Health IT

Back-end of remains in development

Shutterstock image (by Ivan Lukyanchuk): web development concept.

(Image: Ivan Lukyanchuk / Shutterstock)

More than 20 months after its troubled launch, the system still lacks an automated financial back end. That is a key takeaway from an internal watchdog report that examined the processes in place at the Centers for Medicare and Medicaid Services to reconcile payments to insurance carriers to cover health care subsidies under the 2010 health care law.

Under the law, insurance companies get advance payments for certain subsidies to cover the costs of coverage for low-income enrollees. Because launched without financial reconciliation functions, CMS relied on non-automated processes to handle advance payments to insurance companies to cover premium subsidies in the form of advance tax credits, and payments to cover subsidized out-of-pocket expenses. These cost-sharing reductions are paid in advance based on estimated costs and carrier attestations of enrollment.

The Office of the Inspector General at the Department of Health and Human Services examined the financial reconciliation process for payments made to insurance carriers between January and April 2014, and found that internal controls to check for errors in payment were "not effective."

Overall, the OIG report suggests that as much as $2.8 billion in payments to carriers were "at risk," given the ineffective controls. Auditors could only identify about $314,000 in underpayments for cost-sharing reductions, but noted that they could not verify that any of the payments were made correctly because of the lack of a system in place to directly confirm enrollment numbers.

CMS acting Administrator Andy Slavitt said in reply comments, "While CMS lacks fully automated payment systems, it has implemented a rigorous and effective set of internal controls to make accurate payments."

CMS tapped administrative services firm Novitas Solutions to perform back-end financial transaction work on a sole-source basis in August 2013, before the initial open enrollment period and the launch of, because the agency's "need for contractor-provided financial management services had reached an unusual and compelling level of urgency," per contracting documents. The firm's contract was recently extended through July 8, 2015.

The OIG report recommends that CMS implement IT solutions to automate payment processing and enrollment verification.

CMS said it is currently piloting a process to get enrollment information directly from the system, but it will continue to rely on enrollment verification from insurance carriers because the carriers are in a position to confirm whether enrollees have actually paid their premiums.

CMS also said it was working on a process to confirm enrollment data through the state-based marketplaces.

"CMS continues this process as part of its work toward making [Advanced Premium Tax Credit] and [Cost-Sharing Reduction] payments to issuers based on policy-level (individual) enrollment data. In addition, CMS continues to conduct internal validation checks for payment accuracy with policy level enrollment data from issuers," Slavitt said in his comments.

CMS told the OIG that it is looking at late 2015 as a deadline for implementing a permanent process for paying carriers based on individual enrollment data.

About the Author

Adam Mazmanian is executive editor of FCW.

Before joining the editing team, Mazmanian was an FCW staff writer covering Congress, government-wide technology policy and the Department of Veterans Affairs. Prior to joining FCW, Mazmanian was technology correspondent for National Journal and served in a variety of editorial roles at B2B news service SmartBrief. Mazmanian has contributed reviews and articles to the Washington Post, the Washington City Paper, Newsday, New York Press, Architect Magazine and other publications.

Click here for previous articles by Mazmanian. Connect with him on Twitter at @thisismaz.


  • Cybersecurity
    cybersecurity (Rawpixel/

    CMMC clears key regulatory hurdle

    The White House approved an interim rule to mandate defense contractors prove they adhere to existing cybersecurity standards from the National Institute of Standards and Technology.

  • Budget
    Stock photo ID: 134176955 By Richard Cavalleri

    House passes stopgap spending bill

    The current appropriations bills are set to expire on Oct. 1; the bill now goes to the Senate where it is expected to pass.

Stay Connected