Patient Protection and Affordable Care Act: Preliminary Results of Undercover Testing of Enrollment Controls for Health Care Coverage and Consumer Subsidies Provided Under the Act
Released: 2014-07-23T00:00:00

Letter

We Obtained Coverage in 11 of 12 Applications Made through Undercover Testing

The federal Marketplace approved coverage for 11 of our 12 fictitious applicants who initially applied online, or by telephone. We later received notices in 10 of 11 of these cases that failure to submit documentation needed to verify eligibility could lead to loss of coverage or subsidies we received. For 1 of the 11 approvals, we initially were denied coverage, but were successful when we subsequently reattempted the application. Applicants for coverage are required to attest that they have not intentionally provided false or untrue information. Applicants who provide false information are subject to penalties under federal law, including fines and imprisonment. For each of the approved applications, we were ultimately directed to submit supporting documentation to the Marketplace, such as proof of income, identity, or citizenship.

Preliminary Results of Front-End Controls Testing

For each of our 11 approved applications, we paid the required premiums to put policies into force, and are continuing to pay the premiums. For the 11 applications that were approved for coverage, we obtained the advance premium tax credit in all cases. The total amount of these credits for the 11 approved applications is about $2,500 monthly or about $30,000 annually. We also obtained cost-sharing reduction subsidies, according to Marketplace representatives, in at least 9 of the 11 cases. As noted, these advance premium tax credits and cost-sharing reductions are not paid directly to enrolled consumers; instead, the federal government pays them to issuers on consumers’ behalf. To receive advance payment of the premium tax credit, applicants agree that they will file a tax return for the benefit year, and applicants receiving premium tax credits during the inconsistency period must indicate their understanding that premium tax credits are subject to reconciliation on their federal tax return.

For each of our 6 online applications that were among the total group of 12, we failed to clear an identity checking step during the front end of the online application process, and thus could not complete the process online. However, we subsequently were able to obtain coverage for all 6 of these applications begun online by completing them by phone. In 5 of these 6 cases, the online system directed us to contact a Marketplace contractor that handles identity checking. The contractor was unable to resolve the identity issues. According to a CMS public information website, if the contractor cannot resolve the issue, applicants may be asked to provide identity documents, by online upload or by mail. In such cases, according to CMS officials, applications are to be put on hold until identity proofing is completed. For this group of 5 applications, however, contractor representatives did not ask us to submit identity documents but instead directed us to call the Marketplace. We did, and after speaking with Marketplace representatives as instructed, we were able to successfully proceed with our applications by phone and obtain coverage for the 5 applications. In the sixth case, the online system directed us to call the Marketplace directly, without contacting the contractor. In that case, too, we proceeded to successfully complete the application by phone and obtained coverage. According to CMS officials and executives of the Marketplace’s call center contractor, an identity discrepancy must be cleared and identity verified before an application can proceed to completion.

For our 6 phone applications, we successfully completed the application process, with the exception of one applicant who declined to provide a Social Security number and was not allowed to proceed.

In the course of follow-up dealings with the Marketplace, call-center representatives in at least four cases could not locate our existing applications and, as a result, began new applications, according to our conversations with the representatives. According to CMS call-center and document-processing contractors, multiple electronic applications have been common.

Preliminary Results of Back-End Controls Testing

The Marketplace is required to seek postapproval documentation in the case of certain application “inconsistencies”—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. If there is an application inconsistency, the Marketplace is to provide eligibility while the inconsistency is being resolved using “back-end” Under these controls, applicants will be asked to provide controls.additional information or documentation for a Marketplace contractor to review in order to resolve the inconsistency.

Among the 11 of our 12 undercover applications that successfully obtained coverage, the Marketplace initially directed that we submit supplementary documentation in 10 cases, with a request for supplementary documentation in the 11th case coming a few months after approval of coverage. Among the Marketplace communications were the following:

The Marketplace asked two of three applicants with inactive Social Security numbers to submit proof of citizenship, identity, and income, but it asked a third only for income information. In four cases, the Marketplace asked for additional documentation a few months after initial document requests were made.

The Marketplace directed two applicants to log into online accounts for messages—but these applicants had no such online accounts.

The Marketplace sent unclear reminders to three applicants to file supplementary documentation, with a cover letter directing applicants to submit one type of document to resolve a particular inconsistency (for example, income), but then in an enclosure to be returned to the Marketplace requesting that another type of document be sent (for example, citizenship).

