Patient Protection and Affordable Care Act: Status of CMS Efforts to Establish Federally Facilitated Health Insurance Exchanges
Released: 2013-06-19T00:00:00

Letter

Background

Exchanges are intended to allow eligible individuals to obtain health insurance, and all exchanges, whether state-based or established and operated by the federal government, will be required to perform certain functions. The federal government’s role with respect to an exchange for any given state is dependent on the decisions of that state.

Overview of Exchanges

PPACA required that exchanges be established in each state to allow consumers to compare health insurance options available in that state and enroll in coverage. Once exchanges are established, individual consumers will be able to access the exchange through a website, toll- free call centers, or in person. The exchanges will present qualified health plans (QHP) approved by the exchange and offered in the state by the participating issuers of coverage. The benefits, cost-sharing features, and premiums of each QHP are to be presented in a manner that facilitates comparison shopping of plans by individuals. Once individuals wish to select a QHP, they will complete an application—through the exchange website, over the phone, in person, or by mailing a paper form—that collects the information necessary to determine their eligibility to enroll in a QHP. On the basis of the application, the exchange will determine individuals’ eligibility for enrollment in a QHP, and also determine their eligibility for income-based financial subsidies—advance payment of premium tax credits and cost-sharing subsidies—to help pay for that coverage. Also at the time of the application, the exchange will determine individuals’ eligibility for Medicaid and CHIP. After an individual has been determined to be eligible for enrollment in a QHP, the individual will be able to use tools on the exchange website to compare plans and make a selection. For individuals applying for enrollment in a QHP and for income-based financial subsidies, eligibility determinations and enrollment should generally occur on a near real-time basis, to be accomplished through the electronic transfer of eligibility information between the exchange and federal and state agencies, and through the electronic transfer of enrollment data between the exchange and QHP issuers. Assistance with the enrollment process will be provided to individuals either through the website, an established telephone call center, or in person.

To undertake these functions, all exchanges, including those established and operated by the federal government, will be required to perform certain activities, many of which fall within the core functions of eligibility and enrollment, plan management, and consumer assistance.

Eligibility and enrollment: All exchanges will be required to determine an individual’s eligibility for QHP enrollment, income-based financial subsidies, and enrollment in Medicaid and CHIP. Exchanges will be required to enroll eligible individuals into the selected QHP or transmit information for individuals eligible for Medicaid or CHIP to the appropriate state agency to facilitate enrollment in those programs. The exchange is to use a single, streamlined enrollment eligibility system to collect information from an application and verify that information. CMS is building the data hub to support these efforts. The data hub is intended to provide data needed by the exchanges’ enrollment eligibility systems to determine each applicant’s eligibility. Specifically, the data hub will provide one electronic connection and near real-time access to the common federal data, as well as provide access to state and third party data sources needed to verify consumer application information. For example, the data hub is to verify an applicant’s Social Security number with the Social Security Administration (SSA), and to access the data from the Internal Revenue Service (IRS) and the Department of Homeland Security (DHS) that are needed to assess the applicant’s income, citizenship, and immigration status. The data hub is also expected to access information from the Veterans Health Administration (VHA), Department of Defense (DOD), Office of Personnel Management (OPM), and Peace Corps to enable exchanges to determine if an applicant is eligible for insurance coverage from other federal programs that would make them ineligible for income-based financial subsidies. In states in which an FFE will operate, the hub is also expected to access information from state Medicaid and CHIP agencies to identify whether FFE applicants are already enrolled in those programs.

Plan management: Exchanges will be required to develop and implement processes and standards to certify health plans for inclusion as QHPs and recertify or decertify them, as needed. As part of these processes, the exchange must develop an application for issuers of health coverage that seek to offer a QHP. The exchange must review a particular plan’s data to ensure it meets certification standards for inclusion in the exchange as a QHP. The exchange must also conduct ongoing oversight and monitoring to ensure that the plans comply with all applicable regulations.

