Patient Protection and Affordable Care Act: Observations on 18 Undercover Tests of Enrollment Controls for Health-Care Coverage and Consumer Subsidies Provided under the Act
Published: 2015-07-16T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: PPACA provides for the establishment of health-insurance exchanges, or marketplaces, where consumers can compare and select private health-insurance plans. The act also expands the availability of subsidized health-care coverage. The Congressional Budget Office estimates the cost of subsidies and related spending under the act at $28 billion for fiscal year 2015. PPACA requires verification of applicant information to determine eligibility for enrollment or subsidies.
GAO was asked to examine controls for application and enrollment for coverage through the federal Marketplace. This testimony describes (1) the results of GAO's undercover testing of the Marketplace's eligibility and enrollment controls, including opportunities for potential enrollment fraud, for the act's first open-enrollment period; and (2) additional undercover testing in which GAO sought in-person application assistance.
This statement is based on GAO undercover testing of the Marketplace application, enrollment, and eligibility-verification controls using 18 fictitious identities. GAO submitted or attempted to submit applications through the Marketplace in several states by telephone, online, and in-person. Details of the target areas are not disclosed, to protect GAO's undercover identities. GAO's tests were intended to identify potential control issues and inform possible further work. The results, while illustrative, cannot be generalized to the full population of applicants or enrollees. GAO provided details to CMS for comment, and made technical changes as appropriate.
section_title: What GAO Found
paragraphs: To assess the enrollment controls of the federal Health Insurance Marketplace (Marketplace), GAO performed 18 undercover tests, 12 of which focused on phone or online applications. During these tests, the Marketplace approved subsidized coverage under the Patient Protection and Affordable Care Act (PPACA) for 11 of the 12 fictitious GAO applicants for 2014. The GAO applicants obtained a total of about $30,000 in annual advance premium tax credits, plus eligibility for lower costs due at time of service. For 7 of the 11 successful fictitious applicants, GAO intentionally did not submit all required verification documentation to the Marketplace, but the Marketplace did not cancel subsidized coverage for these applicants. While these subsidies, including those granted to GAO's fictitious applicants, are paid to health-care insurers, and not directly to enrolled consumers, they nevertheless represent a benefit to consumers and a cost to the government. GAO's undercover testing, while illustrative, cannot be generalized to the population of all applicants or enrollees. GAO shared details of its observations with the Centers for Medicare & Medicaid Services (CMS) during the course of its testing, to seek agency responses to the issues raised. Other observations included the following:
The Marketplace did not accurately record all inconsistencies. Inconsistencies occur when applicant information does not match information available from Marketplace verification sources. Also, the Marketplace resolved inconsistencies from GAO's fictitious applications based on fictitious documentation that GAO submitted. Overall, according to CMS officials, the Marketplace did not terminate any coverage for several types of inconsistencies, including Social Security data or incarceration status.
Under PPACA, filing a federal income-tax return is a key control element, designed to ensure that premium subsidies granted at time of application are appropriate based on reported applicant earnings during the coverage year. GAO, however, found errors in information reported by the Marketplace for tax filing purposes for 3 of its 11 fictitious enrollees, such as incorrect coverage periods and subsidy amounts.
The Marketplace automatically reenrolled coverage for all 11 fictitious enrollees for 2015. Later, based on what it said were new applications GAO's fictional enrollees had filed—but which GAO did not itself make—the Marketplace terminated coverage for 6 of the 11 enrollees, saying the fictitious enrollees had not provided necessary documentation. However, for five of the six terminations, GAO subsequently obtained reinstatements, including increases in premium tax-credit subsidies.
For an additional six applicants, GAO sought to test the extent to which, if any, in-person assisters would encourage applicants to misstate income in order to qualify for income-based subsidies during coverage year 2014. However, GAO was unable to obtain in-person assistance in 5 of the 6 undercover attempts. For example, an assister told GAO that it only provided help for those applying for Medicaid and not health-care insurance applications. Representatives of these organizations acknowledged the issues GAO raised in handling of the inquiries. CMS officials said that their experience from the first open-enrollment period helped improve training for the 2015 enrollment period.

section_title: Letter
paragraphs: I am pleased to be here today to discuss enrollment for health-care  coverage obtained through the federal health-insurance exchange  established under the Patient Protection and Affordable Care Act  (PPACA), and in particular, to discuss results of our undercover testing  of eligibility and enrollment controls for the 2014 coverage year. We  presented preliminary results in July 2014. Among other things, PPACA  provides subsidies to those eligible to purchase private health-insurance  plans who meet certain income and other requirements, and with those  subsidies and other costs, represents a significant, long-term fiscal  commitment for the federal government. According to the Congressional  Budget Office, the estimated cost of subsidies and related spending  under the act is $28 billion for fiscal year 2015, rising to $103 billion for  fiscal year 2025, and totaling $849 billion for fiscal years 2016–2025.  While subsidies under the act are not paid directly to enrollees,  participants nevertheless benefit through reduced monthly premiums or  lower costs due at time of service, such as copayments. Because subsidy  costs are contingent on who obtains coverage, enrollment controls that  help ensure only qualified applicants are approved for coverage with  subsidies are a key factor in determining federal expenditures under the  act.
