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Watchdog agency audits Maryland exchange

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Investigators say a public health insurance exchange should make sure the mix of federal funding it’s using reflects the actual enrollment mix, even if that means updating how it allocates costs in the middle of the year.

Officials at the U.S. Department of Health and Human Services Office of Inspector (HHS OIG) have delivered that message in a report on an audit of the Maryland Health Benefit Exchange, which runs the state-based Maryland Health Connection exchange.

The auditors say the Maryland exchange misallocated $28.4 million of $132 million in Patient Protection and Affordable Care Act (PPACA) exchange construction grants it received because of a failure to shift to using actual enrollment mix figures, rather than outdated, inaccurate enrollment mix projections.

Maryland exchange managers used their exchange to enroll consumers in both Medicaid and private qualified health plans (QHPs). Managers originally predicted enrollment would justify allocating 42 percent of the costs to Medicaid and 58 percent to PPACA QHP program funding.

In reality, HHS OIG officials say, updated March 2014 enrollment numbers show that the exchange should have allocated 63 percent of the costs to Medicaid and only 34 percent of the costs to PPACA QHP funding.

Maryland exchange managers misallocated $42.9 million in QHP funding because they failed to update their enrollment fix figures promptly, and they misallocated the other $89 million by failing to speak up when they learned of a major error in the data they had used to come up with their enrollment mix projections, HHS OIG officials say.

The exchange should pay $28.4 million in PPACA exchange grant money back to the Centers for Medicare & Medicaid Services (CMS), the arm of the U.S. Department of Health and Human Services (HHS) that provided the money, HHS OIG officials say.

The Maryland exchange can get reimbursed for some of the exchange costs through the Medicaid program, officials say.

Maryland exchange managers say in a response to the HHS OIG audit report that the latest CMS advice requires an exchange to update exchange enrollment mix numbers just once per year, and when an exchange applies for new funding.

The Maryland exchange has done that, Maryland exchange officials say.

The exchange “believes that the OIG report reflects simply a difference of interpretation over cost allocation requirements and the use of projections absent other baseline data,” exchange officials say. “Moreover, since states, including Maryland, must build their annual budgets a year in advance of an open enrollment period, they could not plan for retroactive cost allocation adjustments based on enrollments they would have no way to foresee.”

HHS OIG officials say CMS also has told exchanges to update cost allocation figures “if there is a substantive change in program participation.” HHS OIG officials say they will work with CMS to see if CMS can improve the guidance it is exchange the managers of the state-based exchanges.

See also: Exchange may form an audit committee