Consumer assistance: All exchanges will be required to provide a call center, website, and in-person assistance to support consumers in filing an application, obtaining an eligibility determination, comparing coverage options, and enrolling in a QHP. Other consumer assistance function activities that exchanges must conduct are outreach and education to raise awareness of and promote enrollment in QHPs and income-based financial subsidies. One such form of consumer assistance required by PPACA is the establishment of Navigators—entities, such as community and consumer-focused nonprofit groups, to which exchanges award grants to provide fair and impartial public education regarding QHPs, facilitate selection of QHPs, and refer consumers as appropriate for further assistance.

Federal and State Roles in Exchanges

The role of the federal government with respect to an exchange for a state is dependent on whether that state seeks to operate a state-based exchange. States can choose to establish exchanges as directed by PPACA and seek approval from CMS to do so. States electing to establish and operate a state-based exchange in 2014 were required to submit to CMS, by December 14, 2012, a declaration of intent and the “Blueprint for Approval of Affordable State-based and State Partnership Insurance Exchange.” Through this Blueprint, the state attests to how its exchange meets, or will meet, all legal and operational requirements associated with a state-based exchange. For example, the state must demonstrate that it will establish the necessary legal authority and governance, oversight, financial-management processes, and the core exchange functions of eligibility and enrollment, plan management, and consumer assistance. Although a state assumes responsibility for the exchange when it elects to operate a state-based exchange, it can choose to rely on the federal government for certain exchange-related activities, including determining individuals’ eligibility for income-based financial subsidies and activities related to reinsurance and risk adjustment.issuers on behalf of enrollees in all exchanges.

In addition, CMS will make financial subsidy payments to Under PPACA, if a state did not elect to establish a state-based exchange or is not approved by CMS to operate its own exchange, then CMS is required to establish and operate an FFE in that state. Although the federal government retains responsibility to establish and operate each FFE, CMS has identified possible ways that states may assist it in the day-to-day operation of these exchanges:

CMS indicated that a state can choose to participate in an FFE through a partnership exchange by assisting CMS with the plan management function, consumer assistance function, or both. According to CMS, the overall goal of a partnership exchange is to enable the FFE to benefit from efficiencies to the extent states have regulatory authority and capability to assist with these functions, help tailor the FFE to that state, and provide a seamless experience for consumers. The agency also noted that a partnership exchange can serve as a path for states toward future implementation of a state- based exchange. Although the states would assist in carrying out the plan management function, consumer assistance function, or both on a day-to-day basis, CMS would retain responsibility for these and all other FFE functions. For example, for plan management, states would recommend QHPs for certification, and CMS would decide whether to approve the states’ recommendations and, if so, implement them. In the case of consumer assistance, states would manage an in-person assistance program and Navigators and may choose to conduct outreach and education activities. However, CMS would be responsible for awarding Navigator grants and training Navigators, and would operate the exchange’s call center and website. By February 15, 2013, states seeking to participate in a partnership exchange had to submit a declaration letter and Blueprint to CMS regarding expected completion dates for key activities related to their participation.

CMS indicated in guidance issued on February 20, 2013, that an FFE state choosing not to submit a Blueprint application for a partnership exchange by the February 15, 2013, deadline could still choose to assist it in carrying out the plan management function on a day-to-day basis. CMS officials said that, operationally, the plan management functions performed by these states will be no different than the functions performed by partnership exchange states. Instead of a Blueprint application, states interested in participating in this alternative type of arrangement had to submit letters attesting that the state would perform all plan management activities in the Blueprint application.

Even in states in which CMS will operate an FFE without a state’s assistance, CMS plans to rely on states for certain information. For example, it expects to rely on state licensure of health plans as one element of its certification of a QHP.

