federal, Connecticut, and California marketplaces had certain procedures 
in place to verify an applicants information, but not all internal controls implemented by the 
three marketplaces were effective in ensuring that individuals were enrolled in QHPs according 
to Federal requirements.  The deficiencies in internal controls that we identified may have 
limited the marketplaces ability to prevent the use of inaccurate or fraudulent information when 
determining eligibility of applicants for enrollment in QHPs.   
 
The presence of an internal control deficiency does not necessarily mean that a marketplace 
improperly enrolled an applicant in a QHP or improperly determined eligibility for insurance 
affordability programs.  Other mechanisms exist that may remedy the internal control deficiency. 
 
For the companion report, we analyzed nationally whether and how marketplaces resolved 
inconsistencies between applicants self-attested information and the data received through the 
Federal Data Hub and other data sources.  We obtained data from the State marketplaces from 
October through December, 2013; for the Federal marketplace, we were able to analyze data 
through February 2014.   
 
We found that during those time periods, marketplaces were unable to resolve most 
inconsistencies, which they reported most commonly as citizenship and income.  Specifically, 
the Federal marketplace was unable to resolve 2.6 million of 2.9 million inconsistencies because 
the CMS eligibility system was not fully operational.  One application may include multiple 
inconsistencies.  Inconsistencies do not necessarily indicate that an applicant provided inaccurate 
information or is enrolled in a QHP inappropriately or is receiving financial assistance through 
insurance affordability programs inappropriately.  The ability to resolve inconsistencies varied 
across the marketplaces, and seven State-based marketplaces reported that they were able to 
resolve inconsistencies without delay. 
 
We also found that data on inconsistencies were limited.  For example, the Federal marketplace 
could not determine the number of applicants who had at least one inconsistency.  Marketplaces 
faced challenges resolving inconsistencies despite having policies and procedures in place. 
 
These are the first two reports in a series relating to operations of the marketplaces.  OIGs other 
marketplace-related work and the work of our oversight partners will provide a detailed 
collection of data for policymakers and stakeholders.3 
 
Following are additional details about our two new reports. 
                                                           
3 For a description of some additional ongoing audits and evaluations, consult Appendix A to our Work Plan, found 
at http://oig.hhs.gov/reports-and-publications/archives/workplan/2014/Work-Plan-2014.pdf.  HHS OIG continues to 
plan and start new work focused on the marketplaces. 
2  House Committee on Energy and Commerce, Subcommittee on Health 
July 16, 2014 
  MANDATED REPORT:  Not All Internal Controls Implemented by the Federal, 
California, and Connecticut Marketplaces Were Effective in Ensuring That Individuals 
Were Enrolled in Qualified Health Plans According to Federal Requirements 
 
Audit Scope and Methodology 
 
In response to the mandate, we reviewed internal controls that the selected marketplaces 
implemented to comply with the procedures and safeguards required by the ACA for 
determining the eligibility of applicants for enrollment in QHPs.  We performed an internal 
control review because it enabled us to evaluate the effectiveness of the selected marketplaces 
operations and the marketplaces compliance with applicable Federal requirements.  Internal 
controls are safeguards and procedures that ensure that programs work as intended.  
  
Because we reviewed the marketplaces internal controls in place during the first 3 months of the 
open enrollment period for applicants enrolling in QHPs (October through December 2013), our 
review provides an early snapshot of the effectiveness of these controls.  We selected three 
marketplaces for this review: (1) the federally facilitated marketplace (the Federal marketplace), 
which operated in 36 States as of October 1, 2013; (2) Covered California (the California 
marketplace); and (3) Access Health CT (the Connecticut marketplace).  We selected these 
marketplaces on the basis of their type (federally operated or State-operated), coverage of States 
in different parts of the country, and size of the uninsured population. 
 
To determine the effectiveness of the internal controls at each marketplace, we: 
 
  tested controls by reviewing a sample of 45 applicants randomly selected at each marketplace 
from all applicants who were determined eligible to enroll in QHPs during the period from 
October 1 through December 31, 2013, with coverage effective January 1, 2014; and4 
  performed other audit procedures, which included interviews with marketplace management, 
staff, and contractors; observation of staff performing tasks related to eligibility 
determinations; and reviews of supporting documentation and enrollment records. 
 
We did not review supporting documentation for certain eligibility requirements, such as annual 
household income and family size, for the purpose of this report because we did not have access 
to needed Federal taxpayer data at the time of our data collection period.5 
 
                                                           
4 Our attribute sampling approach is commonly used to test the effectiveness of internal controls for compliance 
with laws, regulations, and policies.  According to the Government Accountability Office and the Presidents 
Council on Integrity and Efficiencys Financial Audit Manual (July 2008), section 450, auditors may use a 
randomly selected sample of 45 items to perform a compliance review.  If all sample items are determined to be in 
compliance with requirements, a conclusion that the controls are effective can be made.  If one or more sample items 
are determined not to be in compliance with requirements, a conclusion that the controls are ineffective can be 
made.  We tested the controls at each marketplace separately.  Our sampling methodology was limited to forming an 
opinion about whether the internal controls at each marketplace were effective and was not designed to estimate the 
percentage of applicants for whom each marketplace did not perform the required eligibility verifications. 
 
