Author Archive | John Barrett

Penalty for Not Having Health Coverage Can Be Thousands of Dollars

If you’re opting out of the health-care coverage required by the Affordable Care Act, make sure you understand how much you’ll owe Uncle Sam as a result.

The massive health-care changes passed in 2010 are phasing in, and this is the first year most Americans must have approved health insurance. Those who don’t will owe a penalty under the Individual Shared Responsibility Provision. It’s due with your income taxes, payable by April 15, 2015.

  • For those who are thinking of opting out, here’s what you need to know. To begin with, the penalty is either a flat amount or 1% of your household income, whichever is greater. For 2014, the flat amount is $95 per adult and half that for children under 18, with a cap of $285 per family.
  • The flat penalty rises steeply in the future, to $325 per adult in 2015 and $695 in 2016, plus half that per child, up to a maximum of $975 in 2015 and $2,085 in 2016.
  • The percentage-of-income penalty rises quickly as well—to 2% of income in 2015 and 2.5% in 2016. As with the flat penalty, there is also a cap on the maximum payment. It rises no higher than the average cost for a family of five under a bronze-level Affordable Care Act-approved plan.

For many, the percentage-of-income penalty kicks in at a low level. For example, it would take effect at about $50,000 of household income for a family of five. For a family of five with three children and income of $300,000, the penalty would be about $2,800 in 2014. The top penalty payable this year will be $12,240, for a family with three children and an income above about $1.2 million.

While most people will probably obtain qualified health coverage through an employer or an exchange, there will be others who owe the penalty.

  • A health-care and benefits specialist at Grant Thornton in Washington, says this group will likely include affluent and wealthy people who want to self-insure or use a so-called nonconforming policy that doesn’t meet Affordable Care Act standards.
  • Then there are the “young invincibles”: healthy young adults, typically in their late 20s or early 30s, who will get little or no tax credit to reduce their premiums. Many would rather spend the cost of health coverage, which can run from several hundred to several thousand dollars a year, on something else, such as paying off college loans.

CALCULATING HOUSEHOLD INCOME TO DETERMINE THE PENALTY

  • “Household income” is defined differently from other tax thresholds. It begins with adjusted gross income, or AGI, the number at the bottom of the first page of the 1040 form. (This number includes reductions for 401(k) contributions and other items, but not for itemized deductions such as mortgage interest.) AGI earned by children counts as well.
  • To this total the taxpayer adds back any foreign-earned income and municipal-bond income that has been exempted, and then subtracts the filing threshold—the amount below which a taxpayer needn’t file a return.
  • This year, that’s $10,150 for most singles and $20,300 for most joint filers. The result is household income, the base for figuring the penalty.

Members of some groups aren’t subject to the penalty, even if they don’t have approved insurance. There are exemptions for people who belong to certain religious groups or who will be uncovered for three months or less, as well as for members of Indian tribes, illegal immigrants and prisoners, among others. The rules also don’t apply to people covered by Medicare.

Although taxpayers without proper health coverage will owe the tax penalty in April, the IRS will have a hard time identifying them. It will get easier in 2016, when insurers and employers will be required to send the IRS computer files of participants that can be matched against individual returns for tax year 2015.

Even then, the IRS won’t be able to use standard collection procedures. For example, the agency can’t put a lien on a taxpayer’s house because of an unpaid health-care penalty.

However, interest will be owed on any unpaid penalties, and the total can be withheld from future tax refunds.

Modified from a WSJ.com article

 

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Obamacare Auto-Renewal Plan Could Cause Costs to Soar

A significant problem looms for the Affordable Care Act when the next open enrollment period begins in November, according to many health care experts and media accounts. The administration announced on June 26 that those currently enrolled would be automatically renewed in the same plan for 2015.

There is a growing concern this will cause many who received subsidies, through Covered California or the federal exchange, to see sharp rises in after-subsidy insurance premiums due to the way subsidies are calculated. Many who are auto-enrolled will end up paying more than they needed to for coverage because they will not realize that last year’s best choice won’t be this year’s best choice.

  • Automatic Renewal  = Automatic Premium Increase?

The automatic renewal of plans for people already enrolled through the either Covered California exchange or in other states Healthcare.gov was intended to allow greater focus on enrolling the uninsured as well as easing pressure on both web sites.

