PATIENT PROTECTION 

AND AFFORDABLE CARE 

ACT

Status of CMS Efforts to 

Establish Federally 

Facilitated Health Care 

Exchanges and the Federal 

Data Services Hub

Statement of John E. Dicken

Director, Health Care

Testimony

Before the Subcommittee on Cybersecurity, 

Infrastructure Protection, and Security Technologies, Committee on Homeland Security, and the 

Subcommittee on Energy Policy, Health Care, and

Entitlements, Committee on Oversight and 

Government Reform, House of Representatives

For Release on Delivery 

Expected at 10:00 a.m. EDT

Wednesday, July 17, 2013

GAO-13-786T

United States Government Accountability Office
Page 1 GAO-13-786T

Chairmen Meehan and Lankford, Ranking Members Clarke and Speier, 

and Members of the Subcommittees:

I am pleased to be here today to discuss the efforts of the Centers for

Medicare & Medicaid Services (CMS) to establish federally facilitated 

exchanges (FFE) and the federal data services hub (data hub). The 

Patient Protection and Affordable Care Act (PPACA) required the 

establishment in all states of exchanges,1

All exchanges, whether state-based or FFE, will be required to perform 

certain activities, many of which fall into the core functions of eligibility 

and enrollment,

which are marketplaces where 

eligible individuals can compare and select health insurance plans. CMS 

must oversee the establishment of exchanges, including approving states 

to operate a state-based exchange or establishing and operating one 

itself in states that will not do so, referred to as an FFE. In establishing 

the framework within which an FFE in a particular state will be established 

and operated, CMS has provided states with the option to assist with 

certain FFE functions.

2 plan management,3 and consumer assistance.4 To 

support the exchanges’ efforts to determine exchange applicants’

eligibility to enroll, CMS is building a tool called the data hub. According to 

CMS officials, the data hub is to provide one electronic connection to 

federal sources for near real-time access to data,5

 1

In this statement, the term “state” includes the District of Columbia.

as well as provide 

2

The eligibility and enrollment function includes the requirement that the exchange 

determine an individual’s eligibility for enrollment into a health insurance plan and for 

income-based financial subsidies. In order to enroll in health insurance coverage offered 

through an exchange, individuals must complete an application and meet certain eligibility 

requirements defined by PPACA; for example, they must be U.S. citizens or legal 

immigrants.

3

The plan management function includes the development and implementation of 

processes and standards by the exchange to certify qualified health plans (QHP) for 

inclusion in the exchange, or to decertify them, as needed.

4

The consumer assistance function includes the requirement for each exchange to 

provide a call center, website, and in-person assistance to support consumers in filing an 

application, obtaining an eligibility determination, comparing coverage options, and 

enrolling in a QHP. Other consumer assistance function activities include outreach and 

awareness activities.

5

Near real-time refers to a system capability to deliver data in response to transactions 

one at a time, as they occur.
Page 2 GAO-13-786T

access to state and other data sources needed to verify consumer 

exchange application information. Enrollment in the exchanges begins on 

October 1, 2013, with coverage effective January 1, 2014.

This statement highlights key findings from our June 2013 report that 

describes the status of CMS efforts to establish FFEs and the data hub.6

For that report, we reviewed regulations and guidance issued by CMS in 

preparation for establishing the FFEs, and documents indicating the 

activities that the federal government and states are expected to carry out 

for these exchanges. We also reviewed planning documents CMS used 

to track the implementation of federal and state activities, including 

documents describing the development and implementation of the data 

hub. We interviewed CMS officials responsible for establishment of the 

exchanges. We relied largely on documentation provided by CMS—

including information CMS developed based on its contacts with the 

states—regarding the status of the exchanges and did not interview state 

officials or collect information directly from states. We also reviewed data 

received from CMS on funding obligated for contracts and interagency 

agreements from fiscal year 2010 through March 31, 2013, to assist in the 

development and operation of the FFEs and the data hub and carry out 

certain other exchange-related activities. Our work was performed from 

February 2013 through June 2013 in accordance with generally accepted 

government auditing standards. Those standards require that we plan 

and perform the audit to obtain sufficient, appropriate evidence to provide 

a reasonable basis for our findings and conclusions based on our audit 

objectives. We believe that the evidence obtained provides a reasonable 

basis for our findings and conclusions based on our audit objectives.

