Kusserow on Compliance: OIG issues early alert—federal funds might be used illegally to cover Marketplace operational costs

The HHS Office of Inspector General (OIG) issued a warning that under the Patient Protection and Affordable Care Act (ACA) there is a clear prohibition against the Marketplaces granting funds to support ongoing operations after January 1, 2015. The OIG raised concerns that, without more detailed guidance from CMS, state-based marketplaces (SBMs) might have and to use, establishment grant funds for operating expenses after that period. This would be clearly contrary to law. The OIG noted that this is a “significant matter and warrants immediate attention” by CMS.

The ACA established a competitive private insurance “Marketplace” in all 50 states and the District of Columbia. CMS oversees the implementation of the ACA. The ACA provided funding for the planning and establishment of the Marketplaces, but funding for this ended on January 15, 2015, and requires thereafter that they operate self-sustaining by charging assessments or user fees from participating health insurance issuers to generate needed funding for operation. Use of federal grant funds now to these maintenance purposes is not legal. During the course of its audits of SBMs, the OIG encountered potentially serious issues concerning potential illegal use of federal funds. The OIG also cited media reports; in addition to its own reviews of SBMs’ budget information evidence that some SBMs facing uncertain operating revenues in 2015 and future years. As result of this uncertainty, there is a risk that SBMs might use establishment grant funds to cover operational costs.

The OIG called upon CMS to consider:

  1. developing and publishing clear guidance on what constitutes operational costs and design, development, and implementation costs to minimize the marketplaces’ improper use of establishment grant funding for operational expenses;
  2. developing guidance to review SBM plans for using establishment grant funds to ensure that the guidance addresses real-world examples, such as call centers, in-person assisters, bank fees, and printing and postage expenses; and
  3. monitoring SBMs’ use or potential use of establishment grant funds for operational costs and take appropriate action.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

Connect with Richard Kusserow on Google+ or LinkedIn.

Subscribe to the Kusserow on Compliance Newsletter

Copyright © 2015 Strategic Management Services, LLC. Published with permission.