But many people who do nothing and allow their plans to be automatically renewed will likely face a substantial increase in what they have to pay. Subsidies for plans sold through the exchanges are determined according to a person’s income and the premium of the second-lowest ‘silver’ level plan available in each market, called the benchmark plan.

The 2014 benchmark plan in California and other states will be replaced with a different benchmark plan in 2015. Most of the 2014 benchmark plans have higher premiums in 2015. This combination of plan change and higher premiums will lead to much higher out-of-pocket costs for many of those who are auto-enrolled in the same plan, as the Obama administration intends to do.

For example, in 2014 several benchmark Anthem Blue Cross & Blue Shield plans, had a monthly premium of $354 for a 40-year old. In 2015 the same plan will cost approximately $363 according to rate approval information. 

If the value drops by $90, then someone automatically re-enrolled in the 2014 benchmark plan from Anthem could see their monthly premium skyrocket by nearly $100 or more once the premium increase for the former benchmark plan is included.

  •  Critics fault auto-enrollment plan

According to the president of a health care think tank, “every time the Obama administration has changed the law to make it less onerous for consumers – like automatic re-enrollment – it winds up creating new pitfalls for consumers.  In this case, millions of consumers could face higher premium and out-of-pocket costs because the plan they selected for this year might not qualify for extra subsidies next year, The law’s endless administrative complexity shows the impossibility of trying to centrally plan one-sixth of the economy.  We need to put the market and consumers in charge of choices, not bureaucrats, politicians, and regulators.”

Some point out that the auto-enrollment plan goes against the idea that people should be actively involved in the selection of their own health insurance plans. “A passive auto re-enrollment can be useful, but we shouldn’t coddle consumers,” said Yevgeniy Feyman, a health policy fellow at the Manhattan Institute. “If we want patients to be good consumers when it comes to purchasing health insurance, some level of administrative burden will be necessary.”

Modified from a news.heartland.org article

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High Health Plan Deductibles Weigh Down More Employees

As employers seek to comply with the Affordable Care Act (Obamacare) on 2015, even more corporate workers are likely to be offered high-deductible plans — sometimes known as consumer-directed plans — and at a rising share of large companies, it will be the only option remaining.

  • Just as employers replaced pensions with retirement savings plans, more large companies appear to be in a similar cost-sharing shift with health plans. Besides making workers responsible for more of their care, employers hope these plans will motivate employees to comparison-shop for medical services — an admirable goal but one that some say is hard to achieve.

Several big companies started offering consumer-driven plans as their only option in the last couple of years, including JPMorgan, Wells Fargo, General Electric and Honeywell, among others; it is the only choice for Bank of America employees earning more than $100,000.

  • Next year, nearly a third of large employers will offer only high-deductible plans — up from 22 percent in 2014 and 10 percent in 2010, according to a study by the National Business Group on Health, which included 136 large companies that collectively employ 7.5 million workers. And 81 percent of those large employers will have added one of these plans to their lineup of choices, up from 53 percent in 2010.

With high-deductible health plans, consumers pay for all their medical services — at the insurer’s negotiated rate — until they meet their deductible. After that, consumers typically pay coinsurance, which is a percentage of each service — say 10 to 35 percent — until they reach the out-of-pocket maximum.

  • That is scheduled to be generally capped at $6,450 for singles and $12,900 for families in 2015, according to the Kaiser Family Foundation, and includes items like deductibles, coinsurance and co-payments, but not premiums, which tend to be lower in these plans.

So it is easy to see how shopping for an M.R.I. of the lower back — which can range from roughly $415 to $4,530 — would suddenly pay off for both the employee and the employer.

Insurers and independent providers, tools that help consumers estimate their costs and the quality of the providers. But shopping around can still be challenging; the question is whether the prices they give you are binding. Another concern is that some people will be ill prepared to handle large bills, and will forgo care as a result. 

  • High-deductible plans are often used with health savings accounts. As long as the plan deductibles in 2015 exceed $1,300 for single people or $2,600 for families, and meet other criteria, employers and workers can deposit money into an Health Savings Account (HSA). In 2015, individuals will be allowed to contribute up to $3,350 in pretax dollars (or $6,650 for family coverage). The money grows tax-free and can be used to pay for out-of-pocket health care expenses. 