5 OIG plans to conduct additional audit work in this area. 
3  House Committee on Energy and Commerce, Subcommittee on Health 
July 16, 2014 
  Audit Findings 
  
Not all internal controls implemented by the Federal, California, and Connecticut marketplaces 
were effective in ensuring that individuals were enrolled in QHPs according to Federal 
requirements.  The deficiencies in internal controls that we identified may have limited the 
marketplaces ability to prevent the use of inaccurate or fraudulent information when 
determining eligibility of applicants for enrollment in QHPs.  
 
On the basis of our reviews of sampled applicants, we determined that certain controls were 
effective, e.g., verification of applicants incarceration status, at all three marketplaces. However, 
the internal controls were not effective for:  
 
  validating Social Security numbers (one sample applicant) at the Federal marketplace,  
  verifying citizenship (seven sample applicants) and lawful presence (one sample applicant) at 
the California marketplace, and 
  performing identity proofing of phone applicants (one sample applicant) and verifying 
minimum essential coverage through non-employer-sponsored insurance (seven sample 
applicants) at the Connecticut marketplace.6  
 
On the basis of performing other audit procedures, such as interviews with marketplace officials 
and reviews of supporting documentation, we determined that other controls were not effective. 
For example, the Federal and California marketplaces did not always resolve inconsistencies in 
eligibility data, and the Connecticut marketplace did not always properly determine eligibility for 
insurance affordability programs.  Further, the California and Connecticut marketplaces did not 
maintain all eligibility data needed to sufficiently demonstrate that applicants are eligible for 
enrollment, and the Federal marketplace lacked the system functionality to allow enrollees to 
update enrollment information.  The presence of an internal control deficiency does not 
necessarily mean that a marketplace improperly enrolled an applicant in a QHP or improperly 
determined eligibility for insurance affordability programs. 
 
These deficiencies occurred because (1) the marketplaces did not have procedures or did not 
follow existing procedures to ensure that applicants were enrolled in QHPs according to Federal 
requirements or (2) the marketplaces eligibility or enrollment systems had defects or lacked 
functionality.  For example, the Federal marketplaces system functionality to resolve 
inconsistencies in eligibility data had not been fully developed.   
 
OIG Recommendations and CMSs and Marketplaces Responses 
 
OIG recommends that CMS, Covered California, and Access Health CT take action to improve 
internal controls related to (1) verifying identity of applicants and entering application 
information, (2) determining applicants eligibility for enrollment in QHPs and eligibility for 
                                                           
6 Connecticut marketplace officials stated that the marketplace planned to correct a system defect that prevented the 
marketplace from storing verification data for minimum essential coverage through non-employer-sponsored 
insurance for the seven applicants. 
4  House Committee on Energy and Commerce, Subcommittee on Health 
July 16, 2014 
  insurance affordability programs, and (3) maintaining and updating eligibility and enrollment 
data. 
 
We also recommend that CMS work with Covered California and Access Health CT to 
implement OIGs recommendations addressing deficiencies identified at these marketplaces.  
 
CMS concurred with all of our recommendations and provided information on actions that it had 
taken or planned to take to address them.  California and Connecticut agreed with some of our 
findings and recommendations.  CMSs, Californias, and Connecticuts comments (full text) are 
included in our final report.7 
 
COMPANION REPORT:  Marketplaces Faced Early Challenges Resolving Inconsistencies 
With Applicant Data 
 
Evaluation Scope and Methodology 
 
This evaluation, which offers a nationwide snapshot of marketplaces, examined specifically 
whether and how the Federal and 15 State health insurance marketplaces resolved 
inconsistencies between applicants self-attested information and the data received through the 
Federal Data Hub or from other data sources.   
 
We obtained data from the State marketplaces (except for four States that did not provide the 
requested data) from October through December, 2013; for the Federal marketplace, we were 
able to analyze data through February 2014.  We conducted interviews or site visits with the 
staffs at the Federal marketplace and all 15 State marketplaces between January and March 2014. 
We reviewed each marketplace's policies and procedures for resolving inconsistencies.   
 
Evaluation Findings  
 
During the period of our review, marketplaces were unable to resolve most inconsistencies, 
which they reported most commonly as citizenship and income.  Specifically, the Federal 
marketplace was unable to resolve 2.6 million of 2.9 million inconsistencies because the CMS 
eligibility system was not fully operational. 
 