After a state submits an application to operate a state-based exchange or participate in a partnership exchange, CMS may approve or conditionally approve the state for that status. Conditional approval indicates that the state had not yet completed all steps necessary to carry out its responsibilities in a state-based exchange or partnership exchange, but its exchange is expected to be ready to accept enrollment on October 1, 2013. To measure progress towards completing these steps, CMS officials indicated that the agency created a set of typical dates for when specific activities would need to be completed in order for the exchanges to be ready for the initial enrollment period. The agency then adapted those dates for each state establishing a state-based exchange or participating in a partnership exchange. The agency officials said that if the state indicated in its Blueprint that it planned to complete an activity earlier than CMS’s typical targeted completion date, CMS accepted the state’s earlier date. If the state proposed a date that was later than CMS’s typical targeted completion date, the state had to explain the difference and CMS determined whether that date would allow the exchange to be ready for the initial enrollment period. The agency indicated that a state’s conditional approval continues as long as it conducts the activities by the target dates agreed to with the individual state and demonstrates its ability to perform all required exchange activities.

CMS’s role in operating an exchange in a particular state may change for future years if states reassess and alter the roles they play in establishing and operating exchanges. For example, a state may be approved to participate in a partnership exchange in 2014 and then apply, and receive approval, to run a state-based exchange in 2015. Although the federal government would retain some oversight over the state-based exchange, the responsibility for operating the exchange would shift from the federal government to the state.

Funding for FFEs and the Data Hub

HHS indicated that it has drawn from several different appropriations to fund CMS activities to establish and operate FFEs and the data hub. These include the Health Insurance Reform Implementation Fund, HHS’s General Departmental Management Account, and CMS’s Program Management Account. HHS also indicated that it plans to use funds from the Prevention and Public Health Fund and the agency’s Nonrecurring Expenses Fund to pay for certain exchange activities in 2013.will assist with eligibility determinations and activities to make people Specifically, the agency plans to use these funds for activities that aware of insurance options and enrollment assistance available to them. For fiscal year 2014, CMS has estimated that it will need almost $2 billion to establish and operate the FFEs. Specifically, the President’s fiscal year 2014 budget requests $1.5 billion in appropriations for CMS’s Program Management Account for the implementation and operation of the exchanges. In addition to this amount, it estimated that $450 million in user fees will be collected from issuers of health coverage participating in the exchanges in fiscal year 2014 and credited to the Program Management Account.used for activities related to operation of the exchanges, including eligibility and enrollment, consumer outreach, plan oversight, SHOP and employer support, information-technology systems, and financial management.

According to the agency, these funds will be In addition to these sources of funding, the agency also awarded grants with funds appropriated under section 1311 of PPACA to states in which an FFE will operate for activities related to the FFE. These include the plan management and consumer assistance activities that certain states will undertake on behalf of the FFE, as well as the development of state data systems to coordinate with the FFE.

CMS Expects to Operate an Exchange in Most States, but Planned CMS and State Exchange Activities Continue to Evolve

CMS expects to operate an FFE in 34 states in 2014. States are expected to assist with certain day-to-day functions in 15 of these FFEs. However, the precise activities that CMS and the states will perform have not been finalized and may continue to evolve.

CMS Expects to Operate FFEs, including Partnership Exchanges, in 34 States in 2014

For 2014, CMS will operate the exchange in 34 states, although it expects that states will assist in carrying out certain activities in almost half of those exchanges. As of May 2013, 17 states were conditionally approved by CMS to establish state-based exchanges. CMS granted conditional approval to these states in letters issued from December 2012 to January 2013. CMS is required to operate an FFE in the remaining 34 states. While CMS will retain full authority over each of these 34 FFEs, it plans to allow 15 of the states to assist it in carrying out certain exchange functions. Specifically, as of May 2013, CMS granted 7 FFE states conditional approval to participate in a partnership exchange. CMS issued these conditional approval letters from December 2012 to March 2013. Of the 7 partnership exchange states, 6 (Arkansas, Delaware, Illinois, Michigan, New Hampshire, and West Virginia) indicated that they planned to assist with both the plan management and consumer assistance functions of the exchange and 1 (Iowa) indicated that it would only assist with the plan management function. In an alternate arrangement, CMS plans to allow the other 8 of these 15 FFE states (Kansas, Maine, Montana, Nebraska, Ohio, South Dakota, Utah, and Virginia) to assist In the remaining 19 FFE states, with the plan management function.CMS plans to operate all functions of an FFE without states’ assistance for plan year 2014. (See fig. 1 for a map of exchange arrangements for 2014.)