Given the increased adoption of the plans — Kaiser estimates about 20 percent of workers covered by plans were enrolled in a high-deductible plan with a savings account option in 2013, up from 8 percent in 2009 — consumers will need to weigh their options more closely during open-enrollment season.

  • When evaluating these plans, consumers need to ask themselves several questions: Do you have the money to pay for all medical expenses until the deductible is met? What is the out-of-pocket maximum — can you afford that? And are you the type of person who will skip needed care if you need to pay out of pocket?

Many workers may not have a choice — a high-deductible plan may be their only option. One still has protection against very high claims, but one may have to pay $5,000, or more during one year toward the cost of their care. 

Modified from a nytimes.com article

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Employers consider alternatives as health care costs rise

U.S. employers want a more efficient system of health care delivery that is better able to control costs, according to a recent report from the HR Policy Association and the American Health Policy Institute, based on interviews with chief human resources officers at large corporations.

  • Many HR professionals believe that rising health care costs are putting U.S. employers at a disadvantage globally and hampering job growth and economic growth in the United States, the report noted.

The Affordable Care Act has caused large employers to closely examine their benefit costs, the reasons behind the cost increases in recent years, and their future role in health care delivery.

  • There’s no consensus on the future of health benefits. “Some believe that employers may, in fact, continue to absorb increases in the cost of health care and greater regulatory burdens no matter how great they might become. Others, including financial analysts and even some principal architects of the Affordable Care Act, see the collapse of the employment-based system as inevitable,” the report states.

Only 50% of chief HR officers said their company will continue to offer health benefits for the foreseeable future, regardless of what most other large employers do, while 16% disagreed with that statement.

Jeffrey McGuiness, CEO of the HR Policy Association and co-author of the report, says, “Large employers have used self-insured plans to provide health care to their employees and dependents, as well as retirees, for decades and view it as essential to a productive and competitive workforce and as the most valued benefit in compensation packages. However, the cost of health care continues to escalate despite this and is causing large employers to not only question the long-term viability of the current system of employment-based care, but also to begin moving toward alternative health care delivery methods.”

  • Among the alternatives are high-deductible health plans, private insurance exchanges, or not offering health benefits, meaning that employees will obtain coverage on public insurance exchanges or go uninsured.

At least 50% of respondents said their company offers a consumer-directed health plan (a high-deductible plan with a personal account), or plan to do so. In fact, 23% said they offer a consumer-directed plan as the only option for workers, or plan to do so.

  • Forty percent of respondents said they are considering private exchanges, but have not yet made a decision, while 37% said they considered private exchanges, but decided not to go that route.

The strategies of the past, such as HMOs, PPOs and self-insuring, have helped to contain health care costs somewhat, but have not resolved long-term cost concerns. The most successful efforts have occurred when a very large company or group of companies in one region have combined their purchasing power, the report notes.

  • “Large employers see the current health care environment as being in flux. They have a strong interest in figuring out how best to provide health care to their employees in the current environment and which alternative approaches will work best in the emerging new world of health care,” says Tevi Troy, president of the American Health Policy Institute and co-author of the report.

*Modified from an eba.benefitnews.com article

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Will Employer-Sponsored Health Insurance Survive?

Will the link between employment and health insurance survive?

That’s one of the serious questions that a new report from the Employee Benefit Research Institute (EBRI), a nonprofit research organization based in Washington, D.C., raises about the future of employee benefits.

  • Paul Fronstin, head of the health research and education program at EBRI, noted that the Affordable Care Act “levels the playing field like it’s never been before,” as employees will not necessarily have to depend on getting health coverage through work.

“Employers are just not sure if they’ll be offering coverage in the future,” he added.

  • In fact, the U.S. Congressional Budget Office estimates that 3 million to 5 million fewer Americans will obtain coverage through their employer each year from 2019 through 2022 than would have been the case without the ACA.

Starting next year, the ACA will require employers with at least 50 full-time employees to offer a minimum level of health coverage to workers, but some employers may prefer to pay a tax penalty instead of paying for the coverage. The need to recruit and retain good talent is what keeps employers offering benefits.