PPACA, signed into law on March 23, 2010, expands the availability of  subsidized health-care coverage, and provides for the establishment of  health-insurance exchanges, or marketplaces, to assist consumers in  comparing and selecting among insurance plans offered by participating  private issuers of health-care coverage. Under PPACA, states may elect  to operate their own health-care exchanges, or may rely on the federally  facilitated exchange, known to the public as HealthCare.gov. These  marketplaces were intended to provide a single point of access for  individuals to enroll in private health plans, apply for income-based  subsidies to offset the cost of these plans—which are paid directly to  health-insurance issuers—and, as applicable, obtain an eligibility  determination for other health coverage programs, such as Medicaid or  the Children’s Health Insurance Program. The Department of Health and  Human Services’ (HHS) Centers for Medicare & Medicaid Services  (CMS) is responsible for overseeing the establishment of these online  marketplaces, and the agency maintains the federally facilitated  exchange. At the time we began the work described in this statement,  CMS was operating HealthCare.gov, also known as the Health Insurance  Marketplace (Marketplace) in about two-thirds of the states.
To be eligible to enroll in a qualified health plan offered through a  marketplace, an individual must be a U.S. citizen or national, or otherwise  lawfully present in the United States; reside in the marketplace service  area; and not be incarcerated (unless incarcerated while awaiting  disposition of charges). Marketplaces, in turn, are required by law to verify  application information to determine eligibility for enrollment and, if  applicable, determine eligibility for the income-based subsidies. These  verification steps include validating an applicant’s Social Security number,  if one is provided; verifying citizenship, status as a national, or lawful  presence with the Social Security Administration (SSA) or the Department  of Homeland Security (DHS); and verifying household income and family  size against tax-return data from the Internal Revenue Service (IRS), as  well as data on Social Security benefits from the SSA.
My statement today presents results and analysis from work originally  requested by a number of congressional requesters.statement (1) describes the final results of our undercover testing of the  federal Marketplace’s application, enrollment, and eligibility verification  controls, including opportunities for potential enrollment fraud, for the  act’s first open-enrollment period ending March 31, 2014; and (2)  describes additional undercover testing in which we sought in-person  consumer assistance for federal Marketplace applications. Our control  testing began in January 2014 and concluded in April 2015.
Specifically, today’s  Our July 2014 testimony, which described the results of our work up to  that time, focused on application for, and approval of, coverage for   My statement today extends that work to the fictitious applicants. postapplication process, including our maintenance of the fictitious  applicant identities throughout 2014 and into 2015, payment of subsidized  premiums on policies we obtained, and the Marketplace’s verification  process for applicant documentation. Thus, taken together, our two  statements now cover the entire process of first obtaining, and then  continuing, coverage for our fictitious applicants, from early 2014 into  2015.
To perform our undercover testing of the Marketplace application,  enrollment, and eligibility-verification process, we created 18 fictitious  identities for the purpose of making applications for individual health-care  coverage by telephone, online, and in-person. Because the federal government, at the time of our review, operated a marketplace on behalf  of the state in about two-thirds of the states, we focused our work on  those states. We selected three of these states for our undercover  applications, and further selected target areas within each state. To  maintain independence in our testing, we created our applicant scenarios  without knowledge of specific control procedures, if any, that CMS or  other federal agencies may use in accepting or processing applications.  We thus did not create the scenarios with intent to focus on a particular   The results obtained using our limited number of  control or procedure.fictional applicants are illustrative and represent our experience with  applications in the three states we selected. They cannot, however, be  generalized to the overall population of all applicants or enrollees. In  particular, our tests were intended to identify potential control issues and  inform possible further work. We shared details of our work with CMS  during the course of our testing, to seek agency responses to the issues  we raised. We also provided details prior to this hearing, and made  technical changes as appropriate.
As noted earlier, to be eligible to enroll in a qualified health plan offered through a  marketplace, an individual must be a U.S. citizen or national, or otherwise lawfully present  in the United States; reside in the marketplace service area; and not be incarcerated  (unless incarcerated while awaiting disposition of charges). Marketplaces, in turn, are  required by law to verify application information to determine eligibility for enrollment and,  if applicable, determine eligibility for the income-based subsidies. premium tax credit and cost-sharing reduction.fictitious applicants who provided invalid Social Security identities,  noncitizens claiming to be lawfully present in the United States, and  applicants who did not provide Social Security numbers. As appropriate,  in our applications for coverage and subsidies, we used publicly available  information to construct our scenarios. We also used publicly available  hardware, software, and materials to produce counterfeit or fictitious  documents, which we submitted, as appropriate for our testing, when  instructed to do so. We then observed the outcomes of the document  submissions, such as any approvals received or requests to provide  additional supporting documentation. We began this control testing in  January 2014 and concluded it in April 2015. We also obtained data from  CMS on applicant submission of required verification documentation.  These data listed document submission status as of April 2015 for the  act’s first open-enrollment period, including for our undercover  applications.
