Operational Problems with ACA Exchanges

VII. Key Issues: Regulation & Reform >> C. Health Reform >> Affordable Care Act (ACA) >> ACA Repeal >> Components of ACA Not Working Well >>Health Exchanges >> Operational Problems with ACA Exchanges (last updated 12.24.17)

First Year Health Exchange Rollout Glitches

Flawed Design of Federal Enrollment Web Site

General Design Flaws

Items are in reverse chronological order.

  • New Strategy: Underselling Obamacare for Year 2. “Sobered — and burned — by last fall’s meltdown of the federal website, the administration is setting expectations for the second Obamacare open enrollment period as low as possible. Officials say the site won’t be perfect but will be improved. They refuse to pinpoint how many people they plan to enroll, instead describing general goals of reducing the number of uninsured and providing a positive ‘customer experience’ — not exactly metrics that can be immediately judged. ‘What we have said is that the experience will be better,’ Health and Human Services Secretary Sylvia Mathews Burwell told reporters on Thursday. ‘It will not be perfect. We know that, and we know that there will be issues that will be raised as we go on in the process.’” (Politico, 10.12.14)
  • HealthCare.gov Still Suffers From Lack of Transparency. “In an interview with Alex Wayne of Bloomberg News, Mr. Counihan said his goal was to create a consumer experience so satisfying that it would result in ‘raving fans’ for the insurance shopping site. But here’s one big hurdle: The site still won’t have any tools to allow consumers to see which doctors and hospitals are covered by individual insurance plans. Mr. Counihan told Mr. Wayne that HealthCare.gov would not change to allow consumers to comparison shop on insurance plan networks. Plans that limit patients’ choices of doctors and hospitals have turned out to be the signature product of the Affordable Care Act marketplaces. That may be a welcome development for cost-conscious consumers, but only if they know what they’re buying.” (New York Times, 10.8.14)
  • Discrepancies in Health Premium Subsidies. “Linda Close was grateful to learn she qualified for a sizable subsidy to help pay for her health insurance under the new federal law. But in the process of signing up for a plan, Close said her HealthCare.gov account showed several different subsidy amounts, varying as much as $180 per month…The Associated Press interviewed insurance agents, health counselors and attorneys around the country who said they received varying subsidy amounts for the same consumers. As consumers wait for a resolution, some have decided to go without health insurance because of the uncertainty while others who went ahead with policies purchased through the exchanges worry they are going to owe the government money next tax season…The differing subsidy calculations are part of a mountain of data conflicts affecting at least 2 million people who signed up for coverage in the new health insurance exchanges. Most of the discrepancies involve important details about income, citizenship and immigration status — which affect eligibility and subsidies.” (Associated Press, 7.24.14)
  • Obamacare Computers Not Yet Equipped to Fix Errors: Report. “The HealthCare.gov website is not yet equipped to handle appeals by thousands of people seeking to correct errors the system made when they were signing up for the new federal healthcare law, the Washington Post reported on Sunday. The newspaper, citing sources familiar with the situation, said appeals by about 22,000 people were sitting untouched in a government computer. ‘And an unknown number of consumers who are trying to get help through less formal means – by calling the health-care marketplace directly – are told that HealthCare.gov’s computer system is not yet allowing federal workers to go into enrollment records and change them,’ according to the Post. It added that the Obama administration had not made public the problem with the appeals system. Despite efforts by legal advocates to press the White House on the situation, ‘there is no indication that infrastructure . . . necessary for conducting informal reviews and fair hearings has even been created, let alone become operational,’ attorneys for the National Health Law Program were quoted as saying in a December letter to the Centers for Medicare and Medicaid Services, or CMS, which oversees HealthCare.gov. The Post quoted two knowledgeable people as saying it was unclear when the appeals process would become available.” (Reuters, 2.4.14)

Lack of Back-end Technology

Items are in reverse chronological order.