Kathryn Gaglione, a spokesperson for the National Association of Health Underwriters, says, “Offering comprehensive, competitive benefits makes for a more robust workforce and better compensation for individuals trying to support families … Many American business owners understand the benefit to offering employees and their families coverage. Employer-sponsored health plans might change, but they won’t be going anywhere.”

Most employees want and expect health insurance through their employer, especially knowing that it’s much less expensive to receive group coverage that comes with an employer’s premium contribution than to buy individual coverage on a health insurance exchange (with no employer contribution).

Nonetheless, “one could argue workers won’t need their employers any more for health benefits once the law is fully implemented, and health exchanges become a viable option to job-based health benefits,” Fronstin said.

*Modified from an ebabenefitsnews.com article

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New Obamacare Enrollment Data: Employer-Based Coverage Declines

New data show that the number of people who have private health insurance increased by just over 520,000 in the six months between October 1, 2013, and March 31, 2014. That was because almost all the gains in individual coverage through the Obamacare exchanges were offset by reduced enrollment in employer-sponsored group coverage.

During the same period, Medicaid enrollment increased by about 5 million, principally as a result of Obamacare expanding eligibility to able-bodied adults without dependent children.

Because of delays in the exchanges processing enrollments and a “surge” in exchange applications in March, it is possible that a further 3 million to 4 million individuals may have gained individual coverage since March 1.

  • However, even if that proves to be the case, and even if there is no further erosion in employer coverage, more than half of any increase in coverage during 2014 will still be due to Obamacare’s expansion of Medicaid.

Modified from a heritage.org article

 

 

 

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Will Obamacare Cost You Your Job?

Why is our recovery from the Great Recession so sluggish and so slow? Economists are increasingly focusing on the Affordable Care Act. Although generally thought of as a measure to insure the uninsured, health reform is affecting the entire labor market in negative ways.

  • The employer mandate to provide health insurance will cost almost $6 an hour for family coverage. This health minimum wage (on top of the money minimum wage) raises the cost of labor, and may discourage hiring.

There are two ways that employers can get around it: stay small and employ part-time rather than full-time employees.

  • The employer mandate, which kicks in in about a year and a half, doesn’t apply to firms with fewer than 50 employees. Suppose an employer has 49 low-wage workers. Because these workers can get highly subsidized health insurance in the (ObamaCare) exchange, they don’t want health insurance from the employer. They would rather have the cash equivalent in the form of higher wages.

Now suppose the employer hires one more worker. Not providing health insurance at this point subjects the employer to a $2,000 fine for each employee.

Bottom line: hiring one more worker will cost this firm $100,000.

  • The mandate also doesn’t apply to employees who work fewer than 30 hours per week. To continue with the above example, if instead of hiring a 50th full time worker, the employer hired two part-time workers he would avoid the requirement to provide health insurance or pay $100,000 in fines.

For firms that have already exceeded the 50 worker threshold, every time they reduce the hours of an employee below 30 they avoid the requirement to provide costly health insurance or pay a $2,000 fine. Moreover, the economic incentive to work fewer hours affects employees as well as their employers.

A University of Chicago economist estimates that there are about 4 million workers who would be better off switching to part-time work. Once they reduce their hours, they are no longer eligible for their employer’s health plan. After that, they are entitled to generous subsidies in the health insurance exchange. And the subsidies in the exchange are greater than the lost wages.

Writing in the Wall Street Journal the other day, Mort Zuckerman said:

  • Most people will have the impression that the 288,000 jobs created last month were full-time. Not so…. Full-time jobs last month plunged by 523,000, according to the Bureau of Labor Statistics. What has increased are part-time jobs. They soared by about 800,000 to more than 28 million….

There is another way in which ObamaCare may discourage work. For low-income families, the federal government is paying more than 90% of the cost of health insurance purchased in the exchanges. But that subsidy drops quickly as income rises and disappears completely at four times the poverty level ($46,680 for an individual and $95,400) for a family of four).

  • So when people earn higher incomes, they not only pay higher income and payroll taxes, they also lose subsidy dollars as well. In fact, because of peculiar quirks in the formula, a family can lose $10,000 or more in subsidies by earning just one more dollar of income.

When loss of health insurance subsides is added to income and payroll tax rates the net effect is quite high – even for the average family. ObamaCare imposes the third largest increase in marginal tax rates in the past 70 years, lowering the return from working by 10%.

