	The Federal Marketplace Approved Subsidized Coverage for 11 of 12 Fictitious Applicants in 2014, with Coverage Continuing into 2015

		We Obtained Coverage for 11 of 12 Fictitious Applicants by Using the Telephone Application Process and Bypassing Online Identity Verification

As we described in our July 2014 testimony, the federal Marketplace  approved subsidized coverage for 11 of 12 fictitious applicants who  initially applied online or by telephone. The APTC and  CSR subsidies are not paid directly to enrolled consumers; instead, the  federal government pays them to issuers of health-care policies on  consumers’ behalf. However, they represent a benefit to consumers—and  a cost to the government—by reducing out-of-pocket costs for medical  coverage. Although intended to counter such identity theft involving others,  identity proofing thus also serves as an enrollment control for those applying online. The Marketplace is required to seek postapproval documentation in the  case of certain application “inconsistencies.” Inconsistencies occur in  instances in which information an applicant has provided does not match  information contained in data sources that the Marketplace uses for  eligibility verification at time of application, or such information is not  available. Thus, the Marketplace was required to approve eligibility to  enroll in health-care coverage and to receive subsidies for each of our 11  fictitious applicants while the inconsistencies were being addressed. Federal Marketplace Communications with Our 11 Successful Fictitious Enrollees about Their Applications Were Unclear or Incomplete

According to CMS officials, the federal Marketplace makes eligibility determinations. We also noted  instances where the Marketplace either did not accurately capture all  inconsistencies, or resolved inconsistencies based on suspect  documentation, including the following:
Did not capture all inconsistencies. For 3 of the 11 applicants,  while the Marketplace at the outset directed our applicants to provide  documentation of citizenship/immigration status, the CMS applicant  data we later received for these applicants do not reflect  inconsistencies for the items initially identified. For example, if consumers elect to receive the premium tax  credit in advance, that lowers the cost of monthly coverage. Under the CMS directive, the  applicant’s policy and subsidies continued through 2014 because our  applicant submitted at least one document to the Marketplace, but not all  documents required. Thus, in the case of our four applicants that  submitted partial documentation to the Marketplace, we likely were  relieved of the obligation for submitting all documents for the 2014 plan  year. The Marketplace Automatically Reenrolled Coverage for All 11 Fictitious Applicants for 2015

The coverage we obtained for our 11 fictitious applicants contained an  automatic reenrollment feature—both insurers and the Marketplace  notified us that if we took no action, we would automatically be enrolled in  the new coverage year (2015). CMS Provided Inaccurate Tax Information for 3 of 11 Fictitious Applicants

Under PPACA, an applicant’s filing of a federal income-tax return is a key  element of back-end controls. If an applicant chooses to have all or some of his or her credit paid in  advance, the applicant is required to “reconcile” on his or her federal tax  return the amount of advance payments the government sent to the  applicant’s insurer on the applicant’s behalf with the tax credit for which  the applicant qualifies based on actual reported income and family size. However, we had not filed any such  applications, nor, as described earlier, had we sought any  redetermination of subsidies. For five of the six applicants, the Marketplace approved reinstatement of  subsidized coverage, while in the process also increasing total premium  tax credit subsidies for all these applicants combined by a total of more  than $1,000 annually. We Were Unable to Obtain In-Person Assistance in Five of Six Undercover Attempts to Test Income-Verification Controls, and Application Assisters Subsequently Acknowledged Errors

As described earlier, CMS has awarded grants for “Navigators,” which are  to provide free, impartial health-insurance information to consumers. As described in our July 2014 statement, in addition to the 12 online and  telephone applications, we also attempted an additional 6 in-person  applications, seeking to test income-verification controls only. During  our testing, we visited one in-person assister and obtained information on  whether our stated income would qualify for subsidy. Representatives of these organizations generally acknowledged the  issues we raised in handling of our application inquiries. CMS officials stressed to  us Navigator training and experience from the first open-enrollment period  helped improve training for the second enrollment period ending in  February 2015. A full examination of in-person  assistance was beyond the scope of our work. Appendix I: Undercover Application Results

