Federal Health Insurance Exchange: CMS Needs to Ensure Complete Accurate Data on Terminations of Coverage for Nonpayment of Premiums
Released: 2018-04-09T00:00:00

Letter

Background

The exchanges (including the FFE and those operated by individual states) provide a seamless, single point of access for eligible individuals to enroll in qualified health plans. For the FFE, CMS established a website—Healthcare.gov—as the public portal through which individuals may apply for coverage and select and enroll in health plans, which are offered at different levels of coverage, or “metal tiers”—bronze, silver, gold, and platinum—that reflect the percentage of covered medical expenses estimated to be paid by the insurer. The data that individuals provide in their application is stored in the FFE’s centralized enrollment system, which is maintained by CMS.

Although CMS oversees the centralized enrollment system, both CMS and issuers have shared responsibility for enrollment and coverage functions once individuals apply for coverage:

CMS is responsible for determining an individual’s eligibility for coverage and income-based federal subsidies, enrolling the individual, and processing subsequent coverage changes or terminations. For example, individuals may change their existing coverage by signing up under an SEP due to the birth of a child or relocation, or they may voluntarily terminate their coverage, or CMS may terminate coverage if the agency is unable to verify key information such as citizenship status. CMS is also responsible for making payments for APTCs and determining whether an enrollee is eligible for any cost-sharing reductions that lower enrollees’ out-of- pocket costs for expenses, such as deductibles and copayments.

Issuers are responsible for, among other things, collecting premiums from enrollees, arranging for coverage through provider networks, and paying claims. Issuers are also responsible for processing, and notifying CMS of, terminations related to nonpayment of premiums or fraud.

As a result of this shared responsibility, CMS and issuers notify each other of coverage updates by transferring data back and forth through electronic files known as “transaction files.” It is critical that both issuers and CMS have consistent, accurate, and current information on enrollees, because monthly APTC payments are based on enrollment data in CMS’s centralized system. Federal regulations require CMS to reconcile enrollment information with issuers on at least a monthly basis. Accordingly, CMS and issuers reconcile certain key data elements on a monthly basis through an automated enrollment reconciliation process, in which issuer and CMS data are compared and discrepancies are resolved. Through this process, APTC amounts and their effective dates are compared and reconciled. CMS’s data system is considered to be correct when considering discrepancies on overall enrollment counts or with key data elements, such as coverage start and end dates between issuer and CMS data. Therefore, CMS will not change the APTC payments based on issuers’ data that may differ from CMS’s data unless there are significant discrepancies.

There are several specific steps involved in transferring data between CMS and issuers for initial enrollment, subsequent updates, and reconciliation (see fig. 1 for a high-level overview of the data transfer process): Initial enrollment: CMS forwards an outbound electronic transaction file to the issuer with information on the applicant, the plan selection, the premium, and the APTC amount. Once the issuer receives the initial premium payment, the issuer sends an inbound electronic transaction file back to CMS to confirm the enrollment. Issuers may not refuse to issue coverage to an individual CMS has deemed eligible once that individual has made the initial premium payment. Transaction files are transmitted electronically on a daily basis.

Subsequent changes/terminations: Subsequent changes to the individual’s coverage may be initiated by enrollees, CMS, or issuers. For example, enrollees may request changes to their coverage through the portal if they experience a change in circumstance (such as needing to enroll under an SEP due to the birth of a child, or to terminate their coverage if they move to a different state); CMS may terminate coverage if the agency cannot verify key eligibility information (such as citizenship status); or issuers may terminate coverage if enrollees fail to pay their premiums. If CMS initiates changes in coverage, it notifies issuers through subsequent outbound transaction files, and similarly, if issuers initiate changes they notify CMS through subsequent inbound transaction files.

Monthly reconciliation: CMS sends issuers a snapshot of key elements of the enrollment data in its centralized enrollment system in an outbound reconciliation file. Issuers compare the data from the file to their enrollment systems and identify missing enrollments or other discrepancies. Issuers make updates as necessary and send CMS an inbound reconciliation file with information about current enrollees, cancellations, and terminations in their systems. CMS then performs an automated comparison of the data in the inbound reconciliation files with its centralized enrollment system and identifies any further discrepancies that may need to be resolved either by CMS or issuers. If necessary, CMS makes further updates to its data.

