The CMS has ineffectively managed the accuracy and control of premium subsidies and cost-sharing reductions in the Affordable Care Act's new health insurance marketplaces, according to a report (PDF) released Tuesday by HHS' Office of Inspector General.
Because the federal government does not have adequate processes in place, payments to health insurers totaling billions of dollars are potentially erroneous.
“Without effective internal controls for ensuring that financial assistance payments are calculated and applied correctly, a significant amount of federal funds are at risk,” the OIG report said.
Low- and moderate-income Americans have been buying health plans on HealthCare.gov and state-based exchanges since the beginning of 2014. The ACA created premium and cost-sharing subsidies to help defray the cost of health insurance for those people, many of whom were previously uninsured.
Premium subsidies are available to anyone who earns between 100% and 400% of the federal poverty level. They also are at stake in the King v. Burwell U.S. Supreme Court case, which will determine whether subsidies should be given to consumers in states that haven't established their own insurance exchanges. Cost-sharing reductions, which pay down deductibles and other out-of-pocket costs, go to people who bought a silver-level ACA plan and earn between 100% and 250% of the poverty level.
The OIG examined a sample of the $2.8 billion of ACA subsidies paid to insurers during the first four months of 2014. The OIG was unable to verify premium subsidies on a member-by-member basis because payment data only occurs on an aggregate level. Cost-sharing reduction payment rates also lacked oversight because the CMS “did not always follow its guidance for calculating” them, the OIG said.
Part of the problem was that the CMS did not have electronic systems in place to communicate with state-based exchanges. As of January 2015, the CMS was developing a system that would connect state subsidy data with the federal government.
The OIG recommended the CMS rectify its problems by installing new computer systems that track and confirm individual consumer payment information, better implementing its own guidance and relying less on insurers' information for making subsidy payments. The agency generally agreed with the OIG and said cost-sharing reduction payments are already being reconciled through an end-of-the-year process.
“Cost-sharing reductions and premium tax credits are a key part of providing more Americans with access to quality healthcare they can afford,” an HHS spokesperson said in a statement. “CMS takes seriously our responsibility to make sure this financial assistance is paid accurately and that taxpayer dollars are protected.”
But those policy prescriptions could have little value if the Supreme Court rules with the plaintiffs in King v. Burwell. Premium subsidies would be struck down in up to 37 states (and potentially fewer) that rely on HHS to run their exchange. Cost-sharing subsidies would also go away in federally run exchange states because they are tied to the premium tax credits.