As part of our testing and in response to Marketplace requests, we provided counterfeit follow-up documentation, but varied what we submitted by application—providing all, none, or only some of the material requested—in order to note any differences in outcomes. Specifically, among the 10 applications for which we were directed to send documentation at the time of approval, we submitted all requested documentation for 3 of the 10 applications, partial documentation for 4 applications, and no documentation for the remaining 3 applications.

In addition, in 2 cases in which we were directed to submit income information, we reported income substantially higher than the amount we initially stated on our applications, and at levels that should disqualify our applications from obtaining subsidies.

CMS officials told us that a CMS contractor evaluates follow-up documentation on a rolling basis as it receives submissions. If the contractor deems the information submitted to be complete, a decision on eligibility is typically made within 1 to 2 days, according to the officials. Otherwise, applicants may be directed to submit additional information as deemed necessary. In all cases, CMS officials told us, applicants are to be notified of the outcome of the review of their submitted documentation.

For the seven applications for which we elected to submit full or partial follow-up documentation, approximately 3 months have elapsed since we submitted the requested information. As of July 17, 2014, we had received notifications indicating the Marketplace had reviewed portions of the counterfeit documentation sent for two applications. Specifically, the Marketplace notified both these applicants that their proof of citizenship/immigration status had been verified and no further action is necessary. One of them also had identity verified. We are awaiting notice on other documents filed for these two applicants.

In the time since we filed documents requested at time of approval, we have received a number of follow-up communications from the Marketplace, which, as noted earlier, include requests for documentation not originally requested. In response, we have submitted a second round of documents, which responds to the requests but also maintains our testing methodology of submitting all, none, or some of the items requested. As of July 17, 2014, outcomes were still pending for these applications. Regardless of the status of any postapproval communications, our coverage remains in effect for all 11 approved applications.

Overall, among all applications for the federal Marketplace, about 4.3 million application inconsistencies have been identified, representing about 3.5 million people, according to the CMS contractor handling receipt and evaluation of submitted materials. Of the total inconsistencies, about 2.6 million are for applicants who took the step of selecting health care plans after completing their applications. As of mid-July 2014, about 650,000 inconsistencies had been cleared. However, according to contractor executives, due to system limitations, processing of income and citizenship/immigration status inconsistencies—which together account for 75 percent of inconsistency volume—began in May and June 2014.cannot be matched to their respective applications, and become “orphans.” As of mid-July 2014, the contractor said, there had been about 227,000 such documents. According to the contractor executives, unmatched documents are retained and reconsidered every 21 days to see if new information is available that can enable a match to be made.

In some cases, according to the CMS contractor, documents As noted, applicants attest at the time of application that information they provide is not false or untrue. According to CMS officials, its document processing contractor is not required under its contract to authenticate documentation or to conduct forensic analysis. Executives of the contractor concurred, and told us the review standard the contractor uses is that it accepts documents as authentic unless there are obvious alterations. According to the executives, the contractor does not certify authenticity, does not engage in fraud detection, and does not undertake investigative activities. Specifically, in the contractor’s standard operating procedures for its work for CMS, document review workers are directed under “general verification guidance” to “determine if the document image is legible and appears unaltered by visually inspecting it.” Further, the contractor is not equipped to attempt to identify fraud, the contractor executives told us, and the contractor does not have the means to judge whether documents submitted might be fraudulent. The standard of accepting authenticity unless there is obvious alteration originated from CMS, the executives said.

According to the contractor executives, when consumers send copies of documents, as directed, rather than originals, there inevitably is a loss of image quality such that the contractor could not closely examine whether a document is authentic.thoroughly analyze document authenticity, the CMS contractor executives Costs would increase by several times to told us. Even if such an effort was attempted, they said, it would be difficult to say if anti-fraud measures would be effective, because that is not the company’s business.

The contractor also does not currently make use of outside data sources in its document review; instead, it inspects what documents are received. Overall, the contractor executives told us, the contractor is not aware of any fraudulent applications and that, based on its practices, it also is not in a position to know whether fraud is being attempted. CMS officials similarly told us they did not know the extent of any attempts at application or enrollment fraud, but said that to date, there is no evidence of applicants defrauding the federal Marketplace.