  • OIG Report: HealthCare.gov Still Lacks Automated Financial Back End. “The new OIG report examined the financial reconciliation process for payments to insurers from January 2014 to April 2014. OIG found that internal controls to check for payment errors were ‘not effective,’ FCW reports. Further, OIG indicated that up to $2.8 billion in carrier payments were ‘at risk’ because of ineffective controls. The report identified just $314,000 in underpayments for reductions. However, it also noted that OIG was unable to confirm that any payments were made correctly because there was no system in place for verifying enrollment numbers. OIG suggested that CMS implement technology to automate enrollment verification and payment processing.” (iHealthBeat, 6.18.15)
  • Healthcare.gov’s Back End Not to be Fully Complete Until 2017. “HealthCare.gov CEO Kevin Counihan told insurance brokers today that CMS is spending a lot of time focusing on how to improve the federal exchanges’ back-end functions and that the agency meets at least weekly with a group of insurance officials from large companies to discuss its two-year development plan. Counihan added, ‘It’s not going to be as fast as everybody wants, but we’re going to get there. We’re going to make good progress this year and even more progress next year.’” (House Energy and Commerce Committee, 2.24.15)
  • Health Law Has Caveat on Renewal of Coverage. “The federal exchange does not have accurate enrollment and payment records for some consumers because the ‘back end’ of the computer system for HealthCare.gov, which keeps such data, has not been completed. As a result, the government and insurers have records that can differ on who is enrolled, the dates of coverage and demographic factors used to calculate premiums and tax credits.” (The New York Times, 9.15.14)
  • Lack of Back End Poses Large Risk. While many of the early glitches with the Federal Exchange web site have been fixed, the “back end” is still under construction. “As a result, the system’s ‘back end’ is a tangle of technical workarounds moving billions of taxpayer dollars and consumer-paid premiums between the government and insurers. The parts under construction are essential for key functions such as accurately paying insurers. The longer they lag, experts say, the likelier they’ll trigger accounting problems that could leave the public on the hook for higher premium subsidies or health care costs. CMS had warned in late 2013 that without a permanent system in place by mid-March, the whole law could unravel and expose taxpayers to a huge risk.” (Politico.com, 4.25.14)
  • Projected to Be Completed December 2014. According to Wall Street Journal 3.17.14, Secretary Sebelius on 3.12 testified that the government can’t track how many have paid premiums because the back end of HealthCare.gov that would allow insurers to reconcile enrollment and payment information still isn’t completed. As of late July 2014, GAO reported that the administration does not plan to have the back-end completed until the end of December 2014.

Federal Mismanagement

Items are in reverse chronological order.