For the 2014 coverage year, CMS awarded $67 million in grants for “Navigators,” which  are individuals or organizations that are to provide, without charge, impartial health- insurance information to consumers, and to help them complete eligibility and enrollment  forms. In addition, such aid is also to be available from other in-person assisters (“non- Navigators”) who generally perform the same functions as Navigators, but are funded  through separate grants or contracts. Navigators and non-Navigator assisters must  complete comprehensive training, according to CMS. Through the HealthCare.gov  website, CMS published a state-by-state list of where in-person assistance can be  obtained. any, in-person assisters might encourage our undercover applicants to  misstate income in order to qualify for either of the income-based PPACA  subsidies. We chose to limit our review of those providing in-person  assistance to the extent we encountered these assisters as part of our  enrollment control testing. A full examination of in-person assistance,  including issues other than eligibility and enrollment, was beyond the  scope of our work. Overall, our review covered the act’s first open- enrollment period, from October 1, 2013 to March 31, 2014, as well as  follow-on work through 2014 and into 2015 after close of the open- enrollment period.
We plan to issue a final report, with recommendations, on our undercover  eligibility- and enrollment-controls testing. We are conducting our audit  work 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 we obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives. We conducted  our related investigative work in accordance with investigative standards  prescribed by the Council of the Inspectors General on Integrity and  Efficiency.
subsections: section_title: The Federal Marketplace Approved Subsidized Coverage for 11 of 12 Fictitious Applicants in 2014, with Coverage Continuing into 2015
subsections: section_title: We Obtained Coverage for 11 of 12 Fictitious Applicants by Using the Telephone Application Process and Bypassing Online Identity Verification
paragraphs: As we described in our July 2014 testimony, the federal Marketplace  approved subsidized coverage for 11 of 12 fictitious applicants who  initially applied online or by telephone. For the 11 approved applications,  we paid the required premiums to put health-insurance policies into force.  We obtained the advance premium tax credit (APTC) in all cases, totaling  about $2,500 monthly or about $30,000 annually for all 11 applicants.  After receiving these premium subsidies, our 11 fictitious applicants paid  premiums at a total annual rate of about $12,000. We also obtained  eligibility for cost-sharing reduction (CSR) subsidies. The APTC and  CSR subsidies are not paid directly to enrolled consumers; instead, the  federal government pays them to issuers of health-care policies on  consumers’ behalf. However, they represent a benefit to consumers—and  a cost to the government—by reducing out-of-pocket costs for medical  coverage. To receive advance payment of the premium tax credit,  applicants agree they will file a tax return for the coverage year, and must  indicate they understand that the premium tax credits paid in advance are  subject to reconciliation on their federal tax return.
According to CMS, the purpose of identity proofing is to prevent someone from creating  an account and applying for health coverage based on someone else’s identity and  without their knowledge. Although intended to counter such identity theft involving others,  identity proofing thus also serves as an enrollment control for those applying online. only the applicant is believed likely to know. If an applicant’s identity  cannot be verified online, applicants are directed to call the credit  reporting agency for assistance.cannot verify identity, applicants are typically told to contact the federal  Marketplace or their state-based exchange, credit-reporting agency  officials told us.
If the credit reporting agency then  We subsequently were able to obtain coverage for all six of these  applications that we began online by completing them by phone. By  following instructions to make telephone contact with the Marketplace, we  circumvented the initial identity-proofing control that had stopped our  online applications. When we later asked CMS officials about this  difference between online and telephone applications, they told us that  unlike with online applications, the Marketplace allows phone applications  to be made on the basis of verbal attestations by applicants, given under  penalty of perjury, who are directed to provide supporting documentation.
For our 6 phone applications, we successfully completed the application  process, with the exception of one applicant who declined to provide a   After being  Social Security number and was not allowed to proceed.approved for coverage, we received enrollment material from insurers for  each of our 11 successful fictitious applicants. Appendix I summarizes  outcomes for all 12 of our phone and online applications.