Some states also informed CMS of whether or not they chose to carry out certain other activities related to the exchanges. First, CMS officials said that all states with an FFE are to notify CMS whether or not their relevant state agencies will determine the Medicaid/CHIP eligibility for individuals who submit applications to the FFE or if the states will delegate this function to the FFE. As of May 2, 2013, CMS officials indicated that none of the 34 FFE states had notified CMS as to whether they would conduct Medicaid/CHIP eligibility determinations rather than delegate this responsibility to CMS. CMS officials indicated that states do not have a deadline for notifying CMS of their decisions on this area, but would have to do so before initial enrollment on October 1, 2013. Second, states notified CMS as to whether they would operate a transitional reinsurance program. CMS indicated that for plan year 2014, two state-based exchange states—Connecticut and Maryland—notified CMS that they would each operate a transitional reinsurance program, leaving CMS to operate programs in the remaining 49 states.

Planned CMS and State Activities to Establish Exchanges Have Evolved Recently and May Continue to Change

The activities that CMS and the states each plan to carry out to establish the exchanges have evolved recently. CMS was required to certify or conditionally approve any 2014 state-based exchanges by January 1, 2013. CMS extended application deadlines leading up to that date to provide states with additional time to determine whether they would operate a state-based exchange. On November 9, 2012, CMS indicated that in response to state requests for additional time, it would extend the deadline for submission of the Blueprint application for states that wished to operate state-based exchanges in 2014 by a month to December 14, 2012. The agency noted that this extension would provide states with additional time for technical support in completing the application. At the same time, the agency extended the application deadline for states interested in participating in a partnership exchange by about 3 months to February 15, 2013. In addition, the option for FFE states to participate in an alternative arrangement to provide plan management assistance to the FFE was made available to states by CMS in late February. CMS did not provide states with an explicit deadline for them to indicate their intent to participate in this arrangement, but CMS officials said April 1, 2013, was a natural deadline because issuers of health coverage had to know by then to which entity—CMS or the state—to submit health plan data for QHP certification.

The specific activities CMS will undertake in each of the state-based and partnership exchanges may continue to change if states do not make adequate progress toward completion of their required activities. When CMS granted conditional approval to states, it was contingent on states meeting several conditions, such as obtaining authority to undertake exchange activities and completing several required activities by specified target dates. For example, in April 2013, CMS officials indicated that Michigan—a state that had been conditionally approved by CMS in March to participate in a partnership exchange—had not been able to obtain passage of legislation allowing the state to use federal grant funds to pay for exchange activities, which had been a requirement of its conditional approval. As of May 2, 2013, CMS officials expected that Michigan would remain a partnership exchange state, but indicated that Michigan may not be able to conduct consumer assistance without funding authority. They noted, however, that a final decision about Michigan’s responsibilities had not been determined. In addition, on May 10, 2013, CMS indicated that it intended to allow Utah’s exchange, which was conditionally approved as a state-based exchange in January 2013, to now be an FFE. Officials indicated that final approval for state-based and partnership exchanges will not be granted until the states have succeeded in completing required activities, and that some of these exchanges may still be under conditional approval when enrollment begins on October 1, 2013.

Agency officials indicated that they are working with each state to develop mitigation strategies to ensure that all applicable exchange functions are operating in each state on October 1, 2013. CMS officials said that they are assessing the readiness of each state as interim deadlines approach. For example, issuers began submitting applications to exchanges for QHP certification on April 1, 2013. Therefore, CMS officials said that they began assessing state readiness for this activity in March 2013. They also indicated that CMS is doing this kind of assessment for each state as deadlines approach for other functions—such as eligibility and enrollment, and consumer assistance. If a state is not ready to carry out a specific responsibility, CMS officials said the agency will support them in this area. As of May 2, 2013, CMS had not granted final approval to any state to operate a state-based exchange or participate in a partnership exchange. If any state conditionally approved to operate a state-based exchange or to participate in a partnership exchange does not adequately progress towards implementation of all required activities, CMS has indicated that it would carry out more exchange functions in that state. CMS officials indicated that exchanges receiving this assistance would retain their status as a state-based or partnership exchange.