  • The Creation of Obamacare’s Individual Market Mess. “The bigger problems occurred when those in power issued major changes – literally weeks into the first open enrollment. Some problems have continued because of a lack of enforcement. Others have come from bipartisan Congressional changes that were signed by President Obama.  The first was a reprieve for those already insured who found out that ‘if they liked their plan’ they couldn’t keep it. These transitional plans (Grandmothered) kept a large number of healthy folks out of the Obamacare markets when HHS issued a rule allowing people to retain their medically underwritten insurance. The second problem was the expansion of – but no policing of – ‘hardship waivers.’… Lack of enforcement continues to be a significant contributor. The primary culprit on the enforcement front stems from Special Enrollment Periods (SEP)… A final problem is revenues. ‘Not one dime to the deficit’ was BS. When you have an initial CBO score that uses 10 years of revenues but only 6 years of expenses and it barely is at breakeven we know it won’t be true. “ Paule, Patrick. (InsureBlog, 8.2.17)
  • HHS Failed to Heed Many Warnings That HealthCare.gov Was in Trouble. “A brand new Inspector General report (which came off embargo at midnight) contains cringe-worthy illustrations of utter incompetence at HHS ahead of the Obamacare rollout in 2013: ‘During the two years before the disastrous opening of HealthCare.gov, federal officials in charge of creating the online insurance marketplace received 18 written warnings that the mammoth project was mismanaged and off course but never considered postponing its launch’ Amy Goldstein reports. ‘The warnings included a series of 11 scathing reviews from an outside consultant — among them a top-10 list of risks drawn up in the spring of 2013 that cited inadequate planning for the website’s capacity and deviations from usual IT standards. A few months before, then-Health and Human Services Secretary Kathleen Sebelius had hired another consultant to review the project and recommend ways to improve its management, but its advice was never shared with the technical staff working on the website.’ A lack of leadership, the report says, ‘caused delays in decision-making, lack of clarity in project tasks and the inability of CMS to recognize the magnitude of problems as the project deteriorated.’” (Washington Post, 2.22.16)
  • Lack of Accountability. DailyCaller reports (7.31.14): “In 7.31.14 testimony to Congress, a GAO official stated that “CMS incurred significant cost increases, schedule slips, and delayed system functionality” for both HealthCare.gov and the Obamacare data hub, a computer system which communicates personal information about applicants across federal and state agencies, “due primarily to changing requirements that were exacerbated by inconsistent oversight.” The administration continuously changed requirements, delayed reviews, established “inconsistent” oversight over contractors and inappropriately authorized contractors to spend money. Even when CMS knew contractors were not performing up to their standards, the agency failed to hold anyone accountable.”
  • Ineffective CMS Oversight. AP reports (7.30.14): “Management failures by the Obama administration set the stage for computer woes that paralyzed the president’s new health care program last fall, nonpartisan investigators said in a report released Wednesday…The report faults the Centers for Medicare and Medicaid Service for ineffective oversight.”

Problems Related to Enrollment

General Problems

Items are in reverse chronological order.

