Payment Integrity: Additional Coordination Is Needed for Assessing Risks in the Improper Payment Estimation Process for Advance Premium Tax Credits
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.
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) |
The Department of Health and Human Services (HHS) disagreed with this recommendation. In October 2024, HHS indicated that it continues to disagree with this recommendation. HHS stated that it conducted a risk assessment for the advance premium tax credit (APTC) program, as required by the Payment Integrity Information Act of 2019 (PIIA) and the Office of Management and Budget (OMB) guidance. HHS stated that an additional risk assessment is not required under PIIA or the OMB guidance in Appendix C to Circular No. A-123. PIIA and the OMB guidance in Appendix C do not reference any requirements relating to the assessment of residual risk. Additionally, HHS stated that the suggested risk assessment is not necessary and would be redundant with HHS's existing approach to developing the improper payment measurement methodology. The only risk assessment required under OMB guidance in Appendix C is the Improper Payment Risk Assessment, the purpose of which is to determine if a program administered by the agency is susceptible to significant improper payments, and therefore is subject to the measurement and reporting requirements of PIIA. HHS said it completed this risk assessment in 2016. Further, HHS stated that the OMB guidance also requires that "the identification of payment integrity risks should be a continuous process to ensure new or changing risks are not overlooked." In the federally facilitated marketplace program, HHS stated that it satisfies this requirement by reviewing and updating the improper payment measurement methodology on an annual basis. HHS stated it will follow this approach when developing and implementing the state-based marketplace (SBM) improper payment measurement program methodology. HHS approaches the design of the APTC improper payment measurement methodology comprehensively, such that substantially all legally applicable requirements related to payment and eligibility determinations are within the scope of the measurement. According to HHS, conducting an additional assessment to identify residual risks would not benefit the design of the improper payment measurement methodology, as such risks are inherently accounted for in HHS's existing approach. Additionally, such a risk assessment would incur substantial costs, and would divert resources away from other improper payment measurement activities. In November 2023, HHS said it published the second consecutive improper payment rate for the federally facilitated marketplace program. The rate continues to be less than one percent (0.58 percent) for Benefit Year 2021. HHS said that this rate is in line with the rate GAO reported in an audit of select eligibility requirements for Benefit Year 2015. Finally, HHS stated that it continues to develop the improper payment measurement program for SBMs and will continue to provide updates on the development status of the SBM improper payment measurement through its annual Agency Financial Report. 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) |
The Department of Health and Human Services (HHS) disagreed with this recommendation. In October 2024, HHS indicated it continues to disagree with this recommendation and considers it 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 exchanges, within federal rules, to best meet the unique needs of their residents and insurance markets. Accordingly, HHS stated that its Centers for Medicare & Medicaid Services (CMS) regulations specify a set of eligibility verification requirements in 45 CFR 155 Subpart D that all exchanges, including state-based marketplaces (SBM), must follow. HHS said that these regulations, developed and finalized through a public comment process, allow flexibility for certain eligibility verification requirements as to how exchanges should meet the verification requirement. Additionally, HHS cited another GAO audit recommendation from July 2017 where CMS assessed and documented its options for verifying residency and concluded that accepting an applicant's attestation was the most practical option, as codified at 45 CFR 155.315(d). HHS indicated that GAO subsequently closed that recommendation. As such, HHS stated that it considers the potential risk associated with accepting an applicant attestation for verifying residency as a risk that has been fully evaluated and is already inherently accounted for in HHS's oversight and program integrity activities. Further, HHS stated that SBM compliance with all eligibility verification requirements is comprehensively assessed each year through CMS' State-based Marketplace Annual Reporting Tool (SMART) process. Through the SMART process, HHS stated that CMS identifies any potential areas of risk or concern for follow-up or technical assistance. Any identified areas of non-compliance are formally communicated to the SBM through a SMART Summary Letter to which the SBM must provide an official response and a corrective action plan. Finally, HHS stated that CMS regularly follows up on SBM progress toward correcting any outstanding observations and provides technical assistance, as needed. HHS indicated that 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 CMS regulations specify a set of eligibility verification requirements that all marketplaces, including SBMs, must follow and allow flexibility for how certain eligibility verification requirements should be met. We acknowledged in our 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.
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