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GAO Finds Bogus Applicants Not Only Enroll in ACA Marketplace, but Get Coverage Renewed

Mary K. Caffrey
The Government Accountability Office received notices of inconsistent information, but it wasn't enough for CMS to cancel coverage for the phony beneficiaries. A key flaw revealed is the ability of phony applicants to use the telephone to bypass online controls.
The Government Accountability Office enrolled 11 phony applicants for health coverage through the federal Marketplace in 2014, according to a report released early today. Seven of the 11 applicants lacked all the required documentation but obtained coverage anyway.

These 11 were among 12 phony applicants the office created in 2014 to test whether the Marketplace’s phone or online systems would detect fraud. These “applicants” obtained $30,000 worth of advance tax credits to subsidize premium; while the GAO notes that these monies are paid to insurers, not to enrollees themselves, “They nevertheless represent a benefit to consumers and a cost to the government.”

The Marketplace also automatically re-enrolled all 11 bogus applicants for 2015, although 6 later had their coverage canceled for lack of documentation. However, the GAO succeeded in reinstating 5 of these 6, including the premium subsidies.

GAO notes that its test was small and its findings cannot be generalized to the large population of applicants who obtained health coverage, either through healthcare.gov or on state-run marketplaces. But Republican lawmakers seemed ready to pounce on the findings, and a hearing was scheduled to review the report today.

US Senator Orrin Hatch, R-Utah, who chairs the Finance Committee, said the GAO's report reveals "negligence" by the Obama administration. The ease with which the testers enrolled phony applicants "calls into question the legitimacy of the health law's enrollment numbers and challenges the integrity of the website's security checks,” Hatch said.

Earlier testimony from GAO revealed that the federal Marketplace had approved coverage for phony applicants who applied online or by phone. That testimony revealed that for 6 applicants, the online system halted the process when security features failed to confirm the applicant’s identity, but the investigators were able to work around the system by making telephone contact with the Marketplace. CMS officials later explained that such verbal attestations are subject to penalties of perjury, according to the report.

For 11 of the 12 applicants, the system of bypassing the online system and getting coverage over the phone ended with insurers sending enrollment material and coverage being approved. Marketplace controls did produce notifications that there were inconsistencies between information provided on the applications on federal records; however, the Marketplace is required to keep coverage in force while this is resolved.

The GAO continued to receive these notifications through 2014 and into 2015, but CMS never canceled coverage due to the inconsistent or incomplete information. Of note, the requests for additional documentation were not always clear or complete, according to the report.

Additional report to come. GAO investigators also ran 6 additional tests of income-verification controls. In these scenarios, the agency selected 3 navigators and 3 non-navigator in-person assisters in target areas. In half the cases, the applicant planned to state an income slightly higher than the maximum amount that would allow a premium subsidy based on income, while in the others, the applicant would state an income just below the amount that would allow a subsidy. The purpose of these tests was to determine whether in-person assisters encouraged applicants to misstate income to obtain income-based subsidies.

This test took place during the first open-enrollment period, which ran from October 1, 2013, to March 31, 2014, as well as follow-up work through 2014 and 2015. A later report with recommendations on that test is expected, according to the GAO statement.

 
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