  • Obamacare Enrollment YR 3 Summary — Increase In Mandate Penalty Has Not Improved Risk Pool. “The big story is how little has changed from 2015 to 2016. The number of 2016 exchange enrollees is up only slightly from last year, and the make-up of the risk pool—as proxied by income and age of enrollees—is virtually identical. This is generally very bad news for insurers who made steep losses selling exchange plans in 2015 and 2016. It also shows that the conventional wisdom about how the large increase in the individual mandate tax penalty would induce additional younger and healthier people to enroll seems wrong. Rather, the evidence increasingly shows that the vast majority of people purchasing exchange plans are those with expensive health conditions or those with income below 200 percent of the federal poverty level (FPL)—about $23,760 of income for a single person…Simply put, it now appears that there is a significant risk that the ACA, without major change, may lead to the destruction of the individual market for health insurance.” Blase, Brian. (Forbes, 3.16.16)
  • Is the ObamaCare Death Spiral Underway? “This explains why the Centers for Medicare & Medicaid Services last week reported that as of ‘December 31, 2015, about 8.8 million consumers had effectuated Health Insurance Marketplace coverage,’ which The Hill notes is ‘3.5 percent below the administration’s target’ of 9.1 million and ‘a drop of almost 25 percent compared to the 11.7 million people who were signed up at the beginning of 2015.’ There’s no question that participation is bad, but even the government’s ‘target’ rate is deceiving. Why? Because paltry enrollment since ObamaCare’s inception has forced the feds to set the bar much lower. And moving the goal posts is what this administration does best…The fact is, it was the authors of ObamaCare who had egregiously unrealistic expectations.” (The Patriot Post, 3.15.16)
  • Obamacare Enrollment Dropped Off 25% Over the Course of 2015. “New figures released Friday by the Centers for Medicare and Medicaid Services (CMS) show that the number of people who dropped their Obamacare plans during 2015 was greater than anticipated. The Hill reports on the actual numbers versus the enrollment target by the Obama administration…Following the latest open enrollment period there were 12.7 million people enrolled in the program. If that total were to experience a similar 25% decline over 2016, there would be approximately 9.5 million enrollees remaining at the end of the year. That would be less than the 10 million HHS Secretary Burwell predicted last year.” (Sexton, John, 3.11.16)
  • Assessing ACA Marketplace Enrollment. “The 10 best-performing states – which include several large states such as Florida, North Carolina, and California — have collectively signed up 59% of the potential market. While that might appear to leave room for substantial further growth, there are reasons to believe that enrollment has close to plateaued in those states. The potential market includes people who are buying their own coverage outside the marketplaces, many of whom do not qualify for subsidies. The experience so far is that the vast majority (82%) of marketplaces enrollees are receiving premium subsidies, while people who are ineligible for subsidies typically buy coverage on the outside market. In fact, we estimate that in the top-performing states the number of people who have selected a plan and qualified for a subsidy represents more than 90% of subsidy-eligible people. This is a very high take-up rate for a public program, suggesting there is very little potential for growth in these states.There are several reasons why marketplace enrollment may be lower than what CBO projected:
    • The availability of employer coverage has not declined.
    • Many people are still buying their own insurance outside of the marketplaces.
    • Affordability remains a challenge.” (Kaiser Family Foundation, 3.4.16)
  • Obamacare Not Working as Intended. “When the Affordable Care Act, or ‘Obamacare,’ passed five years ago, government prognosticators and private research organizations projected between 21 million and 27 million exchange enrollees in 2016. But last month, the Obama administration announced that it reduced that target to just 10 million enrollees. In 2010, the Urban Institute, a left-of-center think tank, projected that almost as many people with income above four times the poverty level ($47,080 for a single person and $97,000 for a family-of-four in 2015) would enroll in exchange plans as people with income less than half these amounts…It turns out that more than 25 times as many people with income below twice the poverty level bought an exchange plan as people with incomes above four times the poverty level. Here are the most likely explanations:
    • First, for most uninsured people, the costs of enrolling in ACA plans exceed the benefits.
    • Second, exchange plan deductibles are very high.
    • Third, exchange plans contain fewer doctors and hospitals than expected.
    • Fourth, the individual mandate isn’t motivating as many people to enroll as anticipated.
    • Fifth, large net attrition in exchange enrollment in both 2014 and 2015 suggests that many people may be dropping coverage after treatment.
    • Just last year, the Congressional Budget Office released projections that insurers would make profits on exchange plans. Using data released by the administration, however, I estimate that insurers lost about 12 percent of ACA plan premiums in 2014…despite a huge government subsidy to cover most of the cost of their expensive enrollees…

The magnitude of the errors of initial predictions about the ACA’s effect is cause to re-examine our assumptions about health care markets. The failure of exchange plans to attract people who don’t receive giant subsidies should cause policymakers to revisit the law and allow people to purchase insurance products that they actually want.” Blase, Brian. (The Times and Democrat, 12.6.15)

  • Five Easy Ways To Game Obamacare.
    • Buy Nine, Get Three Free.
    • Understate Your Income.
    • Are You Sure You Use Tobacco?
    • Buy it. Change it. Use it. Drop it.
    • Pay The Tax for Being Uninsured.

As the Obamacare abyss continues, it will be more likely that people will look toward these mechanisms to avoid paying the high premiums. It should be noted that, although not all of these options are necessarily ethical, they all fall within the law.” Paule, Patrick. (The Federalist, 2.16.15)

  • Obamacare Enrollment Will Also be Difficult in Year Two. “If you want to understand why some health policy experts are worried about the challenges of the next Obamacare enrollment period, this graphic from Colorado’s health exchange is a pretty good explanation. The health industry doesn’t view the 2015 enrollment period as especially easier than the disastrous sign-up period in 2014. Yes, it’s nearly certain that there will be a functional website this time around. But the 2015 open enrollment period has its own complexities: the government is trying to sign up new customers and re-enroll the 8 million Americans who bought plans in 2014. In that way, the open enrollment period that starts November 15 brings a whole new set of challenges that the exchanges haven’t yet encountered.” (Vox, 8.11.14)