CMS Completed Many Activities to Establish FFEs and the Data Hub by the Beginning of Open Enrollment, Although Completion of Some Activities Was Behind Schedule

CMS has completed many activities necessary to establish FFEs and the data hub. The agency established targeted completion dates for the many activities that remain to be completed by the beginning of initial enrollment on October 1, 2013, and certain activities were behind schedule.

CMS Issued Numerous Regulations and Guidance Necessary to Establish FFEs, and Made Progress in Each of the Core Exchange Functions and in Developing the Data Hub

CMS issued numerous regulations and guidance that it has said are necessary to set a framework within which the federal government, states, issuers of health coverage, and others can participate in the exchanges. For example, in March 2012, the agency issued a final rule regarding implementation of exchanges under PPACA, and in February 2013, it issued a final rule setting forth minimum standards that all health insurance issuers, including QHPs seeking certification on a state-based exchange or FFE, have to meet. The March 2012 rule, among other things, sets forth the minimum federal standards that state-based exchanges and FFEs must meet and outlines the process a state must follow to transition between types of exchanges. The February 2013 rule specifies benefit design standards that QHPs must meet to obtain certification. That rule also established a timeline for QHPs to be accredited in FFEs. CMS also issued a proposed rule related to the Navigator program on April 5, 2013. This rule proposes conflict of interest, training, and certification standards that will apply to Navigators in FFEs. CMS officials expected to issue this final rule prior to initial enrollment. CMS officials indicated that before initial enrollment begins in October 2013, they would propose an additional rule that would set forth exchange oversight and records retention requirements, among other things. On June 14, 2013, CMS released this proposed rule, which will be published in the Federal Register on June 19, 2013.

CMS also issued guidance specifically related to the establishment of FFEs and partnership exchanges to assist states seeking to participate in a partnership exchange and issuers seeking to offer QHPs in an FFE, including a partnership exchange. For example, the agency issued general guidance on FFEs and partnership exchanges in May 2012 and January 2013, respectively. On April 5, 2013, the agency issued guidance to issuers of health coverage seeking to offer QHPs through FFEs or partnership exchanges.

In addition to establishing the basic exchange framework for state-based exchanges and FFEs, including partnership exchanges, CMS also completed activities needed to establish the core FFE functions— eligibility and enrollment, including the data hub; plan management; and consumer assistance. (See table 1.)

CMS established timelines to track its completion of the remaining activities necessary to establish FFEs. CMS has many key activities remaining to be completed across the core exchange functions—eligibility and enrollment, including development and implementation of the data hub; program management; and consumer assistance. In addition, the agency established targeted completion dates for the required activities that states must perform in order for CMS to establish partnership exchanges in those states. However, the completion of certain activities was behind schedule.

CMS expects to complete development and testing of the information technology systems necessary for FFEs to determine eligibility for enrollment into a QHP and to enroll individuals by October 1, 2013, when enrollment is scheduled to begin for the 2014 plan year. As of April 2013, CMS indicated that it still needed to complete some steps to enable FFEs to be ready to test development of key eligibility and enrollment functions, including calculation of advance payments of the premium tax credits and cost-sharing subsidies, verification of consumer income, and verification of citizenship or lawful presence. CMS indicated that these steps will be completed in July 2013. For one activity—the capacity to process applications and updates from applications and enrollees through all channels, including in-person, online, mail, and phone—CMS estimated that the system will be ready by October 1, 2013. CMS officials said that redeterminations of consumer eligibility for coverage will not occur until the middle of 2014.