In an April 2017 final rule, CMS implemented several actions that, in part, responded to issuer concerns about special enrollment periods and stability of enrollment. Specifically, CMS stated that the agency would require documentation from all individuals applying to enroll in coverage under an SEP to verify their eligibility for the SEP prior to enrollment. CMS also stated that, starting in June 2017, it would allow issuers, subject to state law, to apply a new premium payment to an individual’s past due payments before applying that premium towards a new enrollment. CMS stated that issuers would be allowed to refuse to provide coverage to an enrollee applying under an SEP due to loss of existing coverage if the issuer had previously terminated the enrollee’s coverage for nonpayment of premiums, unless the enrollee paid the past due premiums. CMS further stated that this provision was intended to encourage individuals to maintain continuous coverage rather than start and stop coverage (and thereby avoid incurring past due premiums).

Just over Half of FFE Enrollees Maintained Continuous Coverage throughout 2015; Length of Coverage Varied by Enrollee Characteristics

Approximately 4.9 million enrollees (53 percent of the 9.2 million FFE enrollees in 2015) maintained continuous coverage throughout the year— that is, their coverage began between January 1 and March 1, 2015, and lasted through December 31, 2015. These individuals therefore had 10 or more months of continuous coverage, with an average length of coverage of 11.6 months. Most of these enrollees (83 percent) re-enrolled in coverage by June 2016.

The remaining 4.3 million enrollees (47 percent of the FFE enrollees in 2015) did not maintain continuous FFE coverage throughout the year, as defined above. The average length of coverage for these enrollees was about 5.0 months and, for most (72 percent), coverage ended prior to the end of the year. (See fig. 2 for information on enrollee length of coverage.)

Of the 4.3 million enrollees, 38 percent re-enrolled in exchange coverage for 2016, although enrollees that held coverage through the end of the year—regardless of their length of coverage—were far more likely to have re-enrolled than enrollees whose coverage ended prior to the year’s end.

In general, we did not find notable differences in attributes of enrollees’ coverage (for example, by benefit level of selected plan or monthly premium after APTC) or enrollee demographics when comparing the two groups of enrollees—those who maintained continuous coverage throughout 2015, and those who did not. (For data on coverage and demographics of FFE enrollees who did maintain continuous coverage throughout 2015 and those who did not, see app. I.)

However, in examining the demographic and coverage characteristics of all FFE enrollees, we found that enrollees with certain characteristics tended to remain covered for a longer period of time in 2015 compared to other enrollees. For example:

Enrollment period. Enrollees who enrolled during the open enrollment period had a higher average length of coverage than enrollees who enrolled through an SEP—9.1 months compared to 5.2 months (see fig. 3). However, more individuals who enrolled through an SEP remained enrolled through December 31, 2015, compared to individuals who enrolled during open enrollment—72 percent compared to 64 percent.

Age. Enrollees aged 55 or older had the highest average length of coverage, while those aged 25 to 34 had the lowest—9.2 months compared to 7.8 months.

Reported household income. APTC-eligible enrollees who reported having a household income between 301 and 400 percent of the federal poverty level had the highest average length of coverage, while those who reported having a household income less than, or equal to, 100 percent of the federal poverty level had the lowest—8.9 months compared to 8.0 months.

Eligibility for APTC. Enrollees who were eligible for APTC had a higher average length of coverage than enrollees who were not eligible for APTC—8.6 months compared to 7.8 months

Benefit level of selected plan. Enrollees who selected higher- benefit, gold plans had the highest average length of coverage, while enrollees who selected lower-benefit catastrophic, plans had the lowest—8.8 months compared to 6.7 months. Enrollees who selected silver plans—the most common plan selection—had an average length of coverage of 8.6 months.

State of residence. Enrollees residing in Maine had the highest average length of coverage, while enrollees residing in Mississippi had the lowest—9.4 months compared to 8.0 months.

