U.S. HOUSE OF REPRESENTATIVES COMMITTEE ON ENERGY AND COMMERCE CHAIRMAN FRED UPTON

The Oversight Series Accountability to the American People

Implementing Obamacare: A Review of CMS’ Management of the State-Based Exchanges

‘

Prepared by the Energy and Commerce Committee, Majority Staff

September 13, 2016

energycommerce.house.gov

I.

Table of Contents

I.

Table of Contents ................................................................................................................ 1

II.

Executive Summary ............................................................................................................ 3

III.

Findings ................................................................................................................................ 5

IV.

Background .......................................................................................................................... 6

A. PPACA Authorizes States to Establish State-Based Health Care Insurance Exchanges .................................................................................................................................. 6 1.

How State-Based Exchanges are Intended to Work ............................................. 6

2.

Section 1311 Authorizes Federal Grants to States ................................................. 8

B.

Some State-Based Exchanges Failed ......................................................................... 11 1.

Oregon ....................................................................................................................... 11

2.

Hawaii ....................................................................................................................... 14

3.

Nevada ...................................................................................................................... 16

4.

New Mexico .............................................................................................................. 17

5.

Kentucky ................................................................................................................... 18

C.

Many Remaining State Exchanges Continue to Struggle ...................................... 20 1.

Operational Costs Cause Financial Challenges ................................................... 21

2.

SBEs Fail to Meet Enrollment Projections ............................................................ 22

D. V.

The Committee’s Investigation ................................................................................. 27 CMS Fails to Conduct Adequate Oversight of the SBEs ............................................. 31

A.

CMS Issued Permissive Guidance to SBEs .............................................................. 32

B.

CMS Approved Questionable SBE Spending ......................................................... 37

C. CMS Failed to Enforce SBE Transparency Requirement Mandated by the PPACA ..................................................................................................................................... 44 D. CMS Failed to Protect Consumers Equally by Imposing Lenient Consumer Protections for SBEs ............................................................................................................... 45 E.

CMS Failed to Recover Misspent Dollars Identified by the Inspector General . 46

F.

CMS Recovers Only a Small Fraction of Misspent Federal Funds from SBEs ... 50 1.

CMS Misled the Committee on Funds Recouped from SBEs .......