Risk Distribution

Widespread Mandate Exemptions

  • CBO/JCT. Payments of Penalties for Being Uninsured Under the Affordable Care Act: 2014 Update (6.5.14). CBO and JCT have estimated that about 30 million nonelderly residents will be uninsured in 2016 but that the majority of them will be exempt from the penalty. Those who are exempt include:
    • Unauthorized immigrants, who are prohibited from receiving almost all Medicaid benefits and all subsidies through the insurance exchanges;
    • People with income low enough that they are not required to file an income tax return;
    • People who have income below 138 percent of the federal poverty guidelines (commonly referred to as the federal poverty level) and are ineligible for Medicaid because the state in which they reside has not expanded eligibility by 2016 under the option provided in the ACA;
    • People whose premium exceeds a specified share of their income (8 percent in 2014 and indexed over time); and
    • People who are incarcerated or are members of Indian tribes.

CBO and JCT estimate that 23 million uninsured people in 2016 will qualify for one or more of those exemptions. Of the remaining 7 million uninsured people, CBO and JCT estimate that some will be granted exemptions from the penalty because of hardship or for other reasons.

  • Fewer Uninsured Face Fines as Health Law’s Exemptions Swell. “Almost 90% of the nation’s 30 million uninsured won’t pay a penalty under the Affordable Care Act in 2016 because of a growing batch of exemptions to the health-coverage requirement…An analysis by the Congressional Budget Office and the Joint Committee on Taxation said most of the uninsured will qualify for one or more exemptions…Insurers are concerned that the exemptions could make it easier for younger, healthier people to forgo coverage, leaving the pools overly filled with old people or those with health problems. That, in turn, could cause premiums to rise.” (Wall Street Journal, 8.6.14)

Fraudulent Enrollments

Items are in reverse chronological order.

  • DailyCaller (12.16.16). Obamacare Approved Fake Enrollees For Subsidies In Undercover Investigation. “Obamacare marketplaces across the country approved fake applicants for health care insurance subsidies in an undercover federal investigation, according to a new Government Accountability Office (GAO) report. California and the District of Columbia through their state-run marketplaces, and Florida and Virginia through the federal marketplace, approved nine of the 12 fictitious applicants GAO created for special enrollment and subsidies. That’s because there are no laws requiring marketplaces to verify whether someone is eligible for special enrollment outside the normal enrollment period for life events, like gaining a dependent through marriage or a making permanent move… ‘Because subsidy costs are contingent on eligibility for 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,’ the report added. The approved nine fake applicants collected subsidies amounting to $18,960.”
  • Jost, Timothy (9.2.16). Notices To Those Enrolled In Both Medicare And APTC. “On September 1, 2016, CMS announced that it is sending out notices to a small number of individuals who are enrolled both in Medicare and marketplace advance premium tax credits (APTC). Medicare Part A (including Medicare Part A benefits received through a Medicare Advantage plan) is minimum essential coverage. Thus an individual enrolled in Medicare Part A is not eligible for APTC or cost sharing reduction payments. An individual enrolled in Medicare and receiving APTC will have to pay the APTC back through the reconciliation process at tax filing time.”
  • New York Times (8.19.16). U.S. Officials Move to End Duplicate Health Care Coverage. “The Obama administration is moving to end duplicate coverage for tens of thousands of people who are enrolled in Medicaid and simultaneously receiving federal subsidies to help pay for private health insurance under the Affordable Care Act… The action, supervised by Sylvia Mathews Burwell, the secretary of health and human services, comes more than nine months after congressional investigators from the Government Accountability Office said they had discovered the potential for duplicate coverage, with double payment… The Obama administration identified people who were receiving both Medicaid and tax-credit subsidies by comparing records of the federal marketplace with enrollment files maintained by state Medicaid agencies. A similar exercise in the spring found 88,000 people with ‘dual enrollment,’ but the administration did not take action against them.”
  • New York Times (10.22.15). Investigation Finds Errors in Coverage and Payments Under Affordable Care Act. “[U]ndercover investigators from the accountability office created 18 fictitious identities and filed applications in their names. Federal and state officials approved subsidies or Medicaid coverage for 17 of the applicants, even though they used nonexistent Social Security numbers, invalid immigration document numbers, fictitious birth certificates and other counterfeit documents… a fictitious applicant received subsidized insurance coverage from the federal marketplace and from two state marketplaces at the same time.”
  • Washington Post (7.22.14) reported: “In undercover tests of the new federal health insurance marketplace, government investigators have been able to procure health plans and federal subsidies for fake applicants with fictitious documents… GAO investigators tried to obtain health plans for a dozen fictitious applicants online or by phone, using invalid or missing Social Security numbers or inaccurate citizenship information. All but one of the fake applicants ended up getting subsidized coverage — and have kept it. In one instance, an application was denied but then approved on a second try. In six other attempts to sign up fake applicants via in-person assisters, just one assister accurately told an investigator that the applicant’s income was too high for a subsidy.”
  • Conover, Christopher J. The Dishonor System: A user’s guide to committing fraud on the Obama­care exchanges. The Weekly Standard (8.5.13).
  • Roy, AvikNot Qualified For Obamacare’s Subsidies? Just Lie — Govt. To Use ‘Honor System’ Without Verifying Your Eligibility. Forbes.com (7.6.13).