The Marketplace is required to seek postapproval documentation in the  case of certain application “inconsistencies.” Inconsistencies occur in  instances in which information an applicant has provided does not match  information contained in data sources that the Marketplace uses for  eligibility verification at time of application, or such information is not  available. For example, an applicant might state income at a particular  amount, but his or her federal tax return lists a different amount, or the  applicant has no tax return on file. Likewise, the applicant may provide a  Social Security number, but it does not match information on file with the  SSA. If there is such an application inconsistency, the Marketplace is to  determine eligibility using attestations of the applicant, and ensure that  subsidies are provided on behalf of the applicant, if he or she is eligible to  receive them, while the inconsistency is being resolved using “back-end”  controls. Thus, the Marketplace was required to approve eligibility to  enroll in health-care coverage and to receive subsidies for each of our 11  fictitious applicants while the inconsistencies were being addressed.  At  the time of our July 2014 testimony, we had begun to receive notifications  from the Marketplace on the outcomes of our fictitious document  submissions. As discussed later in this statement, we continued to  receive additional notices about our applicants through 2014 and into  2015.
section_title: Federal Marketplace Communications with Our 11 Successful Fictitious Enrollees about Their Applications Were Unclear or Incomplete
paragraphs: According to CMS officials, the federal Marketplace makes eligibility determinations.  Private insurers, also called “issuers,” provide coverage. applicant may be affected by something, and then leaving it to the  applicant to parse through details to see if they were indeed affected.
Inaccurate guidance. The Marketplace directed 8 of our 11  successful applicants to submit additional documentation to prove  citizenship and identity—but an accompanying list of suitable  documents that could be sent in response consisted of items for  proving income.
Lack of Marketplace notice on document submissions. In five  cases, we did not receive any indication on whether information sent  in response to Marketplace directives was acceptable. As a result, we  had to call the Marketplace to obtain status information. According to  CMS, after documents are processed, consumers will receive a  written notice.
Lack of written notice. In one case, the Marketplace did not provide  us with any written correspondence directing we submit additional  documentation. The Marketplace only requested documentation for  the initial enrollment during our phone application for coverage.  According to the Marketplace, applicants are to receive written notice  of documentation required.
CMS officials told us they are working to improve communication with  consumers, and will make improvements in consumer notices. According  to the officials, they are soliciting feedback from consumer advocates,  call-center representatives, and application assisters to improve such  communications. According to the officials, CMS has already made  significant improvements that include adding a complete list of acceptable  documents to resolve citizenship and immigration status inconsistencies,  and consolidating warning notices to include all inconsistency issues.  CMS is currently working on further improvements in notices, including  those for eligibility and instances of insufficient documentation, according  to the officials.
section_title: Our 11 Fictitious Enrollees Maintained Subsidized Coverage throughout 2014, Even Though We Sent Fictitious Documents, or No Documents, to Resolve Application Inconsistencies
paragraphs: As part of our testing, and in response to Marketplace directives, we  provided follow-up documentation, albeit fictitious. Overall, as shown in  appendix II, we varied what we submitted by application—providing all,  none, or only some of the material we were told to send—in order to test  controls and note any differences in outcomes. Among the 11  applications for which we were directed to send documentation, we  submitted all requested documentation for four applications, partial documentation for four applications, and no documentation for the remaining three applications.
Although our documentation was fictitious, and in some cases we  submitted none, or only some, of the documentation we were directed to  send, we retained our coverage for all 11 applicants through the end of  the 2014 coverage year. As described earlier, APTC subsidies our  applicants received totaled about $30,000 annually, and further financial  benefit would have been available through CSR subsidies if we had  obtained qualifying medical services. Following our document  submissions, the Marketplace told us, either in writing or in response to  phone calls, that the required documentation for all our approved  applicants had been received and was satisfactory. In one case, when we  called the Marketplace to inquire about the status of our documentation  submission—but where we had not actually submitted any documents—a  representative told our applicant that documents had been reviewed and  processed, and, “There is nothing else to do at this time.” Figure 1 shows  a portion of a call in which a Marketplace representative said our  documentation was complete, even though we did not submit any  documents.
For one applicant, the Marketplace did subsequently state in a November  2014 letter that we would lose our subsidies, beginning in December  2014. However, there was no follow-up communication regarding the loss  of our subsidies, and the subsidies were not terminated in December  2014.
On the basis of applicant data we obtained from CMS, the Marketplace  cleared inconsistencies for some of our 11 fictitious applications in  instances where we submitted bogus documents.a summary of our document requests and submissions. We also noted  instances where the Marketplace either did not accurately capture all  inconsistencies, or resolved inconsistencies based on suspect  documentation, including the following:
Did not capture all inconsistencies. For 3 of the 11 applicants,  while the Marketplace at the outset directed our applicants to provide  documentation of citizenship/immigration status, the CMS applicant  data we later received for these applicants do not reflect  inconsistencies for the items initially identified.
Disqualifying income. For 2 of the 11 applicants, we reported  income substantially higher than the amount we initially stated on our  applications, and at levels that should have disqualified our  applications from receiving subsidies. However, according to the CMS  data, the Marketplace resolved our income inconsistencies and, as  noted, our APTC and CSR subsidies for both applicants continued.