See appendix II for additional data on the average length of coverage for enrollees by various characteristics.

CMS Lacks Complete and Transparent Data on Terminations of Enrollee Coverage for Nonpayment of Premiums

CMS’s data on terminations of enrollee coverage due to nonpayment of premiums are not complete and accurate. CMS officials told us that they collect some information from issuers on their terminations of enrollee coverage for nonpayment of premiums. When issuers terminate policies, the inbound transaction files they send to CMS must include, among other elements, a revised coverage end date taking the termination into account. CMS uploads these data into its centralized FFE enrollment system. However, while the issuers may also include codes that designate the reasons for the terminations, there is no requirement for them to consistently do so. Data on termination codes may therefore not be consistently reported by issuers. CMS officials told us that data on reasons for termination are not tracked because they are not critical to ensure the accuracy of APTC payments—which is the main function of the reconciliation process. Officials stated that key essential variables that CMS does track are whether coverage is effectuated (that is, whether the first premium payment has been made), whether the enrollee is eligible for APTC payments, and whether coverage was terminated.

In addition, when issuers do report termination reason codes, these data are not always accurate. Specifically, CMS told us that, historically, issuers may have incorrectly used the nonpayment termination code for other types of terminations, and two issuers we interviewed acknowledged having done so. We compared data on terminations for nonpayment from CMS’s centralized enrollment system with data we obtained from three issuers for a small selection of enrollees. We found that for one large issuer operating in multiple states, the CMS data indicated that coverage for 18 of the 26 enrollees that we examined had been terminated for nonpayment of premiums, while the issuer data indicated that coverage had been terminated for other reasons, in most cases because it had expired at the end of the year. The issuer indicated that it likely reported these year-end terminations to CMS incorrectly as terminations for nonpayment of premiums.

CMS has recently taken actions that may improve the reliability of data on terminations for nonpayment, but these actions do not ensure the data are consistently reported and recorded by CMS. Specifically, in July 2017, CMS indicated that it would add new codes to the transaction files for issuers to use to help prevent inaccurate reporting of the nonpayment termination code. CMS told us that it expects issuers to begin using the new codes in 2018. CMS’s data on terminations for nonpayment therefore may be more reliable beginning in 2018. However, CMS has not required issuers to report the termination reasons in the transaction files because, according to CMS officials, these data are not essential to tracking the accuracy of APTC payments. The agency also does not have plans in the near future to use the data in tracking trends in enrollment and termination of enrollee coverage in the FFE to assess the overall stability of the exchange.

Further, CMS does not have a transparent, systematic process for issuers to ensure that data on terminations they initiate due to nonpayment are complete and accurate in the CMS system. Issuers we interviewed told us that they are unable to ascertain whether CMS is correctly updating the FFE enrollment system with the termination reason codes issuers provide when policies are terminated. While issuers can determine from the monthly reconciliation files whether CMS has updated certain issuer data for enrollees whose coverage was terminated (for example, the revised coverage end date), the files do not capture data on reasons for termination. Therefore, issuers are unable to determine if the CMS FFE data on termination reason codes matches theirs and make corrections where necessary. Some issuers told us they had requested that CMS add a variable to capture data on termination reasons in the monthly reconciliation files sent to issuers. CMS officials stated that the agency is in the initial stages of exploring whether this would be feasible for CMS and issuers, but that it will require significant resources and time to develop.

Although CMS’s recent changes may improve its data, they do not ensure the agency will have complete and transparent data on terminations for nonpayment of premiums. According to federal internal control standards, federal agencies should obtain and use relevant, reliable data to achieve their objectives. Without complete and accurate data, CMS may be allowing enrollees who lost exchange coverage for nonpayment of premiums to re-enroll under SEPs although, under federal regulations, these individuals are ineligible to do so. Issuers reported that this had occurred. CMS officials told us that the agency is exploring options to have its system automatically prevent certain enrollees with prior terminations for nonpayment from enrolling in coverage under an SEP for loss of existing coverage, but noted that this functionality would depend on receiving reliable data on terminations for nonpayment from issuers. Further, without reliable data, CMS may not be able to assess the effects of its April 2017 policy allowing issuers to apply enrollees’ new premium payments toward unpaid premiums over the past 12 months. This is because the agency lacks the complete and accurate data that would be necessary to ensure that issuers are correctly identifying enrollees terminated for nonpayment.

