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CO Health Insurance Exchange Struggled in Establishment Grants

OIG found Colorado’s health insurance exchange had mishandled nearly $9.7 million in federally-granted establishment funds.

By Kate Monica

Connect for Health Colorado, the state’s health insurance exchange instituted under the Patient Protection and Affordable Care Acts, received three establishment grants collectively amounting to 183.7 million on December 31, 2014, according to a full OIG report.

Colorado received these grants for its efforts in establishing its own state-based marketplace in the vein of other states.*

Editor's note: A previous version of this article misidentified Missouri Health Connection as the state's health insurance exchange.

Upon review, OIG found the Colorado marketplace incorrectly expended these grant funds in four separate incidents.

“The Colorado marketplace did not adequately document costs that it charged to the establishment grants ($4.4 million),” according to OIG.

Additionally, the organization charged $4.5 million in unallowable contract costs whose period of benefit occurred after December 31, 2014, which was deemed impermissible according to the guidelines set forth by the Centers for Medicare & Medicaid Services.

“[The Colorado marketplace] improperly transferred costs from one establishment grant to another without demonstrating that the transfers were performed to correct bookkeeping or clerical errors,” OIG explained, accounting for another $312,000 in misused funds.

Finally, OIG found the Colorado marketplace used $463,000 establishment grant funds to improperly award bonuses, overpay subgrantees, fund promotional giveaway items, give excessive and unreasonable tips, pay for unallowable social activities, and issue vendor rebates uncredited to the establishment grants.

On top of incorrectly expending establishment grant funds, OIG also chastised the Colorado marketplace for drawing down unused establishment grant funds and entering into contracts with consultants and other contractors that did not conform to Federal and State requirements or the organizations own policies.

 “These findings were caused by a lack of adequate stewardship of Federal funds” according to OIG reports.

In light of the incidents, OIG presented the Colorado marketplace with the following recommendations:

  • The Colorado marketplace must refund $9.7 million to the Federal Government
  • The Colorado marketplace must develop, finalize, and implement policies and procedures to ensure that it expends Federal grant funds in accordance with Federal, State, and Colorado marketplace requirements. 

In response to these recommendations, the Colorado marketplace declined to repay the $9.7 million in misused funds. It did, however, agree to design policies and procedures to better handle Federal grant funds in the future in accordance with Federal, State, and Colorado requirements. 

After reviewing Colorado’s comments regarding OIG’s recommendations, OIG maintained that its findings warranted both recommendations.

As states look to implement health insurance exchanges, they need to make sure all regulations regarding expenditure of establishment funds, proper procedures, and data security measures are met.

For example, OIG also recently found issues with the New York marketplace’s PII security.

“Exploitation could have resulted in unauthorized access to and disclosure of PII, as well as disruption of critical marketplace operations,” reported OIG. “In addition, without proper safeguards, systems were not protected from individuals and groups with malicious intent to obtain access in order to commit fraud, waste, or abuse or launch attacks against other computer systems and networks.”

This potential data security issue arose after OIG discovered that while there were policies and procedures in place to protect PII on the health insurance exchange website, certain Federal requirements aimed at increasing data security were left unmet.

OIG deemed this a significant threat to information security due to the sensitive nature of the data potentially at risk of exposure.

“Web applications (Web sites) and database systems that are not properly secured create vulnerabilities that could be exploited by unauthorized persons to compromise the confidentiality of PII,” reported OIG. “One of the top challenges in the U.S. Department of Health and Human Services, Office of Inspector General’s list of management challenges facing the Department is ensuring the security of the marketplaces.”

Dig Deeper:

OIG Early Implementation Review Enforces Payment Reforms

Solutions for Addressing Health Information Exchange Challenges

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