In addition to having fictitious documentation approved, two of our  applicants also received notices in early 2015 acknowledging receipt of  documents recently submitted, when we had not sent any such  documents. We do not know why we received these notices.
section_title: The CMS Document- Verification Process Is Not Designed to Identify Fraudulent Applications
paragraphs: We found that the CMS document-processing contractor is not required to  seek to detect fraud. It is only required to inspect for documents that  have obviously been altered. According to contractor executives we  spoke with, the contractor personnel involved in the document-verification  process are not trained as fraud experts and do not perform antifraud  duties. In particular, the executives told us, the contractor does not certify  the authenticity of submitted documents, does not engage in fraud  detection, and does not undertake investigative activities. In the  contractor’s standard operating procedures for its work for CMS,  document-review workers are directed to “determine if the document  image is legible and appears unaltered by visually inspecting it.” Further,  according to the contractor, it is not equipped to attempt to identify fraud,  and does not have the means to judge whether documents submitted  might be fraudulent.
CMS officials told us there have been no cases of fraudulent applications  or documentation referred to the U.S. Department of Justice or the HHS  Office of Inspector General, because its document-processing contractor  has not identified any fraud cases to CMS. However, as noted earlier, the  contractor is not required to detect fraud, nor is it equipped to do so.  According to the CMS officials, there has been “no indication of a  meaningful level of fraud.”
According to CMS officials, it would not be practical to have applicants  show original documents at time of application. With the HealthCare.gov  website, the agency decided to move away from in-person authentication,  in order to avoid burden on consumers, the officials told us. They also  said in-person presentation of documentation is not possible in the  current structure, as there are insufficient resources to establish a system  to do so.
Overall, according to CMS officials, the agency has limited ability to  respond to attempts at fraud. They told us CMS must balance consumers’  ability to “effectively and efficiently” select Marketplace coverage with  “program-integrity concerns.” CMS places a strong emphasis on program  integrity and builds program integrity features into all aspects of  implementation of the law, according to CMS officials. In any case, the  CMS officials said the design of the program does not allow for direct  consumer profit from fraud, because APTC and CSR subsidies are paid  to policy issuers, not consumers. We note, however, that even so, the  subsidies nevertheless can produce direct financial benefits to  consumers. For example, if consumers elect to receive the premium tax  credit in advance, that lowers the cost of monthly coverage. A consumer  could also receive the advance premium tax credit and not file a federal  tax return, as required to ensure proper treatment of the credit. Likewise,  CSR subsidies mean smaller out-of-pocket expenses when obtaining  medical services. Accordingly, although subsidies may be paid directly to  issuers, they still result in a cost to the government and a benefit to  enrollees.
CMS officials told us the agency plans to conduct an assessment of the  Marketplace’s eligibility determination process, including the application  process and the inconsistency resolution process. They did not provide a  firm date for completion, saying the review would depend on obtaining  IRS information for use as a reference.
section_title: Four of Our 11 Applicants Continued to Receive Subsidized Coverage for 2014, Likely Because CMS Waived Documentation Requirements
paragraphs: According to the applicant data we obtained from CMS, most of our  applications had unresolved inconsistencies—indicating either that the  Marketplace did not receive requested documentation or the  documentation was not satisfactory. Specifically, as shown in appendix  III, the CMS data indicate that, as of April 2015, 7 of our 11 applications  had at least one inconsistency that remained unresolved.
Because we did not disclose the specific identities of our fictitious  applicants, CMS officials said they could not explain our findings on  handling of inconsistencies for our applications. However, in general,  they said our subsidized policies may have remained in effect during  2014 because CMS waived certain document filing requirements.  Specifically, CMS directed its document contractor not to terminate  policies or subsidies if an applicant submitted any documentation to the  Marketplace. That is, if an applicant submitted at least one document,  whether it resolved an inconsistency or not, that would be deemed  sufficient so that the Marketplace would not terminate either the policy or  subsidies of the applicant, even if other documentation had initially been  required. For example, for one of our applicants, the Marketplace  requested citizenship, income, and identity documents, but our applicant  submitted only identity information. Under the CMS directive, the  applicant’s policy and subsidies continued through 2014 because our  applicant submitted at least one document to the Marketplace, but not all  documents required. Thus, in the case of our four applicants that  submitted partial documentation to the Marketplace, we likely were  relieved of the obligation for submitting all documents for the 2014 plan  year.