In following through on our applications, we also identified a potential challenge to consumers obtaining information about review of documentation submitted. In communications we received from the Marketplace about our document submissions, we were directed to call the Marketplace with questions. When we called to inquire about the status of our document filings, representatives could not answer our questions. They told us they were not able to confirm receipt of requested documentation and were not able to provide information on whether requested documentation has been reviewed. The CMS contractors handling consumer calls and document verification each confirmed to us that the call centers cannot access document-submission information. Hence, it is currently not possible for a call-center representative, fielding an inquiry such as ours, to obtain document status information in order to provide that information to the consumer.

Overall, CMS officials told us that they have internal controls for the eligibility-determination process, and that experience has not shown the need for any changes in that process. They said that thus far, the focus has been on stabilizing processes being implemented for the first time.

Our work continues on the postapproval verification process. In particular, we are tracking whether we receive any additional adjudication notices from the CMS verification contractor, or whether the contractor identifies supporting documentation we submitted as fictitious or inconsistent with information submitted at time of application. We will continue to assess CMS’s management of the application and approval process through our ongoing work and consider any recommendations needed to address these issues.

We Were Unable to Obtain In-Person Assistance in Five of Six Undercover Attempts to Test Income-Verification Controls

We attempted six in-person applications, in order to test income- verification controls only. Specifically, we sought to determine the extent to which, if any, in-person assisters would encourage our applicants to misstate income in order to qualify for either of the income-based PPACA subsidies. According to CMS, in-person assistance is to be available for those seeking assistance in filing applications.applications, we randomly chose three Navigators and three non- Navigators in the target areas of our selected states. For the in-person applications, because our sole interest was any potential advice on reporting income, we did not seek or obtain policies, as we did with our phone and online applications.

During our testing, we visited one in-person assister and obtained information on whether our stated income would qualify for subsidy. In that case, 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, including the following:

One of the three Navigators required that we make an appointment in advance by phone. When we were unable to reach the Navigator by phone, we made an in-person visit. The Navigator declined to provide assistance, or to schedule an appointment, saying instead we would need to phone to schedule an appointment to return.

One of the three non-Navigators initially said it provides assistance only after people already have an application in progress. The non- Navigator did offer to assist us with an application, but the HealthCare.gov website was down. He directed us to call later for assistance. After we did so, this non-Navigator did not respond to three follow-up phone calls.

Another of the three non-Navigators, a health care services company, told us it only handles applications from those having a medical bill at its medical facility.

The third non-Navigator did not provide assistance, telling us it handles only applications for Medicaid.

In two of the five instances in which we were unable to obtain assistance at our originally selected locations, we proceeded to seek assistance at other randomly selected locations in our target areas. In these follow-up attempts, we again encountered difficulty in obtaining assistance for our applicants, including the following:

For one test, we visited two additional locations beyond the initial location before finding an in-person assister at a third who correctly told us our income was insufficient to qualify for subsidy. At the first two locations, we were told, among other things, that appointments were necessary.

For another test, which occurred late in the open-enrollment period, non-Navigator representatives declined to provide help, telling us they were uncomfortable doing so and planned to take a seminar on enrollment.

We further pursued, by phone calls to the Marketplace, the applications for which we could not get explicit in-person guidance on income and qualification for subsidy. In these calls, we were correctly advised that our income was outside the range eligible for income-based subsidy.

Figure 1 summarizes our process and results for each of the groups of applicants—the 12 phone and online applications, and the six in-person attempts.

CMS Does Not Yet Have the Capability to Identify Those Who Have Paid for Policies, Limiting Our Ability to Analyze Enrollment

The federal government, in administering the two income-based subsidies, makes payments to issuers of health insurance on behalf of eligible consumers who have enrolled in a qualified health plan. According to CMS officials, individuals are considered to be enrolled in a plan after they pay the initial premium. Thus, a key factor in analyzing enrollment in Marketplace coverage—and federal expenditures and subsidies that follow—is the ability to identify which applicants approved for coverage have subsequently paid premiums and put policies in force.

According to HHS, more than 8 million people selected a plan for coverage during the initial open-enrollment period that ended in April. CMS officials, however, told us they are thus far unable to identify individuals who have made premium payments. Issuers have reported this information to CMS, but the agency has not yet created a system to process the information, according to CMS officials.

In May 2014, CMS officials told us that work is underway to implement such a system. However, CMS does not have a timeline for completing and deploying this work. As a result, under current operations, CMS must rely on health insurance issuers to self-report enrollment data reflecting individuals for whom CMS owes the issuers the income-based subsidies arising from obtaining coverage through the Marketplace. We plan to continue examining this issue, among others, as part of our ongoing work, and to consider any recommendations needed to address it.