Immigrant Enrollments

Items are in reverse chronological order.

  • Wall Street Journal (11.28.14) reported: “Immigrant groups say people born outside the U.S. who are entitled to private insurance under the Affordable Care Act are having trouble proving their identities to the federal insurance marketplace and uploading documents that demonstrate they are in the country legally. Some also are being routed first to Medicaid, the state-federal insurance for the poor, even though they don’t qualify. The 2010 health law excluded illegal immigrants but extended benefits to certain legal ones. In trying to keep unlawful immigrants out of the system, the enrollment process has made it difficult for lawful ones to get through, immigrant groups say.”
    • “Earlier this year, the administration cut off health plans for 112,000 enrollees because it couldn’t establish if they were legally in the U.S., due in part to technical glitches.”
    • “People who don’t have much credit history in the U.S. still can’t get through the site’s identity verification system to create an account, immigrant groups say. Call-center workers are supposed to manually route them to the next stage, under a policy CMS established last year,but some are refusing to override the automated system, immigrant groups say.”
    • “Enrollment-outreach experts also say that in the first few days after HealthCare.gov reopened Nov. 15, consumers couldn’t find any option to upload documents required to support their applications. Instead, people had to mail in paper copies and schedule new appointments with counselors two weeks later.”

Problems Related to Data Security

Threats to Privacy

Opportunities for Fraud/Identity Theft

Cybersecurity Threats

Problems With Exchange Subsidies

Fraudulent Exchange Subsidies

As summarized by law professor Tim Jost, the final rule issued July 5, 2013 provides that for those seeking subsidized coverage through the exchange each applicant’s claimed income must be checked against tax and Social Security records. If an applicant claims that his or her income is greater than that shown by this data, and thus tax credits will be smaller than they otherwise would have been, the applicant’s attestation will be accepted. Because individuals with incomes below 100% of poverty are not eligible for subsidized coverage in the exchanges, some have raised the concern that such individuals in states that do not expand their Medicaid programs will have an incentive to over-report their income in order to obtain deeply subsidized coverage on the exchange. This is similar to the incentive to over-report income to qualify for a larger Earned Income Tax Credit. According to the Treasury auditor, “The IRS estimates that 21 to 25 percent of EITC payments were issued improperly in Fiscal Year 2012.”
Perhaps equally disturbing, the auditor found that ”the IRS has failed to comply for two consecutive years with the Improper Payments Elimination Act, which President Obama signed in 2010. The law requires federal agencies to reduce erroneous payments to a rate of less than 10 percent.” Similarly, about one-quarter of those receiving free and reduced-cost lunches are not eligible. If people have learned to game the EITC system and school lunch program so effectively, there’s no reason to suppose the same won’t happen under the ACA–especially with exchange subsidies for family health coverage exceeding $10,000 for the lowest income families. However, ACA proponents argue that this is not likely to become a huge problem since “income over-reporting would require low-income individuals and those who generally file with only W-2 forms to concoct dangerously conspicuous tax forms.”
Items are in reverse chronological order.