For the 2014 plan year, PPACA authorized CMS to extend the period for  applicants to resolve inconsistencies unrelated to citizenship or lawful  presence. Additionally, regulations state that CMS may extend the  period for an applicant to resolve any type of inconsistency when the  applicant demonstrates a “good faith effort” to submit documentation.  CMS officials told us they relied upon these authorities to make a policy  decision to broadly extend the period for resolving all types of  inconsistencies in 2014. Under the policy, the officials told us, the  submission of a single document served as evidence of a good faith effort  by the applicant to resolve all inconsistencies, and therefore extended the  resolution period through the end of 2014. As such, CMS did not  terminate any applicant who “demonstrated a good faith effort” in 2014.  The officials told us that CMS is enforcing the full submission requirement  for 2015, and that any good-faith extensions granted in 2015 would be  decided on a case-by-case basis and be limited in length. All consumers,  regardless of whether they benefitted from the good-faith effort extension  in 2014, will still be subject to deadlines for filing sufficient documentation,  they said. In particular, according to the officials, those who made a good- faith effort by submitting documentation, but failed to clear their  inconsistencies in 2014, were among the first terminations in 2015, which  they said took place in February and early March. We are continuing to  seek further information from CMS officials on their good-faith effort  policy, as well as any 2015 terminations, as part of ongoing work.
Although the good-faith effort policy could explain the handling of some of  our applications, CMS officials could not provide a general explanation for  the three applications for which we submitted no documentation but our  subsidized coverage remained. However, based on our examination of  applicant files at the CMS document contractor, this could be due to an  error in the CMS enrollment system. Specifically, we found instances in  which records we reviewed showed that applicants had not enrolled in a  plan, when they actually had done so. Contractor officials told us that in  such cases, they did not terminate the plans or subsidies because the  applicants were shown as not enrolled. We plan to address this issue of  tracking of inconsistencies in our ongoing work.
Also included among the unresolved inconsistencies for our applicants  were four for Social Security numbers. According to CMS officials,  inconsistencies for Social Security numbers occur when an applicant’s  name, date of birth, and Social Security number cannot be validated in an  automated check with SSA. The officials told us that systems capability  has not allowed CMS’s document contractor to make terminations for  such inconsistencies. They also said the agency has done no analysis of  the fiscal effect of not making such terminations. We plan to address this  issue in ongoing work. In addition, CMS officials told us that although it  checks applicants or enrollees against SSA’s Death Master File, it  currently does not have the systems capability to change coverage if a  death is indicated. Instead, the officials told us, the Marketplace has  established a self-reporting procedure for individuals to report a  consumer’s death in order to remove the consumer from coverage. The  number of reported deaths from SSA is “very minimal,” according to CMS  officials.
section_title: The Marketplace Automatically Reenrolled Coverage for All 11 Fictitious Applicants for 2015
paragraphs: The coverage we obtained for our 11 fictitious applicants contained an  automatic reenrollment feature—both insurers and the Marketplace  notified us that if we took no action, we would automatically be enrolled in  the new coverage year (2015). In all 11 of our cases, we took no action and our coverage was automatically reenrolled in January 2015. We  continued to make premium payments, in order to demonstrate  continuation of subsidized coverage, which meant continuing costs for the  federal government. Appendix IV summarizes our automatic  reenrollments.
Although we obtained automatic reenrollments, we found communications  from the Marketplace leading up to the end of 2014 to be contradictory or  erroneous. Examples include the following:
As noted earlier, our applicants were notified they would automatically  be reenrolled for the new coverage year. But most of the applicants  also received, to varying degrees, notices to reapply or to take some  type of action. For example, we received notices stating: “Official  Notice: Your 2015 application is ready,” “Action Needed: Your 2015  health coverage,” and “Follow these steps to re-enroll by December  15.” The message and frequency of these notices could create  uncertainty among applicants who believed they need not take any  action to remain enrolled.
In correspondence to our applicants, the Marketplace referred to  things that could not have happened. In four cases in the latter part of  2014, Marketplace correspondence referred to the filing of federal tax  returns of our applicants, even though our applicants never filed a tax  return.
In four cases, our enrollees received notices directing them to send  additional information in order to continue coverage, saying they could  lose coverage if they did not—but the deadline for submission was a  date that had passed months earlier. For example, one enrollee  received such a notice in December 2014, advising that coverage  might be lost six months earlier, in June 2014.
As mentioned previously, CMS officials told us they are working to  improve communication with consumers, and will make improvements in  consumer notices.
section_title: CMS Provided Inaccurate Tax Information for 3 of 11 Fictitious Applicants
paragraphs: Under PPACA, an applicant’s filing of a federal income-tax return is a key  element of back-end controls. When applicants apply for coverage, they  report family size and the amount of projected income. Based, in part, on  that information, the Marketplace will calculate the maximum allowable  amount of advance premium tax credit. An applicant can then decide if he  or she wants all, some, or none of the estimated credit paid in advance, in  the form of payment to the applicant’s insurer that reduces the applicant’s  monthly premium payment.
If an applicant chooses to have all or some of his or her credit paid in  advance, the applicant is required to “reconcile” on his or her federal tax  return the amount of advance payments the government sent to the  applicant’s insurer on the applicant’s behalf with the tax credit for which  the applicant qualifies based on actual reported income and family size.