A Harvard economics professor explains, that implies a long term loss to the economy on the order of 5% of GDP – or more than $800 billion a year at current prices. That’s about four times the size of the direct ObamaCare spending.

This indirect cost to the economy equals more than $8,000 per household per year.

Modified from a townhall.com article

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Employers continue to shift health care cost burden to employees

With health care costs continuing to rise, it’s no surprise to benefit advisers that their employer clients continue to seek benefit solutions that shift some of the cost burden to their employees — and new data reveals that trend shows no signs of stopping.

Most employers now require employees enrolled in group health plans to contribute toward the cost of their coverage. In 2013, more than 83% of employees enrolled for single-coverage in an employer-sponsored health plan made a contribution toward their plan premium, according to a medical expenditure survey released Wednesday by the Agency for Healthcare Research and Quality.

  • The survey found just 16.6% of enrollees taking single coverage did not make a contribution toward the plan premium; and only 6.9% of enrollees in employee-plus-one coverage and 7.9% of enrollees in family coverage did not.

The number of employers covering the full cost of health care plan premiums continues to decrease, says Beth Crimmel, a survey statistician with AHRQ. Although employers in the past often covered the full cost of a plan premium, “That’s becoming much less common,” she says.

  • In addition, average annual total premiums across all three coverage types were up in 2013 compared to 2012, she says. The average total premium for single coverage per enrolled employee was $5,571 in 2013 for the private sector — a 3.5% increase over the $5,384 single premium for 2012. For employee-plus-one coverage, the average total premium also increased 3.5% in 2013 to $10,990. Family coverage had an average total premium of $16,029 in 2013, up 3.6%.

The average annual dollar amount that employees contributed toward their premium also rose for all three types of coverage in 2013 versus 2012. For single coverage, the 2013 average contribution was $1,170, a 4.7% increase over 2012. For employee-plus-one coverage, the 2013 average was $2,940, a 4.1% increase. And for family coverage, the $4,421 average contribution was 4.4% higher than in 2012.

The survey also found in 2013, 51.3% of employees who enrolled in a health insurance plan through their private-sector employer chose single, employee-only coverage.

Modified from a Employee Benefit Advisor article

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Confusion over doctor lists is costly for Obamacare enrollees in state

Frustration and legal challenges over the network of doctors and hospitals for Obamacare patients have marred an otherwise successful rollout of the federal healthcare law in California. Limiting the number of medical providers was part of an effort by insurers to hold down premiums. 

Covered California had sought to address much of this by promising an online listing of exchange providers so consumers could search for their favorite doctor or hospital before picking out an Obamacare policy. The exchange’s provider directory wasn’t ready when enrollment began in October, and it was later killed because of inaccuracies.

  • But confusion over the new plans has led to unforeseen medical bills for some patients and prompted a state investigation. More complaints are surfacing as patients start to use their new coverage bought through Covered California, the state’s health insurance exchange.

A Fullerton resident found herself stuck with an $8,000 bill for cancer treatment after receiving conflicting information on whether it was covered. The Fullerton resident, who lost her previous coverage when her insurer dropped out of the individual market last year. She enrolled in a Platinum plan, the highest level of benefits on the state exchange, from Blue Shield.

She started treatment at UC Irvine Medical Center in the fall, and her oncologist there took her new Blue Shield insurance in January and February. Then the day before her lumpectomy, UC Irvine called to say her insurance wasn’t accepted after all.

UC Irvine said there’s been considerable confusion among Blue Shield customers with exchange plan. Blue Shield stood by its handling of the case because it said she was advised UC Irvine was out of net

An Oceanside resident faced a similar predicament after getting diagnosed with cancer in his lymph nodes. The insurer covered his care at Cedars-Sinai Medical Center on his prior plan, and he said Blue Shield never advised him of any major changes. Like many consumers, he said it was nearly impossible to get information from the company’s call center or website.

  • A Los Angeles pediatrician said she couldn’t afford the 30% pay cut offered by Blue Shield. She would have received $68 instead of $97 for a routine office visit for a patient with a PPO policy. She decided not accept Covered California insurance but thought other Blue Shield patients would not be affected.

This is a common misperception among doctors and patients. Blue Shield’s new terms also applied to patients with individual policies outside the exchange.