  • Auditor: CMS Was ‘Passive’ in Preventing Fraud in Administering Obamacare: Report Finds 34% of Applications Had Inconsistencies, Involving $1.7 Billion in Subsidies. “‘The Centers for Medicare and Medicaid] did not terminate or adjust subsidies for any applications with incarceration or Social Security number inconsistencies,’ the audit states. ‘[Agency] officials told us that they currently do not plan to take any actions on individuals with unresolved Social Security number or incarceration inconsistencies.’ The investigators found that for coverage year 2014 the agency did not resolve about one-third of applications with inconsistencies, which involved $1.7 billion in associated subsidies. ‘We concluded [the agency] has assumed a passive approach to identifying and preventing fraud, and that adopting a more strategic, risk-based approach could help identify fraud vulnerabilities before they could be exploited in the enrollment process,’ the audit said. ‘[The Centers for Medicare and Medicaid Services] has not performed a single comprehensive fraud risk assessment—a recommended best practice—of the Obamacare enrollment and eligibility process,’ said Sen. Orrin Hatch (R., Utah) at a Senate Finance Committee hearing on Thursday.” (Free Beacon, 3.17.16)
  • Watchdog Finds Billions in Possible Fraudulent Obamacare Payments. “The federal government has failed to properly monitor enrollee eligibility for Obamacare, according to a report by the Government Accountability Office (GAO). As a result, the government has made billions of dollars in Obamacare subsidy payments to individuals that may have been committing fraud… ‘According to GAO analysis of CMS data, about 431,000 applications from the 2014 enrollment period, with about $1.7 billion in associated subsidies for 2014, still had unresolved inconsistencies as of April 2015—several months after close of the coverage year.’ While CMS has information that could shed light on fraud, it has not developed any procedure to utilize it.” ATR lists historical reports of problems regarding Obamacare exchange verification and controls.
    • An auditor’s report examining Minnesota’s Obamacare exchange found the exchange enrolled more than 100,000 individuals who were ineligible for the program. In all, the audit estimated an error rate of close to 50 percent, and the state overpaid up to $271 million over the five-month period that was analyzed by auditors.
    • A December 2015 report by the Health and Human Services Inspector General (HHS OIG) found that CMS relied entirely on data from health insurers to verify whether enrollees had paid their premiums and were eligible. However, this data was completely insufficient – insurers provided payment information on an aggregate rather than enrollee-by-enrollee basis, making verification all but impossible.
    • A October 23, 2015 report by GAO found that Obamacare exchanges (both state and federal) were failing to verify key enrollment information of applicants including Social Security numbers, household income, and citizenship.
    • A September 1, 2015 report by the Treasury Inspector General for Tax Administration (TIGTA) found that Obamacare exchanges are failing to provide adequate enrollment information to the IRS for proper payment and verification of tax credits.
    • A August 2015 report by HHS OIG found that the federal exchange is failing to verify Social Security numbers, citizenship, and household income of Obamacare applicants. As a result, the exchange is unable to verify whether applicants are properly receiving tax credits.
    • A July 16, 2015 audit by GAO found that 11 of 12 fake ‘test’ applicants received coverage for the entire 2014 coverage period despite many using fraudulent documents, and others providing no documentation at all. From these 11 applicants alone, Healthcare.gov paid $30,000 in tax credits.
    • A June 16, 2015 report released by the HHS OIG found that $2.8 billion worth of Obamacare subsidies and payments had been made in 2014 without verification.
    • A June 10, 2015 TIGTA report found the IRS failed to properly administer nearly $11 billion in Obamacare tax credits.
    • A May 21, 2015 report by TIGTA found that the IRS failed to test Obamacare processing and verification IT until a week before the filing season began.  (Americans for Tax Reform, 2.24.16)