To facilitate this reconciliation process, the Marketplace sends enrollees  Form 1095-A, which reports, among other things, the amount of advance  premium tax credit paid on behalf of the enrollee. This information is  necessary for enrollees to complete their tax returns. The accuracy of  information reported on this form, then, is important for determining an  applicant’s tax liability, and ultimately, government revenues.
We found errors with the information reported on 1095-A forms for 3 of  our 11 fictitious applicants.containing different information for the same applicant. In all three cases,  the forms did not accurately reflect the number of months of coverage,  thus misstating the advance premium tax credits received. In one of the  cases, for instance, the form did not include a couple of months of  advance premium tax credit that was received and, as a result,  understated the advance premium tax credit received by more than $600.  Appendix V shows complete results for tax forms we received. Because  we did not provide CMS with detailed information about the specific  cases, CMS officials said they could not conduct research and explain   In two cases, we received multiple forms  why these errors occurred. In general, CMS officials told us the agency  made quality checks on tax information before mailings to consumers.
During our testing work, we also identified that unlike advance premium  tax credits, CSR subsidies are not subject to a recapture process such as  reconciliation on the taxpayer’s federal income-tax return. In discussions  with CMS and IRS officials, we found that the federal government has not  established a process to identify and recover the value of CSR subsidies  that have been provided to our fictitious enrollees improperly. These  subsidies increase government costs; and, according to IRS, excess CSR  payments, if not recovered by CMS, would be taxable income to the  individual for whom the payment was made. We are continuing to seek  information from CMS on any efforts to recover costs associated with  subsidy reductions or eliminations due to unresolved inconsistencies.
section_title: The Marketplace Later Terminated Subsidized Coverage for 6 of Our 11 Applicants in Early 2015, but We Restored Coverage for 5 of These Applicants—with Larger Subsidies
paragraphs: In December 2014, the Marketplace sent notifications to 5 of our 11  applicants, indicating that we had filed new applications for subsidized  coverage. In four of these notices, the Marketplace stated our subsidies  or coverage, or both, would be terminated if we failed to provide  supporting documentation. However, we had not filed any such  applications, nor, as described earlier, had we sought any  redetermination of subsidies. Because each of our fictitious applicants  earlier received either written or verbal assurances from the Marketplace  that documentation had been received and no further action was  necessary, we did not respond to these requests to submit supporting  documentation.
A few months later, the Marketplace terminated coverage or subsidies for  six applicants, including four applicants who had received notice of new  applications in December 2014, and two applicants who had not received  notice of a new application. The termination notices cited failure to  respond to requests to submit documentation in support of what were  claimed to be the new applications we submitted. Our remaining five  applicants continued receiving subsidized coverage without interruption.
Following the termination notices, we elected to pursue continued  coverage for the six cases as part of our testing, even though we had not  filed the claimed new applications. Each of our six fictitious applicants that  lost coverage or subsidies made phone inquiries to the Marketplace for  an explanation of the terminations. In three of these inquiries, the  Marketplace representatives told our applicants that they were required to  file a new application or supporting documentation each year. However,  as described earlier, notifications we received earlier from the  Marketplace and insurers told us that no actions were needed to  automatically reenroll in our plans other than to continue to pay  premiums. In addition, as noted, other applicants did not receive notices  of new applications being filed. We are continuing to seek from CMS  information on this treatment of our applicants.
Next, for each of these six fictitious applicants, we requested in  Marketplace phone conversations reinstatement of coverage or subsidies.  For five of the six applicants, the Marketplace approved reinstatement of  subsidized coverage, while in the process also increasing total premium  tax credit subsidies for all these applicants combined by a total of more  than $1,000 annually. For the sixth applicant, a Marketplace representative said a caseworker must evaluate our situation. We were  told we could not speak with the caseworker, and it could take the  caseworker up to 30 days to resolve the issue. This applicant’s case was  still pending at the time we concluded our undercover activity in April  2015. Appendix VI summarizes outcomes for the unknown applications  and terminations that followed for six of our applicants.
For three of the five applicants for whom we obtained reinstatement of  subsidized coverage, we had open inconsistencies related to  citizenship/immigration status remaining from our initial applications for  2014, according to CMS data. For each of these three applications, we  had never submitted any citizenship or immigration documentation to the  Marketplace for resolution. Nonetheless, we had subsidized coverage  restored. We are continuing to seek from CMS any information on  whether procedures allow repeated applications as a way to avoid  document-filing requirements.
section_title: We Were Unable to Obtain In-Person Assistance in Five of Six Undercover Attempts to Test Income-Verification Controls, and Application Assisters Subsequently Acknowledged Errors
paragraphs: As described earlier, CMS has awarded grants for “Navigators,” which are  to provide free, impartial health-insurance information to consumers. In  addition, such aid is also to be available from other in-person assisters  (“non-Navigators”) who generally perform the same functions as  Navigators, but are funded through separate grants or contracts.
