A look at “Reconciliation” in the US individual health insurance marketplaces

Background

The US Healthcare system is the among the costliest in the world, with twice the per person expenditures as compared to the average spending in other large and wealthy countries.^[1] Data also indicates that health insurance status for individuals is directly linked to “access to care”, with costs being one of the primary causes for lack of medical care.^[2] 

The Affordable Care Act (ACA) was signed into law on 23rd March 2010 and authorized the creation of marketplace insurance exchanges from 1st January 2014, providing a platform for individuals to purchase affordable (subsidized based on eligibility) health insurance. The states have the option to establish and operate a state-based marketplace (SBM) or rely on the federally facilitated marketplace (FFM). Due to improvement in technology and reduction in costs over time, several states have established (or are seeking to establish) their own SBMs.^[3]

The individual health insurance market grew rapidly in the early years with the rising enrollments in the marketplace plans, which has subsequently been driven by enhanced subsidies, and resulted in the number of non-elderly uninsured individuals remaining well below the levels prior to enactment of the ACA.^{[4] [5] [6]} 

Fig. Marketplace Enrollment (2014-2023)

Fig. Almost 4 in 5 individual market enrollees are subsidized

Fig. Health insurance coverage of non-elderly 0-64 – uninsured (2008-2021)

Introduction to reconciliation

One the expectations from issuers participating in the sale of health insurance plans via the federally facilitated or state-based marketplace is ensuring alignment of enrollment and payment data with the marketplace (any subsidy payments made by CMS to issuers are based on the coverage details in the marketplace database).

Fig. Enrollment and Payments

Enrollment data alignment between the marketplace and issuers is maintained through the following mechanisms -
1. 834 transactions via Electronic Data Interchange – this is the primary channel for communicating new enrollments, changes in enrollments and reinstatements.
2. Monthly reconciliation cycle – for data comparison to identify discrepancies and responsible party for action to resolve.

While the underlying purpose and processes are similar in the monthly reconciliation cycles, all marketplaces (FFM and SBMs) have their own set of business rules, with further differences between the enrollment and financial processes. Below example of the FFM enrollment reconciliation cycle process will illustrate the general structure of the monthly cycle -

1. The monthly Enrollment Reconciliation process begins with the FFM “Pre-Audit” extract – this is a point-in-time snapshot of all policy records in the FFM enrollment database.
2. Issuers will create and send Reconciliation “RCNI” file – this is a point-in-time snapshot of all policy records in the issuer enrollment database.
3. FFM will compare the two extracts, generate, and send Reconciliation Result “RCNO” file – this contains data on both the pre-audit and RCNI files, along with record and field level flags to show results of the comparison and resolution action responsibility.
4. FFM will take actions where they are responsible and expect the issuers to do the same after each cycle.

Fig. FFM enrollment reconciliation cycle

Why are reconciliation discrepancies generated?

The primary reason for discrepancies is the fact that there is no single system of record for all fields and either system could be the source of truth based on the scenario that caused the discrepancy. Below are some of the common scenarios:

1. Timing issues –
   1. Differences in the timing of extracting snapshot of the Marketplace and Issuer databases for comparison.
   2. Timing lag associated with making updates to the data after changes are communicated between the databases.
2. Issues with 834 transaction generation and processing –
   1. Issues with outbound 834 file generation for marketplace – communicating the updates made to the marketplace database – there are certain changes that marketplace systems are unable to communicate via the standard 834 transactions and get sent through a different channel (for e.g., only communicated with indicators on the monthly pre-audit file).
   2. Issues with inbound file processing for issuers – ingesting and processing updates to the data shared by the marketplace in the form of IC 834 files/pre-audit indicators.
   3. Issues with outbound file generation for issuers – communicating the updates made to the issuer database in a form that is properly ingested and processed by the marketplace.
3. HICS cases – by design per the CMS process – The HICS process is an incident management system that deals with complaints/concerns from members. The marketplace sends these cases with specific instructions to make updates to the issuer data (with stringent TAT targets to prioritize member’s access to care) without marketplace updating their database. The work on these HICS cases directly leads to discrepancies being generated between the two databases – Marketplace expects these updates to be communicated over to them through the monthly reconciliation cycle (sent as disputes).
4. Data structure – The marketplace stores data in a structure that could be different from the structure of data within the issuer system. For e.g., FFM enrollment data is structured hierarchically and consists of applications, policies, and segments - issuers may not have similar structure for their enrollment database.
5. Differences in the expected (based on the billing) and actual payments received as subsidy (APTC) from the marketplace causes financial discrepancies. These are caused by any of the above issues causing enrollment discrepancies, leading to financial impact or purely payment related issues like below-
   Billing and payment posting issues – Even after enrollment data is aligned, there could be issues in the issuer systems/manual errors that cause problems with generating the correct billing or with correctly identifying and posting the payments received to the right policy. From an issuer’s perspective, there is generally value in classifying the identified discrepancies from the monthly reconciliation cycles in below groups, based on what is financial/financially-impacting as opposed to what is not, to aid with prioritization.

What are the complexities associated with reconciliation discrepancy resolution?