In that report, we described (1) the federal government’s role in 

establishing FFEs for operation in 2014 and state participation in that 

effort; (2) the status of federal and state actions taken and planned for 

FFEs and the data hub; and (3) CMS spending to support establishment 

of FFEs and the data hub.

In brief, our work found that CMS will operate a health insurance 

exchange in the 34 states that will not operate a state-based exchange 

for 2014. While CMS will retain full authority over each of these 34 FFEs, 

 6

GAO, Patient Protection and Affordable Care Act: Status of CMS Efforts to Establish 

Federally Facilitated Health Insurance Exchanges, GAO-13-601 (Washington, D.C.: 

June 19, 2013).
Page 3 GAO-13-786T

it planned to allow 15 of these states to assist it in carrying out certain 

FFE functions.7

CMS has completed many activities necessary to establish FFEs by 

October 1, 2013, although many remained to be completed and some 

were behind schedule. CMS issued numerous regulations and guidance 

and took steps to establish processes and data systems necessary to 

operate the exchanges. The activities remaining crossed the core 

exchange functional areas of eligibility and enrollment, plan management, 

and consumer assistance. For eligibility and enrollment, CMS expected to 

complete development and testing of the necessary information 

technology systems by October 1, 2013. 

However, the activities that CMS plans to carry out in 

these 15 exchanges, as well as in the 17 state-based exchanges, have 

evolved and may continue to change. For example, CMS approved 

states’ exchange arrangements on the condition that states ultimately 

complete activities necessary for exchange implementation. Agency 

officials indicated that they were working with each state to develop 

mitigation strategies to ensure that all applicable exchange functions are 

operating in each state on October 1, 2013. CMS indicated that it would 

carry out more exchange functions if any state did not adequately 

progress towards implementation of all required activities.

To support consumer-eligibility determinations, CMS is developing a data 

hub that will provide electronic, near real-time access to federal data, as 

well as provide access to state and third-party data sources needed to 

verify consumer-eligibility information. Effective use of the FFEs’ eligibility 

and enrollment systems is dependent upon CMS’s ability to provide the 

data needed to carry out eligibility determination and enrollment activities 

through the implementation of the data hub. CMS began conducting both 

internal and external testing for the data hub in October 2012, as planned. 

According to program officials, CMS established milestones for 

completing the development of required data hub functionality by July 

2013, and for full implementation and operational readiness by 

September 2013. Project schedules reflect the agency’s plans to provide 

users access to the data hub for near real-time data verification services 

by October 1, 2013. In our June 2013 report, we noted that agency 

 7

Specifically, CMS indicated that a state in which an FFE will operate can choose to assist 

with certain FFE functions, including the plan management function, consumer assistance 

function, or both.
Page 4 GAO-13-786T

officials stated that ongoing development and testing activities were 

expected to be completed to meet the October 1, 2013 milestone. 

Additionally, CMS has begun to establish technical, security, and data 

sharing agreements with federal partner agencies and states, as required 

by department-level system development processes. 

While CMS stated that the agency had thus far met its project schedules 

and milestones for establishing agreements and developing the data hub, 

several critical tasks remained to be completed before the October 1, 

2013, implementation milestone. According to CMS officials and the 

agency’s testing timeline:

• Service Level Agreements (SLA) between CMS and the states, which 

define characteristics of the system once it is operational, such as 

transaction response time and days and hours of availability, were 

planned to be completed in July 2013;

• SLAs between CMS and its federal partner agencies that provide 

verification data were expected to be completed in July 2013; and

• completion of external testing with all federal partner agencies and all 

states was to be completed by the beginning of September 2013.