Conclusions

In its role as administrator of the FFE, it is important for CMS to assess the overall stability of the exchange by, among other things, tracking trends in enrollment and termination of enrollee coverage and addressing issuers’ concerns, where appropriate, to ensure their continued participation in the exchange. Issuers have raised concerns that the SEP regulations potentially allow individuals to enroll in coverage despite having their coverage terminated for nonpayment of premiums. However, CMS does not have the data needed to determine the extent of these problems. While CMS has made some efforts to improve the accuracy of the agency’s data on terminations for nonpayment, it has not indicated whether the agency will require issuers to consistently and accurately report these data. Moreover, CMS has no way to ensure the reliability and transparency of the data, because the existing process—the exchange of monthly reconciliation files between CMS and issuers—does not have a place to capture these data. CMS could capitalize on this existing process, already familiar to issuers, by adding a variable that captures data on termination reasons to the monthly reconciliation file and tracking its accuracy. By taking this step, in addition to requiring issuers to report these data, CMS could help ensure it has reliable and transparent data on terminations of enrollee coverage for nonpayment of premiums, and it could use these data to assess the effects of CMS policies and the overall stability of the exchange.

Recommendations

We are making the following two recommendations to CMS:

The Administrator of CMS should ensure that CMS has complete data on terminations of enrollee coverage for nonpayment of premiums by requiring issuers to report these data. (Recommendation 1)

The Administrator of CMS should provide a transparent process for issuers and CMS to systematically reconcile discrepancies in their data on terminations of enrollee coverage for nonpayment of premiums. (Recommendation 2)

Agency Comments and Our Evaluation

We provided a draft of this report to HHS. HHS provided written comments, which are reprinted in appendix III. HHS concurred with our first recommendation to require issuers to report data on terminations of enrollee coverage for nonpayment of premiums. HHS noted that it currently collects information on termination reasons on enrollment transactions with issuers, and that it would review the requirements for collection of these data to identify possible improvements. HHS also concurred with our second recommendation to ensure a transparent process for issuers and CMS to systematically reconcile discrepancies in their data on terminations of enrollee coverage for nonpayment of premiums. HHS stated that it would consider how to incorporate reconciliation of these data into its existing monthly data reconciliation process with issuers, balancing issuer and agency burdens against the benefits of doing so.

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If you or your staff have any questions about this report, please contact me 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 report. GAO staff who made major contributions to this report are listed in appendix IV.

Appendix I: Demographic and Coverage Characteristics of Federally Facilitated Exchange Enrollees, 2015

Table 1 provides information on demographic characteristics for federally facilitated exchange (FFE) enrollees that maintained continuous coverage throughout 2015—defined as beginning coverage by March 1, 2015, and maintaining it without any gaps through December 31, 2015—and for all other 2015 FFE enrollees. Table 2 provides information on the characteristics of these enrollees’ coverage. Table 3 provides the extent to which enrollees maintained continuous coverage throughout 2015 by their state of residence.

Appendix II: Average Length of Coverage for Federally Facilitated Exchange Enrollees, 2015

Table 4 provides information on average length of coverage for all 9.2 million federally facilitated exchange enrollees in 2015 by various demographic characteristics. Table 5 provides information on average length of coverage for these enrollees by characteristics of the enrollees’ coverage. Table 6 provides information on average length of coverage for enrollees by their state of residence.

Appendix III: Comments from the Department of Health and Human Services

Appendix IV: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

In addition to the contact named above, William Hadley (Assistant Director), Iola D’Souza (Analyst in Charge), Richard Lipinski, Peter Mann- King, and Priyanka Sethi Bansal made key contributions to this report. Also contributing were Muriel Brown, Laurie Pachter, and Emily Wilson.