In all, customers of Blue Shield in Covered California have filed 590 complaints with the state this year through early June, and 97 of those gripes are about the insurer’s networks.

Even more complaints have been lodged against Anthem Blue Cross, the state’s largest for-profit insurer and the leading company by enrollment in Covered California. The insurer has 848 complaints, including 115 related to provider issues.

Both companies have emphasized that complaints represent a small percentage of enrollment. Anthem and Blue Shield have contacted medical providers repeatedly to clear up confusion, and they have expanded their networks in recent months.

  • Narrow networks aren’t going away, and we don’t need access to every doctor. But patients should have certain expectations and guarantees. Insurers insist that pruning the network of doctors is a crucial cost-cutting measure and a major reason that so many Californians could find affordable coverage in the health law’s first year. “These narrow networks are making a huge difference in terms of affordability,” said the president of Anthem Blue Cross, a unit of industry giant WellPoint Inc. “We found in convincing numbers that people value price above all else.”

Nationwide, about half of all exchange plans feature narrow networks, according to consulting firm McKinsey & Co., which has closely tracked the new insurance market.

  • Narrow network plans cost up to 17% less on average than plans with broad networks. In forming tighter networks, insurers tried to persuade doctors and hospitals to accept less money in exchange for a higher volume of Obamacare patients.

Meantime, some consumers are taking their network gripes to court. Last month, two San Francisco residents sued Blue Shield in state court, accusing the insurer of misrepresenting that their policies would cover the full network.

The latest case involves Anthem. A Fallbrook sued her insurer June 20 in Los Angeles County Superior Court, accusing Anthem of misleading customers. Like nearly 1 million Californians, she had a policy that was canceled last fall because it didn’t comply with requirements of the Affordable Care Act.

To ease her transition, Anthem enrolled her in an exclusive provider organization plan that limits her access to out-of-network care even more than the PPO plan she had for 16 years. But Anthem sent her an insurance card in February labeling her coverage as a PPO. As a result, she incurred several thousand dollars in medical bills that Anthem wouldn’t cover, according to her attorney.

Exchange officials said it’s too early to tell what effect, if any, the state investigation or pending legislation may have on next year’s networks and rates. State lawmakers are considering two bills that would increase oversight of these network issues and require insurers to foot the bill for out-of-network care if regular providers aren’t available.

*Modified from a latimes.com article

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Federal audit faults California exchange for lax enrollment practices

Federal auditors found that California’s health insurance exchange was lax at times in verifying consumers’ eligibility for Obamacare coverage. The report issued by the Inspector General’s Office at the U.S. Department of Health and Human Services also cited the federally-run exchange and Connecticut’s insurance marketplace for similar deficiencies.

  • “The California marketplace’s process for verifying citizenship was incomplete,” federal auditors said in the report. California, in particular, fell short on verifying citizenship, resolving inconsistencies on eligibility, entering paper applications correctly and maintaining enrollee data, according to the report.

Auditors said lax internal controls may have limited the exchanges’ “ability to prevent the use of inaccurate or fraudulent information when determining eligibility of applicants for enrollment.”

  • The audit knocked Covered California for not verifying the citizenship of seven applicants through the Department of Homeland Security when Social Security information indicated they weren’t eligible or data was lacking.

During open enrollment, Covered California often needed to resolve inconsistencies on customer applications and get further documentation.

The audit found that in 19 of 25 applications it reviewed, Covered California didn’t resolve those discrepancies.

The federal review only covered the first three months of open enrollment, from October to December, and focused on a sample of 45 applicants in California.

The Covered California exchange agreed with some of the criticisms and disputed others in a response to the audit.

Covered California told auditors it “did not have the resources to resolve all inconsistencies as required” and in some cases reviews weren’t being completed within the normal 90-day period.

In a May 29 letter to federal auditors, Covered California’s executive director, Peter Lee, noted that the findings are based on a very small sample compared to the 1.4 million people who signed up in the state through mid-April.

“This sample was taken very early in the first open enrollment period and improvements have been ongoing to ensure program integrity,” Lee wrote. “Systems and processes have been and continue to be refined and improved.”

The exchange also said its efforts were hampered by the federal data hub frequently being offline in the fall.

*Modified from a latimes.com article

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