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Payment Integrity: Additional Coordination Is Needed for Assessing Risks in the Improper Payment Estimation Process for Advance Premium Tax Credits

GAO-23-105577 Published: Mar 09, 2023. Publicly Released: Mar 09, 2023.
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Fast Facts

One option for buying health insurance plans in the U.S. is through marketplaces. The Affordable Care Act provided a tax credit in some cases to help individuals buy these plans. The U.S. government may pay this credit to insurance issuers in advance, which lowers the individual's monthly bill.

We reviewed methods 5 states and the U.S. government used to keep ineligible people from using the credit in state-based marketplaces. States checked most key eligibility requirements. However, states and the U.S. government haven't assessed whether more measures are needed to reduce the risk of payment errors. Our recommendations address this issue.

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Highlights

What GAO Found

Control activities for preventing improper advance premium tax credit eligibility determinations varied among the selected state-based marketplaces. Selected states verified most key eligibility criteria for enrollment in the program using the Centers for Medicare & Medicaid Services' (CMS) Federal Data Services Hub. The Patient Protection and Affordable Care Act (PPACA) and CMS's regulations grant marketplaces flexibilities in the eligibility verification process. GAO found that all five selected states exercised certain flexibilities in their eligibility-verification processes, as detailed in the table below. However, CMS did not coordinate with the states to conduct a risk assessment to evaluate the likelihood of improper eligibility determinations when exercising these flexibilities. As such, states were not aware of residual risks—risks that remain after existing control activities have mitigated inherent risks—or whether additional risk-mitigation strategies were needed. Until CMS coordinates with the states to identify any residual risks, neither CMS nor the states will know if additional guidance or other actions are needed to mitigate these potential residual risks.

State-Based Marketplaces' Key Control Activities for Verifying Eligibility Requirements for the Advance Premium Tax Credit beyond Self-Attestation

Key control activities beyond self-attestation

California

Colorado

Nevada

New Jersey

Pennsylvania

Verifying identity on mail applications

N

Y

Y

Y

Y

Verifying residency

N

N

N

N

N

Identifying duplicate coverage through nonfederal employer-sponsored insurance

N

N

N

N

N

Identifying duplicate coverage through Medicaid in other states

N

N

N

N

N

Legend: N = Did not perform additional verifications; Y = Performed additional verifications

Source: GAO analysis of the selected state's information. | GAO-23-105577

Although CMS has developed a reliable methodology to estimate improper advance premium tax credit payments, it was limited to the 33 states that use the federally facilitated marketplace and did not consider the 18 states that operate their own. CMS has a process to engage with the states on the best way to incorporate them into the improper payment measurement program and on the related requirements. However, CMS's process does not consider residual risks in the state-based marketplaces' processes for verifying and determining eligibility. Without additional coordination with these marketplaces that includes assessing and identifying any residual risks to which they may be vulnerable, CMS's process for estimating improper payments may not reflect significant program risks. As such, the resulting improper payment estimate may be incomplete and provide a less useful basis for developing effective corrective action plans.

Why GAO Did This Study

To help taxpayers cover the cost of health insurance premiums, PPACA provides advance premium tax credits for individuals who meet certain eligibility requirements. For fiscal year 2022, the Department of Health and Human Services (HHS) reported an estimated $256 million in improper payments for the federally facilitated marketplace.

GAO was asked to review advance premium tax credit payment integrity efforts. This report examines (1) key control activities selected states and CMS implemented to prevent providing advance premium tax credits to ineligible individuals through the state-based marketplaces and (2) the extent to which CMS developed a reliable methodology to estimate improper payments in the program.

GAO analyzed policies and procedures for determining eligibility in plan year 2022 from CMS, and selected states to include those with the highest average monthly payment amounts and those with new and more established marketplaces (California, Colorado, Nevada, New Jersey, and Pennsylvania). GAO also reviewed CMS's improper payment estimation methodology for the advance premium tax credit for fiscal year 2022.

Recommendations

GAO is making two recommendations to CMS to coordinate with the states to assess residual risks when estimating improper payments, and to determine if additional guidance or actions are needed. HHS disagreed with GAO's recommendations. GAO continues to believe the recommendations are valid, as discussed in the report.

Recommendations for Executive Action

Agency Affected Recommendation Status
Centers for Medicare & Medicaid Services The Administrator for CMS should, in coordination with the states, assess and identify residual risks to which the SBMs may be vulnerable related to eligibility determinations and take these risks into account when developing and implementing the improper APTC payment estimation methodology for the SBMs. (Recommendation 1)
Open
The Department of Health and Human Services (HHS) disagreed with our recommendation. HHS stated that in 2019 HHS developed an initiative to provide state-based marketplaces (SBM) with an opportunity to voluntarily engage with HHS to prepare for future measurement of improper advance premium tax credit payments. However, we found that HHS's Centers for Medicare & Medicaid Services' (CMS) initiative did not include a process to identify and consider residual risks that may result from SBMs' eligibility determinations. In September 2023, HHS indicated it continues to non-concur with this recommendation and considers it closed - not implemented. In addition, HHS stated that the Payment Integrity Information Act of 2019 and the Office of Management and Budget (OMB) guidance in Appendix C to Circular A-123 do not reference any requirements related to the assessment of residual risk. Further, HHS stated the recommendation to assess and identify residual risks would be redundant with CMS's existing approach to developing the improper payment measurement methodology. However, as discussed in our report, OMB guidance states management must perform an assessment to identify and evaluate the potential payment integrity risks that the agency faces and that the identification of payment integrity risks should be a continuous process. Further, OMB encourages agencies to ensure that significant payment integrity risks are part of the estimation methodology so that estimates can be used to assist in identifying root causes. Without first identifying residual risks, there is an increased likelihood that CMS's estimation methodology may not address key risks of improper payments, such as those related to eligibility determinations. Therefore, we continue to believe that our recommendation is valid.
Centers for Medicare & Medicaid Services The Administrator for CMS should, in coordination with the states, assess and identify residual risks to which the SBMs may be vulnerable related to eligibility determinations and identify any additional guidance or other actions, as needed, to mitigate any residual risks within the SBMs. (Recommendation 2)
Open
The Department of Health and Human Services (HHS) disagreed with our recommendation. In September 2023, HHS indicated it considers this recommendation to be closed - not implemented. HHS stated that the Patient Protection and Affordable Care Act (PPACA) provides states with flexibility in the design and operation of their marketplaces, within federal rules, to best meet the unique needs of their residents and insurance markets. HHS further stated that Centers for Medicare & Medicaid Services (CMS) regulations specify a set of eligibility verification requirements that all marketplaces, including state-based marketplaces (SBM), must follow and allow flexibility for how certain eligibility verification requirements should be met. We acknowledge in the report that PPACA and CMS regulations provide flexibilities related to certain eligibility verification requirements, in part due to whether reliable data sources are available that would allow a marketplace to verify eligibility criteria. However, with such flexibilities, we believe it is important that CMS, in coordination with SBMs, evaluates the risks in making improper eligibility determinations and identifies any additional guidance or actions, if needed, to mitigate those risks. Therefore, we continue to believe that our recommendation is valid.

Full Report

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Topics

Eligibility criteriaEligibility determinationsHealth insuranceImproper paymentsInsurance premiumsInternal controlsTax creditTaxpayersMedicaidHealth care standards