For plan management, CMS must review and certify the qualified health 

plans (QHP) that will be offered in the FFEs. Though the system used to 

submit applications for QHP certification was operational during the 

anticipated time frame, several key tasks regarding plan management, 

including certification of QHPs and inclusion of QHP information on the 

exchange websites, remained to be completed. In the case of consumer 

assistance, CMS had yet to complete many activities and some initial 

steps were behind. For example, funding awards for Navigators—a key 

consumer assistance program—had been delayed by about 2 months, 

which delayed training and other activities. CMS is also depending on the 

15 states that will assist it in carrying out certain FFE functions to 

undertake activities to implement those functions, and CMS data show 

that many activities in these states remained to be completed and some 

were behind schedule. For example, two states had delayed the date by 

which they planned to select individuals who would provide in-person 

consumer assistance to those seeking to enroll in a QHP.
Page 5 GAO-13-786T

CMS data indicated that the agency spent almost $394 million from fiscal 

year 2010 through March 31, 2013 through contracts8 to complete 

activities to establish the FFEs and the data hub and carry out certain 

other exchange-related activities.9

In conclusion, FFEs along with the data hub are central to the goal under 

PPACA of having health insurance exchanges operating in each state by 

2014, and of providing a single point of access to the health insurance 

market for individuals. Their development has been a complex 

undertaking, involving the coordinated actions of multiple federal, state, 

and private stakeholders, and the creation of an information system to 

support connectivity and near real-time data sharing between health 

insurance exchanges and multiple federal and state agencies. Much 

progress has been made in establishing the regulatory framework and 

guidance required for this undertaking, and CMS has been taking steps to 

implement key activities of the FFEs, and developing, testing, and 

implementing the data hub. Nevertheless, much remains to be 

accomplished within a relatively short amount of time. 

CMS officials said that these totals did 

not include CMS salaries and other administrative costs, but rather 

reflected the amounts obligated for contract activities. Ten contractors 

accounted for $303.4 million (77 percent of total obligations) for activities 

to support establishment of FFEs and the data hub and to carry out 

certain other exchange-related activities. Specifically, their contracts were 

for projects related to information technology, the healthcare.gov website, 

call center, and technical assistance for the FFEs.

 8

We use the term “contract” to include contracts with private entities to carry out activities 

to establish the FFEs and the data hub, as well as certain other exchange-related 

activities, task orders for such activities under contracts with private entities that may 

encompass a broader range of activities, and interagency agreements for such activities. 

References to CMS “spending” are to the amounts obligated under these contracts, task 

orders, and interagency agreements. This total also includes amounts obligated by the 

Department of Health and Human Services under contracts, task orders, and interagency 

agreements in fiscal years 2010 and 2011, before the department transferred oversight of 

exchange implementation to CMS. An obligation is a definite legal commitment that will 

give rise to payment at some point in the future. An agency incurs an obligation, for 

example, when it awards a contract.

9

CMS indicated that certain of these contracts supported activities, such as state 

oversight, financial management, and risk-adjustment model development, in which CMS 

would have engaged even if all states planned to operate their own exchanges in 2014.
Page 6 GAO-13-786T

CMS’s timelines and targeted completion dates provide a roadmap to 

completion of the required activities by the start of enrollment on 

October 1, 2013. However, certain factors, such as the still-unknown and 

evolving scope of the exchange activities CMS will be required to perform 

in each state, and the large numbers of activities remaining to be 

performed—some close to the start of enrollment—suggest a potential for 

implementation challenges going forward. And while missed interim 

deadlines may not affect implementation, additional missed deadlines 

closer to the start of enrollment could do so. At the time of our report, 

CMS had recently completed risk assessments and plans for mitigating 

identified risks associated with the data hub, and was also working on 

strategies in each state to address state preparedness contingencies. 

Whether CMS’s contingency planning will assure the timely and smooth 

implementation of the exchanges by October 2013 cannot yet be 

determined.

In commenting on a draft of the June 2013 report on which this statement 

is based, the Department of Health and Human Services emphasized the 

progress it has made in establishing the exchanges, and expressed its 

confidence that exchanges will be open and functioning in every state by 

October 1, 2013.

Chairmen Meehan and Lankford, Ranking Members Clarke and Speier, 

and Members of the Subcommittees, this concludes my statement. I 

would be pleased to respond to any questions you or other members of 

the subcommittees have.

For questions about this statement, please contact John E. Dicken at 

(202) 512-7114 or dickenj@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last 

page of this statement. Individuals making key contributions to this 

statement include Randy Dirosa and Teresa Tucker, Assistant Directors; 

Sandra George; William Hadley; Thomas Murphy; and Laurie Pachter.

GAO Contacts and 

Staff 

Acknowledgments

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