Inaccurate Exchange Subsidies

  • According to Americans for Tax Reform, taxpayers applying for credit assistance on the Exchanges must be evaluated by government entities ranging from the SSA to CMS to the IRS. The goal is to have an educated estimate, based on the most immediately-available government documents (e.g. prior year tax returns, etc.), of the taxpayer’s probable income for the year–which in turn determines the size of the tax credit. The problem is that these assessments inevitably are inaccurate, for reasons detailed in congressional testimony by Ryan Ellis. Consequently, the following April, IRS will determine from the actual amount of income reported that many taxpayers received subsidies that were too high and will have to pay back the excess. This will catch many people by surprise. As one tax expert predicts “the upcoming tax filing season has the potential to be one of the most chaotic in years.”
  • Consumers Deal with Healthcare.Gov Glitches, May Lose Insurance. “Hundreds of thousands of people risk losing their new health insurance policies if they don’t resubmit citizenship or immigration information to the government by the end of next week — but the federal Healthcare.gov site remains so glitchy that they are having a tough time complying. Consumers are being forced to send their information multiple times, and many can’t access their accounts at all, immigration law experts and insurance agents say…Marielena Hincapie, executive director of the National Immigration Law Center, says the problems don’t lie with the consumers. The federal databases for the Department of Homeland Security and the Social Security Administration are outdated, have mismatched Social Security numbers and names, and often transpose names for those from other countries, especially refugees from Africa, she says.” (USA Today, 8.27.14)
  • Investigation Finds Errors in Coverage and Payments Under Affordable Care Act. “Federal investigators from the Government Accountability Office said Thursday that they had discovered many errors in eligibility decisions under the Affordable Care Act that had led the government to pay for duplicate coverage for some people and an excessive share of costs for others. The investigators said some people were receiving subsidies for private insurance at the same time they were enrolled in Medicaid. In other cases, the investigators said, the government is probably overpaying because it cannot always distinguish between newly eligible beneficiaries under the Affordable Care Act and those eligible under the old rules. The federal government is paying 100 percent of the cost of Medicaid for newly eligible people, but for others, it should pay a much smaller share, averaging 57 percent of the costs.” (New York Times, 10.22.15)
  • Chairman Johnson Releases Report Detailing Wasteful Obamacare Tax Credits. “Chairman Johnson’s inquiry found that CMS, part of the Department of Health and Human Services, distributed an estimated $750 million of taxpayer funds in the form of tax credits to individuals who were later unable to prove their citizenship or lawful presence in the country. Additionally, the report found that the Internal Revenue Service lacks an effective plan to recoup these improperly awarded funds.” (U. S. Senate Committee on Homeland Security and Governmental Affairs, 2.8.16)
  • The Next PR Problem for Obamacare. “The issue stems from the delay in the 1094/1095 reporting under section 6055 and 6056 of the IRS code specifically created under the Affordable Care Act…With the absence of the employer reporting, however, the government has thus far relied strictly on the self-reported nature of the coverage level and affordability of any employer sponsored plan available to individuals in the exchange…So, you have what my own anecdotal evidence shows could equate to hundreds of thousands of people, who either honestly believed their coverage was not affordable, didn’t think their employers plan met the coverage requirements, or outright lied because there appeared to be no one checking and therefore received what could amount to significant subsidies (these are technically an advanced tax credit, an important distinction, more on that later) to reduce their premiums…So what is the average working person going to do if they get a $1,000 demand from the IRS?  Or $10,000?  Or more?  And if the IRS exerts the same force they do on normal tax debts, frozen bank accounts, liens, and garnished wages could come pretty quickly.” (Benefits Pro, 3.7.16)