Effective use of the FFEs’ eligibility and enrollment systems is dependent upon CMS’s ability to provide the data needed to carry out eligibility determination and enrollment activities through the implementation of the data hub. According to program officials, CMS established milestones for completing the development of required data hub functionality by July 2013, and for full implementation and operational readiness by September 2013. Project schedules reflect the agency’s plans to provide users access to the hub for near real-time data verification services by October 1, 2013.

Agency officials stated that ongoing development and testing activities are expected to be completed to meet the October 1, 2013, milestone. Additionally, CMS has begun to establish technical, security, and data sharing agreements with federal partner agencies and states, as required by department-level system development processes. These include

Business Service Definitions (BSDs), which describe the activities, data elements, message formats, and other technical requirements that must be met to develop, test, and implement capabilities for electronically sharing the data needed to provide various services, such as income and Social Security number verification.

Computer Matching Agreements, which establish approval for data exchanges between various agencies’ systems and define any personally identifiable information the connecting entity may access through its connection to the data hub; and

Data Use Agreements, which establish the legal and program authority that governs the conditions, safeguards, and procedures under which federal or state agencies agree to use data.

For example, CMS officials stated that they established Data Use Agreements with OPM and the Peace Corps in April 2013 and completed BSDs by mid-June. Additionally, these officials plan to obtain final approval of Computer Matching Agreements with IRS, SSA, DHS, VHA, and DOD by July 2013.

CMS began conducting both internal and external testing for the data hub in October 2012, as planned. The internal testing includes software development and integration tests of the agency’s systems, and the external testing begun in October included secured communication and functionality testing between CMS and IRS. These testing activities were scheduled to be completed in May 2013. CMS has also begun to test capabilities to establish connection and exchange data with other federal agencies and the state agencies that provide information needed to determine applicants’ eligibility to enroll in a QHP or for income-based financial subsidies, such as advance premium tax credits and cost- sharing assistance, Medicaid, or CHIP. For example, CMS officials stated that testing with 11 states began on March 20, 2013, and with five more states in April. They also stated that, although originally scheduled to begin in April, testing with SSA, DHS, VHA and Peace Corps started early in May 2013 and that testing with OPM and DOD was scheduled to begin in July 2013. Additionally, CMS recently completed risk assessments and plans for mitigating identified risks that, if materialized, could negatively affect the successful development and implementation of the data hub.

While CMS stated that the agency has thus far met project schedules and milestones for establishing agreements and developing the data hub, several critical tasks remain to be completed before the October 1, 2013, implementation milestone. (See fig. 2). According to CMS officials and the testing timeline:

Service Level Agreements (SLA) between CMS and the states, which define characteristics of the system once it is operational, such as transaction response time and days and hours of availability, are planned to be completed in July 2013;

SLAs between CMS and its federal partner agencies that provide verification data are expected to be completed in July 2013; and

Completion of external testing with all federal partner agencies and all states is to be completed by the beginning of September 2013.

The activities that remain for CMS to implement the plan management function primarily relate to the review and certification of the QHPs that will be offered in the FFEs. CMS has set time frames that it anticipates will allow it to certify and upload QHP information to the exchange website in time for initial enrollment. CMS indicated that its system for issuers of health coverage to submit applications for QHP certification was available by April 1, 2013, and issuers were to submit their Once received, CMS, with the assistance applications by May 3, 2013.of its contractor, expects to evaluate and certify health plans as QHPs by July 31, 2013. CMS will then allow issuers to preview and approve QHP information that will be presented on the exchange website by August 26, 2013. CMS then expects to finalize the QHP information and load it into the exchange website by September 15, 2013.

For those 15 FFEs for which states will assist with the plan management function, CMS will rely on the states to ensure the exchanges are ready by October 2013. In contrast to other FFE states in which CMS manages all aspects of the QHP application and certification process, these 15 states were to evaluate health issuer plan applications to offer a QHP in the exchange and submit recommendations to CMS regarding the plans to be certified as QHPs. CMS indicated that the states are expected to submit their recommendations by July 31, 2013, which is also when CMS expects to complete its evaluation of QHPs for the other FFE states. (See fig. 3.)