Chairman Boustany, Ranking Member Lewis, and Members of the subcommittee, this concludes my statement. I would be pleased to respond to any questions that you may have.

GAO Contact and Staff Acknowledgments

For questions about this statement, please contact Seto 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.

Individuals making key contributions to this statement include: Wayne A. McElrath, Director; Matthew Valenta, Gary Bianchi, and Kristi Peterson, Assistant Directors; Carrie Davidson; Paul Desaulniers; Sandra George; Robert Graves; Barbara Lewis; Maria McMullen; George Ogilvie; Shelley Rao; Ramon Rodriguez; Christopher H. Schmitt; Julie Spetz; Cherié Starck, Helina Wong; Elizabeth Wood; and Michael Zose.

Appendix I: Legal Appendix

This appendix provides background on certain requirements related to the submission of applications and eligibility-verification procedures to enroll in qualified health plans and qualify for income-based subsidies under the Patient Protection and Affordable Care Act (hereafter PPACA).

To be eligible to enroll in a qualified health plan offered through a marketplace established under PPACA, an individual must be a U.S. citizen or national, or otherwise be lawfully present in the United States; reside in the marketplace service area; and not be incarcerated (unless pending disposition of the charges). moderate-income individuals and families may be eligible for income- based subsidies authorized by PPACA to make coverage more affordable: (1) a refundable tax credit, generally paid on an advance basis, to reduce premium costs for marketplace coverage (referred to as premium tax credits) and (2) reductions in cost-sharing associated with such coverage (known as cost-sharing reductions) for items such as copayments for physician visits or prescription drugs. To qualify for either subsidy, an individual must meet applicable income requirements and must not be eligible for coverage under another qualifying plan or program, such as affordable employer-sponsored coverage, Medicaid, or the State Children’s Health Insurance Program. Subsidy payments are made to the issuer of the qualified health plan to offset the cost of the plan to the individual.

PPACA, § 1312(f)(1), (3),124 Stat. at 183-184; 45 C.F.R. § 155.305(a). subsidy eligibility. Applicants for coverage are to attest that they have not intentionally provided false or untrue information. Applicants who provide false information are subject to penalties under federal law, including fines and imprisonment.

Marketplaces are required by law to take several steps to verify application information to assess eligibility for enrollment in a qualified health plan and, if applicable, to qualify for an income-based subsidy. These verification steps include validating an applicant’s Social Security number, if one is provided; verifying an applicant’s citizenship, status as a national, or lawful presence with the Social Security Administration (SSA) and/or the Department of Homeland Security; verifying household income and family size against the most recent tax-return data from the Internal Revenue Service (IRS), as well as data on Social Security benefits from the SSA; and verifying whether the applicant is eligible for health coverage under another qualifying plan or program that would preclude eligibility for subsidy purposes.

Where the marketplace identifies certain inconsistencies in an application that it cannot resolve through reasonable effort, the marketplace must undertake an “inconsistency process,” under which the applicant is given 90 days to present satisfactory evidence to resolve the identified inconsistencies. For example, the inconsistency process applies when the marketplace is unable to validate an individual’s Social Security number or attestation regarding citizenship or immigration status. It also applies when the marketplace is unable to verify eligibility for income- based subsidies, including, for example, if an applicant indicates a change in circumstances, such as substantial changes in income compared with the most recent tax return available, or IRS does not have recent tax-return data. During the inconsistency period, the marketplace must allow the applicant to enroll in a qualified health plan and, if applicable, authorize the advance payment of any premium tax credit or cost-sharing reduction to the applicant’s issuer on the basis of the applicant’s attestations.

PPACA authorizes the Department of Health and Human Services to extend the 90-day period for enrollments occurring during 2014. PPACA, § 1411(e)(4)(A)(ii), 124 Stat. at 228. CMS regulations also generally permit the marketplaces to extend the 90-day period if the applicant has made a good faith effort to obtain documentation required to resolve the inconsistency. 45 C.F.R. § 155.315(f)(3). inconsistency period, an applicant also must attest to understanding that any advance payments of premium tax credits received during this period are subject to reconciliation. Marketplaces are required to permit applicants to receive less than the full amount of advance payments of the premium tax credits in order to minimize the possibility of having to repay such credits if their actual income for the benefit year is higher.

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