Each applicant can have multiple inconsistencies.  Inconsistencies do not necessarily indicate 
that an applicant provided inaccurate information or is enrolled in a QHP inappropriately or is 
receiving financial assistance through insurance affordability programs inappropriately.  
However, marketplaces must resolve inconsistencies to ensure that eligibility determinations for 
enrollment in QHPs and for insurance affordability programs are accurate. 
 
The abilities of State marketplaces to resolve inconsistencies varied: 
 
  four State marketplaces reported that they were unable to resolve inconsistencies;  
                                                           
7 Available online at http://oig.hhs.gov/oas/reports/region9/91401000.pdf.  
5  House Committee on Energy and Commerce, Subcommittee on Health 
July 16, 2014 
    seven reported that they resolved inconsistencies without delay;  
  one reported that it resolved only some inconsistencies; and 
  three reported that their State Medicaid offices resolved inconsistencies. 
 
We also found that data on inconsistencies are limited.  For example, the Federal marketplace 
could not determine the number of applicants who had at least one inconsistency.  Some 
marketplaces reported that failures with eligibility systems allowed applicants to submit multiple 
applications.  In these instances, each application could be processed and cause the same 
inconsistencies to occur and be counted multiple times.  Other marketplaces reported that when 
the Data Hub was experiencing an outage, additional inconsistencies may have occurred because 
the Data Hub could not be accessed to verify applicant information.8 
 
Finally, marketplaces faced challenges resolving inconsistencies despite having policies and 
procedures in place.  Marketplaces reported challenges with their Web sites, their information 
systems, and the Data Hub that they viewed as hindering their ability to resolve inconsistencies.  
 
OIG Recommendations and CMS Response 
 
OIG recommends that CMS develop and make public a plan on how and by what date the 
Federal marketplace will resolve inconsistencies.  This plan should specify, at a minimum, (1) 
the steps that CMS and the Federal marketplace will take to clear the current backlog of 
inconsistencies and to ensure that the CMS eligibility system can resolve inconsistencies and (2) 
the methods that CMS will use to monitor, track, and measure the Federal marketplaces 
progress in resolving inconsistencies.  OIG also recommends that CMS conduct additional 
oversight of State marketplaces to ensure that they are resolving inconsistencies according to 
Federal requirements.  
 
CMS concurred with both of our recommendations.  CMS responded that since the time of our 
review, the Federal marketplace has in place an interim manual process to resolve 
inconsistencies pertaining to citizenship and immigration status, income, and employer-
sponsored minimum essential coverage.  CMS also reported that it plans to replace that manual 
process with an automated system later this summer.  The full text of CMS response is included 
in our report. 
 
Conclusion 
 
OIGs vision is to drive positive change to ensure that HHS programs operate efficiently and 
effectively, prevent waste and fraud, and provide safe and appropriate care and services to 
eligible beneficiaries.  OIG advances this vision and furthers our commitment to protecting the 
                                                           
8 Federal regulations require that marketplaces not place applicants in an inconsistency period if the marketplace 
expects data from the Data Hub to be available within 1 day.  45 CFR  155.315(f).  One marketplace reported that 
when the Data Hub was inoperable, its system attempted to access the Data Hub several times before considering the 
applicants information inconsistent with Federal data sources.  However, not all marketplaces described their 
specific procedures when data from the Data Hub were unavailable. 
6  House Committee on Energy and Commerce, Subcommittee on Health 
July 16, 2014 
  integrity of HHS programs by conducting work that is relevant, innovative, customer focused, 
and high impact.  The findings and recommendations that we described today are intended to do 
just that.     
 
New and changing HHS programs, like the marketplaces and others, offer opportunities to 
improve health and welfare, prevent waste and fraud, and increase the value realized from 
Federal investments.  They also raise challenges for efficient and effective implementation; 
therefore, close oversight is essential.  With respect to oversight of the marketplaces and related 
programs, OIG has a substantial body of work underway and planned to ensure that taxpayer 
dollars are spent for their intended purposes in a system that operates efficiently and is secure. 
This work will examine critical issues, such as payment accuracy, eligibility systems, contract 
oversight, data security, and consumer protection. 
 
Funding of OIGs FY 2015 budget request would enable us to continue and enhance our focus on 
core risk areas associated with the marketplaces, as well as HHSs other public health and human 
service programs, and Medicare and Medicaid.9   
 
Thank you for your interest in and support for OIGs mission and for the opportunity to discuss 
our work.  We are happy to answer any questions you may have. 
                                                           
9 For more details on OIGs impact, the essential work we have planned, and the resources needed to fulfill these 
mission-critical activities, see OIGs FY 2015 congressional budget justification, available online at 
http://oig.hhs.gov/reports-and-
publications/archives/budget/files/FY2015_HHSOIG_Congressional_Justification.pdf.   
7  House Committee on Energy and Commerce, Subcommittee on Health 
July 16, 2014