Figure 3 summarizes outcomes for all 12 of the undercover phone and  online applications we made for coverage to the Health Insurance  Marketplace (Marketplace) under the Patient Protection and Affordable  Care Act, as part of our testing of eligibility and enrollment controls.
Why GAO Did This Study

PPACA provides for the establishment of health-insurance exchanges, or marketplaces, where consumers can compare and select private health-insurance plans. The act also expands the availability of subsidized health-care coverage. The Congressional Budget Office estimates the cost of subsidies and related spending under the act at $28 billion for fiscal year 2015. PPACA requires verification of applicant information to determine eligibility for enrollment or subsidies.
GAO was asked to examine controls for application and enrollment for coverage through the federal Marketplace. This testimony describes (1) the results of GAO's undercover testing of the Marketplace's eligibility and enrollment controls, including opportunities for potential enrollment fraud, for the act's first open-enrollment period; and (2) additional undercover testing in which GAO sought in-person application assistance.
This statement is based on GAO undercover testing of the Marketplace application, enrollment, and eligibility-verification controls using 18 fictitious identities. GAO submitted or attempted to submit applications through the Marketplace in several states by telephone, online, and in-person. Details of the target areas are not disclosed, to protect GAO's undercover identities. GAO's tests were intended to identify potential control issues and inform possible further work. The results, while illustrative, cannot be generalized to the full population of applicants or enrollees. GAO provided details to CMS for comment, and made technical changes as appropriate.

What GAO Found

To assess the enrollment controls of the federal Health Insurance Marketplace (Marketplace), GAO performed 18 undercover tests, 12 of which focused on phone or online applications. During these tests, the Marketplace approved subsidized coverage under the Patient Protection and Affordable Care Act (PPACA) for 11 of the 12 fictitious GAO applicants for 2014. The GAO applicants obtained a total of about $30,000 in annual advance premium tax credits, plus eligibility for lower costs due at time of service. For 7 of the 11 successful fictitious applicants, GAO intentionally did not submit all required verification documentation to the Marketplace, but the Marketplace did not cancel subsidized coverage for these applicants. While these subsidies, including those granted to GAO's fictitious applicants, are paid to health-care insurers, and not directly to enrolled consumers, they nevertheless represent a benefit to consumers and a cost to the government. GAO's undercover testing, while illustrative, cannot be generalized to the population of all applicants or enrollees. GAO shared details of its observations with the Centers for Medicare & Medicaid Services (CMS) during the course of its testing, to seek agency responses to the issues raised. Other observations included the following:
The Marketplace did not accurately record all inconsistencies. Inconsistencies occur when applicant information does not match information available from Marketplace verification sources. Also, the Marketplace resolved inconsistencies from GAO's fictitious applications based on fictitious documentation that GAO submitted. Overall, according to CMS officials, the Marketplace did not terminate any coverage for several types of inconsistencies, including Social Security data or incarceration status.
Under PPACA, filing a federal income-tax return is a key control element, designed to ensure that premium subsidies granted at time of application are appropriate based on reported applicant earnings during the coverage year. GAO, however, found errors in information reported by the Marketplace for tax filing purposes for 3 of its 11 fictitious enrollees, such as incorrect coverage periods and subsidy amounts.
The Marketplace automatically reenrolled coverage for all 11 fictitious enrollees for 2015. Later, based on what it said were new applications GAO's fictional enrollees had filed—but which GAO did not itself make—the Marketplace terminated coverage for 6 of the 11 enrollees, saying the fictitious enrollees had not provided necessary documentation. However, for five of the six terminations, GAO subsequently obtained reinstatements, including increases in premium tax-credit subsidies.
For an additional six applicants, GAO sought to test the extent to which, if any, in-person assisters would encourage applicants to misstate income in order to qualify for income-based subsidies during coverage year 2014. However, GAO was unable to obtain in-person assistance in 5 of the 6 undercover attempts. For example, an assister told GAO that it only provided help for those applying for Medicaid and not health-care insurance applications. Representatives of these organizations acknowledged the issues GAO raised in handling of the inquiries. CMS officials said that their experience from the first open-enrollment period helped improve training for the 2015 enrollment period.