As described in our July 2014 statement, in addition to the 12 online and  telephone applications, we also attempted an additional 6 in-person  applications, seeking to test income-verification controls only. During  our testing, we visited one in-person assister and obtained information on  whether our stated income would qualify for subsidy. In that case, as  shown in Figure 2, a Navigator correctly told us that our income would not  qualify for subsidy. However, for the remaining five in-person applications,  we were unable to obtain such assistance. We encountered a variety of  situations that prevented us from testing our planned scenarios.later returned to the locations, seeking explanations on why we could not   We  obtain the advertised assistance, which are also shown in figure 2.
Representatives of these organizations generally acknowledged the  issues we raised in handling of our application inquiries.
We shared these results with CMS officials, who said they could not  comment on the specifics of our cases without knowing details of our  undercover applications. CMS officials said Navigators are required to  accept all applicants, even if an organization’s mission is to work with  specific populations. If Navigators cannot provide timely help themselves,  they must refer applicants to someone who can give assistance. CMS  officials also said that they can terminate grant agreements, among other  enforcement actions, if Navigators do not comply with terms of their  awards. They cited as an example a corrective action taken in March  2015 against a Navigator grantee operating in several states for not  providing the full range of activities it promised. CMS officials stressed to  us Navigator training and experience from the first open-enrollment period  helped improve training for the second enrollment period ending in  February 2015. As noted earlier, our review of in-person assistance was  limited to the extent we encountered Navigators and non-Navigators as  part of our enrollment control testing. A full examination of in-person  assistance was beyond the scope of our work.
CMS officials told us there is no formal policy or specific guidance for  situations such as the one we encountered in a case described in figure  2, in which an applicant is asked if he or she wishes to perform a service,  such as volunteering for union activities, at the time the applicant seeks  assistance. Still, CMS officials said Navigators would be discouraged  from such activities while applicants seek help.
CMS officials told us it is reasonable for consumers to think that if an  assister is listed on the federal website as providing help—as were the  assisters we selected—that assistance should be available as indicated.  CMS officials told us the agency recognizes challenges with its online tool  to find local assistance, and has been working to make changes. We are  continuing to seek written documentation on these planned  improvements.
Chairman Hatch, Ranking Member Wyden, and Members of the  Committee, this concludes my statement. I would be pleased to respond  to any questions that you may have.
section_title: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contacts
paragraphs: For questions about this statement, please contact Seto J. Bagdoyan at  (202) 512-6722 or BagdoyanS@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement.
section_title: Staff Acknowledgements
paragraphs: Individuals making key contributions to this statement, or our 2014  statement reporting preliminary results, include: Matthew Valenta and  Gary Bianchi, Assistant Directors; Maurice Belding; Mariana Calderón;  Marcus Corbin; Carrie Davidson; Paul Desaulniers; Colin Fallon; Suellen  Foth; Sandra George; Robert Graves; Barbara Lewis; Maria McMullen;  James Murphy; George Ogilvie; Shelley Rao; Ramon Rodriguez;  Christopher H. Schmitt; Julie Spetz; Helina Wong; and Elizabeth Wood.
section_title: Appendix I: Undercover Application Results
paragraphs: Figure 3 summarizes outcomes for all 12 of the undercover phone and  online applications we made for coverage to the Health Insurance  Marketplace (Marketplace) under the Patient Protection and Affordable  Care Act, as part of our testing of eligibility and enrollment controls.
section_title: Appendix II: Fictitious Applicant Documentation Submitted
paragraphs: Figure 4 shows, by application, the documentation we submitted in  support of the 11 undercover applications that were successful. As part of  our eligibility- and enrollment-controls testing, we varied what we  submitted by application—providing all, none, or only some of the  material we were told to send.
section_title: Appendix III: Marketplace Consideration of Documentation Submitted
paragraphs: Figure 5 shows, by application, a summary of our document requests and  submissions, with Marketplace communications on adequacy of the  submissions, for the 11 undercover applications that were successful.
section_title: Appendix IV: Automatic Reenrollments
paragraphs: Figure 6 summarizes automatic reenrollment activity at the end of the  2014 coverage year for the 11 undercover applications that were  successful.
section_title: Appendix V: Accuracy of Tax Forms Received
paragraphs: Figure 7 summarizes receipt of Forms 1095-A, for reconciliation of  advance premium tax credits received, for the 11 undercover applications  that were successful.
section_title: Appendix VI: Restoration of Subsidized Coverage
paragraphs: Figure 8 summarizes outcomes for the six applicants for whom the  Marketplace terminated subsidies or coverage in early 2015. Prior to  termination, four of these applicants had received notices of new  applications filed, although we did not file any such applications.  Following notice of the terminations, we restored subsidized coverage in  five of six cases, with one case pending at the time we concluded our  undercover activity.