GAO: Easy to Fake Applications for Health Insurance Premium Tax Credits

Undercover investigators working with the Government Accountability Office found it was easy to falsify information when applying for Premium Tax Credits to help pay for health insurance.

Undercover investigators working with the Government Accountability Office found it was easy to falsify information when applying for Premium Tax Credits to help pay for health insurance.

As part of a “secret shopper” investigation, the GAO said in a preliminary report that it created 18 fictitious identities to apply for premium subsidies through the federal health insurance exchange by telephone, online at and in-person. With only one exception, the GAO investigators were able to get premium tax credits and health insurance with fake information through telephone and online applications, according to a preliminary report requested by Republicans on the House Ways and Means Oversight Subcommittee, which held a hearing on the matter Wednesday.

Out of the 12 applications with false information for the federal exchanges, 11 were approved, Republicans on the committee noted. The total amount of credits was $2,500 per month or $30,000 per year and is currently being paid out for insurance policies for these fictitious individuals.

Investigators provided fake documents, such as Social Security Numbers and proof of income and citizenship, which proved to be no barrier to getting taxpayer-funded credits. In addition, investigators found that federal contractors made no effort to authenticate documents applicants provided.

The GAO made six in-person attempts to sign up for federal subsidies, Republican lawmakers noted. The GAO was unable to obtain assistance in five of those attempts for a range of reasons including one navigator stating assistance was not available because was down and another declining to provide assistance. The assisters have received tens of millions of dollars in federal grants to provide services to applicants.

“We are seeing a trend with Obamacare information systems: under every rock, there is incompetence, waste, and the potential for fraud,” said House Ways and Means Committee chairman Dave Camp, R-Mich. “Last month, we found that the administration was unable to verify income or eligibility for insurance subsidies. Now, we learn that in many cases, the exchange is unable to screen out fake identities or documents.”

Rep. Joseph Crowley, D-N.Y., suggested during the hearing that it was premature, as the GAO had not completed its investigation and taxpayers have not yet filed tax returns claiming the tax credit. “What is the ultimate benefit to the criminal?” Crowley asked. “Is it a free colonoscopy?”

He noted that there are already substantial penalties for falsifying information under the health care law. Crowley accused Republicans of using the hearing to exploit their dislike of the health care law. “It just another attempt to try to smear the Affordable Care Act,” he said.

Oversight Subcommittee Chairman Charles Boustany, R-La., countered that it was important to catch any problems early with the tax credits.

Seto Bagdoyan, acting director of audit services at the GAO’s Forensic Audits and Investigative Service, told lawmakers that the GAO report was not yet investigating the IRS’s role in the process of verifying the tax credits. The GAO report looked at the role of the Centers for Medicare & Medicaid Services.

On Tuesday, a pair of conflicting federal appeals court rulings were issued on the question of whether the IRS is allowed to provide Premium Tax Credits for health insurance purchased on a federal exchange as opposed to the state exchange.

The Centers for Medicare & Medicaid Services (CMS) officials told the GAO they have internal controls for health care coverage eligibility determinations. The GAO's undercover testing addressed processes for identity- and income-verification, with preliminary results revealing a number of questions.

For 12 applicant scenarios, the GAO tested "front-end" controls for verifying an applicant's identity or citizenship/immigration status. Marketplace applications require attestations that information provided is neither false nor untrue. In its applications, the GAO also stated income at a level to qualify for income-based subsidies to offset premium costs and reduce cost sharing. For 11 of these 12 applications, which were made by phone and online using fictitious identities, the GAO obtained subsidized coverage. For one application, the marketplace denied coverage because GAO's fictitious applicant did not provide a Social Security number as part of the test.

The Patient Protection and Affordable Care Act requires the marketplace to provide eligibility while identified inconsistencies between information provided by the applicant and by government sources are being resolved through submission of supplementary documentation from the applicant. For its 11 approved applications, the GAO was directed to submit supporting documents, such as proof of income or citizenship; but the GAO found the document submission and review process to be inconsistent among these applications. As of July 2014, the GAO had received notification that portions of the fake documentation sent for two enrollees had been verified.

According to CMS, its document-processing contractor is not required to authenticate documentation; the contractor told us it does not seek to detect fraud and accepts documents as authentic unless there are obvious alterations. As of July 2014, GAO continues to receive subsidized coverage for the 11 applications, including 3 applications where GAO did not provide any requested supporting documents.

For six applicant scenarios, the GAO sought to test the extent to which, if any, in-person assisters would encourage applicants to misstate income in order to qualify for income-based subsidies. However, the GAO was unable to obtain in-person assistance in 5 of the 6 initial undercover attempts. For example, one in-person assister initially said that he provides assistance only after people already have an application in progress. The in-person assister was not able to assist us because website was down and did not respond to follow-up phone calls. One in-person assister correctly advised the GAO undercover investigator that the stated income would not qualify for subsidy.

A key factor in analyzing enrollment is to identify approved applicants who put their policies in force by paying premiums. However, CMS officials stated that they do not yet have the electronic capability to identify such enrollees. As a result, CMS must rely on health insurance issuers to self-report enrollment data used to determine how much CMS owes the issuers for the income-based subsidies. Work is underway to implement such a system, according to CMS, but the agency does not have a timeline for completing and deploying it.

The GAO said it is continuing to look at these issues and will consider recommendations to address them.

Cohn writes for Accounting Today, a SourceMedia publication.