CMS has yet to complete many activities related to consumer assistance and outreach, and some initial steps were behind schedule. Specifically, several steps necessary for the implementation of the Navigator program in FFEs have been delayed by about 2 months. CMS had planned to issue the funding announcement for the Navigator program in February 2013 and have two rounds of awards, in June and September 2013. However, the announcement was delayed until April 9, 2013, and CMS officials indicated that there would be one round of awards, with an anticipated award date of August 15, 2013. CMS did not indicate the number of awards it expected to make, but noted that it expects that at least two types of applicants will receive awards in each of the 34 FFE states, and at least one will be a community or consumer-focused nonprofit organization. CMS officials indicated that, despite these delays, they planned to have Navigator programs operating in each FFE state by October 1, 2013.

Before any federally funded in-person assisters, including Navigators, can begin their activities, they will have to be trained and certified. For example, these individuals are required to complete an HHS-approved training program and receive a passing score on all HHS-approved certification exams before they are able to assist with enrollment activities. CMS officials said that the required training for Navigators will be web-based, and it is under development. According to CMS, the Navigator training will be based on the training content that is being developed for agents and brokers in the FFEs and partnership exchanges, which CMS indicates is near completion. In addition, CMS is developing similar web-based training for the state partnership exchange in-person assistance programs. While CMS had planned to begin Navigator training in July 2013, under its current plan, the agency will not have awarded Navigator grants by this date. CMS indicated that it plans to complete development of the training curriculum and certification exam in July or August 2013. CMS officials expected that the training would begin in the summer of 2013, following completion of the curriculum and exam.

Each of the six partnership exchange states that CMS conditionally approved to assist with certain consumer assistance responsibilities plans to establish other in-person assistance programs that will operate in addition to Navigator programs in these states. The dates by which the states planned to release applications and select in-person assisters varied. (See fig. 4.) For example, according to the conditional approval letters, one partnership exchange state planned to select in-person assisters by March 1, 2013, to begin work by May 15, 2013, while another planned to make that selection by August 1, 2013, to begin work by September 1, 2013. Five of the states’ required activities indicated that they planned to add state-specific modules to the required federal training for Navigators and in-person assisters.

As of April 24, 2013, CMS indicated that these six partnership exchange states had made progress, but the completion of some activities was behind schedule.the applications to select in-person assisters by April 2013 had done so. While the deadline for most states to select in-person assisters had not passed as of April 24, 2013, there were delays for two states. One state that planned to select in-person assisters by March 15, 2013 delayed that deadline to May 30, 2013, while the other delayed it to June 15. CMS indicated that these delays are not expected to affect the implementation of these programs. However, the state now planning to complete selection by May 30, 2013, had originally planned to begin training assisters in March and begin work May 15, 2013. The second state had planned that in-person assisters would begin work August 1, 2013.

For example, three states that had planned to release CMS and states with partnership exchanges have also begun, and established time frames for, undertaking other outreach and consumer assistance activities that are necessary to implement FFEs. CMS recommended that in-person outreach activities begin in the summer of 2013 to educate consumers in advance of the open enrollment period. Examples of key activities that remain to be completed include the federal call center, healthcare.gov website, media outreach, and the consumer complaint tracking system for the FFEs. While states with partnership exchanges will utilize the federal call center and website, they have established plans for undertaking other outreach and consumer assistance activities. (See table 2.)

CMS Spent Almost $394 Million through Contracts to Support Establishment of the FFEs and Data Hub and to Carry Out Certain Other Exchange-Related Activities as of March 2013

CMS data indicated that the agency spent almost $394 million from fiscal year 2010 through March 31, 2013, through contracts to complete activities to establish the FFEs and the data hub and carry out certain other exchange-related activities. CMS officials said that these totals did not include CMS salaries and other administrative costs, but rather reflected the amounts obligated for contract activities. The majority of these obligations, about $248 million (63 percent), were incurred in fiscal year 2012. The sources of the $394 million in funding were three appropriation accounts: HHS’s General Departmental Management Account, CMS’s Program Management Account, and the Health Insurance Reform Implementation Fund. The majority of the funding came from the CMS Program Management Account (66 percent) followed by the Health Insurance Reform Implementation Fund (28 percent). (See fig. 5.)

CMS reported that the almost $394 million supported 64 different types of projects through March 31, 2013. The highest volume of obligations related to the development of information technology systems for the FFEs. The 10 largest project types in terms of obligations made through March 31, 2013, accounted for $242.6 million, 62 percent of the total obligations. (See table 3.)

These activities were carried out by 55 different contractors.10 contractors accounted for $303.4 million (77 percent of total obligations) for activities to support establishment of FFEs and the data hub and carry out certain other exchange-related activities. (See table 4.) Their contracts were for projects related to information technology, the healthcare.gov website, call center, and technical assistance for the FFEs. For one contract, with CGI Federal, CMS obligated about $88 million for activities to support establishment of the FFEs, such as information technology and technical assistance. For another contract, with Quality Software Services, Inc., CMS obligated about $55 million for related activities, including to support development of the data hub. (See app. I for each contract by the contractor, the amount obligated, the fiscal year in which funds were obligated, and the source of funding.)

Concluding Observations

FFEs along with the data services hub services are central to the goal under PPACA of having health insurance exchanges operating in each state by 2014, and of providing a single point of access to the health insurance market for individuals. Their development has been a complex undertaking, involving the coordinated actions of multiple federal, state, and private stakeholders, and the creation of an information system to support connectivity and near real-time data sharing between health insurance exchanges and multiple federal and state agencies. Much progress has been made in establishing the regulatory framework and guidance required for this undertaking, and CMS is currently taking steps to implement key activities of the FFEs, and developing, testing, and implementing the data hub. Nevertheless, much remains to be accomplished within a relatively short amount of time. CMS’s timelines and targeted completion dates provide a roadmap to completion of the required activities by the start of enrollment on October 1, 2013. However, certain factors, such as the still-unknown and evolving scope of the exchange activities CMS will be required to perform in each state, and the large numbers of activities remaining to be performed—some close to the start of enrollment—suggest a potential for implementation challenges going forward. And while the missed interim deadlines may not affect implementation, additional missed deadlines closer to the start of enrollment could do so. CMS recently completed risk assessments and plans for mitigating identified risks associated with the data hub, and is also working on strategies to address state preparedness contingencies. Whether CMS’s contingency planning will assure the timely and smooth implementation of the exchanges by October 2013 cannot yet be determined.

Agency Comments

We received comments from HHS on a draft of this report (see app. II). HHS emphasized the progress it has made in establishing exchanges since PPACA became law, and expressed its confidence that on October 1, 2013, exchanges will be open and functioning in every state. HHS also provided technical comments, which we incorporated as appropriate.

We are sending copies of this report to the Secretary of Health and Human Services and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have questions about this report, please contact John E. Dicken at (202) 512-7114 or dickenj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III.

Appendix I: Contractors Supporting the Federally Facilitated Exchanges and Data Hub and Amounts Obligated

Table 5 provides information on the amounts the Department of Health and Human Services’ (HHS) Centers for Medicare & Medicaid Services (CMS) obligated for contract activities to support the establishment of the federally facilitated exchanges (FFE) and the data hub and carry out certain other exchange-related activities by individual contractors. The funds were obligated from fiscal year 2010 through March 31, 2013. The information presented in this table was obtained from CMS. Due to the large number of contractors, we did not edit the information to correct typographical or grammatical errors, or clarify the information provided. We reprinted the abbreviations and acronyms provided by CMS.

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

Appendix III: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

In addition to the contact name above, Randy Dirosa and Teresa Tucker, Assistant Directors; Tonia Brown; Sandra George; Jawaria Gilani; William Hadley; Thomas Murphy; and Laurie Pachter made key contributions to this report.