Discrepancy resolution is an exercise in determining the source of truth between the marketplace and issuer data. This involves looking at multiple systems and figuring out the cause of the discrepancy to determine the path for resolution.

Conclusion

• While it is a lucrative proposition for issuers to participate and create offerings for individuals buying from the marketplace due to the increasing enrollment in the US individual health insurance marketplace business over the years, the counter pressure comes from the trend of increasing SBMs – there are overhead costs associated with adhering to the different business rules and data structures for each state.
• Add to that the fact that the proportion of subsidized enrollees has gone up over the years and that these subsidies are distributed per the status of coverage in the marketplace database, the importance of ensuring successful reconciliation with the marketplaces has also gone up significantly. Below are some recommendations to improve performance-

1. 1. Focus on upstream processes – Efficiently managing 834 file generation and processing, HICS processing, bill generation and payment posting processes has multi-fold impact on the performance of the downstream monthly reconciliation cycle.
   2. Focus on data structure alignment – Depending on the magnitude of reconciliation issues due to data structure misalignment, issuers should evaluate whether upfront investment in fixing the data structure is more cost efficient than the alternative.
   3. Systematic approach to deal with complexities of discrepancy resolution – Issuers can
      1. develop automations for accessing data from multiple systems.
      2. job-aids and work simplification tools for reviewing data.
      3. mistake-proofing tools for taking resolution actions (systemic validation).
   4. The metrics on the EAPS scorecard are great indicators of issuer performance – track and drive improvement on all the reported metrics from CMS for driving improved business outcomes.

Excelling at managing the complexities associated with the reconciliation process continues to be a focus area for all issuers and third-party administrators operating in this space.

Glossary of terms

CMS - Centers for Medicare & Medicaid Services – It is the federal agency that provides health coverage to more than 100 million through Medicare, Medicaid, the Children's Health Insurance Program, and the Health Insurance Marketplace. CMS works in partnership with the entire health care community to improve quality, equity and outcomes in the health care system.

EAPS - Enrollment Alignment Performance Summary Reports – CMS utilizes the set of metrics within the Enrollment Alignment Performance Summary (EAPS) Report to monitor FFM issuer performance within each enrollment data alignment channel.

HICS - Health Insurance Casework System – It is an incident management system based on principles of the Incident Command System (ICS), which assists hospitals and healthcare organizations in improving their emergency management planning, response, and recovery capabilities for unplanned and planned events.

Issuer - An issuer of an Individual Qualified Health Plan (QHP) through the State-based and Federally facilitated Health Insurance Marketplaces (Marketplace plans). 

SEED - System of Exchange Enrollment Data – It is a web application that provides issuers a secure way to view their enrollment data on the Federally Facilitated Marketplace (FFM) in real time.

Refrences

[1] McGough et al.
“How does health spending in the U.S. compare to other countries?”
https://www.healthsystemtracker.org/chart-collection/health-spending-u-s-compare-countries/

[2] Tolbert, Jennifer, and Patrick Drake
“Key Facts about the Uninsured Population.” KFF, KFF, 12 May 2023
www.kff.org/uninsured/issue-brief/key-facts-about-the-uninsured-population/#:~:text=One%20in%20five%20uninsured%20adults,health%20conditions%20and%20chronic%20diseases

[3] White, Joel C. et al.
2021 Health Insurance Exchanges, Council for Affordable Health Coverage - HEALTH BENEFITS INSTITUTE, Oct. 2021,
https://static1.squarespace.com/static/58bf2243d482e99321a69178/t/617fc96a86c21d6563070086/1635764586884/CAHC+HBI+2021+HIX+Report+Final+WEB+.pdf

[4] KFF analysis of 2010-2021 American Community Survey
https://www.kff.org/other/state-indicator/nonelderly-0-64/?dataView=0&activeTab=graph&currentTimeframe=0&startTimeframe=12&selectedDistributions=uninsured&selectedRows=%7B%22wrapups%22:%7B%22united-states%22:%7B%7D%7D%7D&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D#notes

[5] KFF analysis of Open enrollment data from CMS
https://www.kff.org/health-reform/state-indicator/marketplace-enrollment/?activeTab=graph&currentTimeframe=0&startTimeframe=9&selectedDistributions=number-of-individuals-who-selected-a-marketplace-plan&selectedRows=%7B%22wrapups%22:%7B%22united-states%22:%7B%7D%7D%7D&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D#notes

Health Insurance Marketplace Open Enrollment Reports for 2014, 2015, and 2016,
Marketplace Open Enrollment Period Public Use Files for 2017-2023 Centers for Medicare and Medicaid Services (CMS), Department of Health and Human Services

[6] Ortaliza, Jared, and Krutika Amin
“As ACA Marketplace Enrollment Reaches Record High, Fewer Are Buying Individual Market Coverage Elsewhere.” KFF, 12 Sept. 2023
www.kff.org/private-insurance/issue-brief/as-aca-marketplace-enrollment-reaches-record-high-fewer-are-buying-individual-market-coverage-elsewhere/#:~:text=Almost%204%20In%205%20Individual%20Market%20Enrollees%20are%20Subsidized&text=Early%202023%20off%2DMarketplace%20enrollment,plans%20has%20fallen%20each%20year

About the authors

Preshit Kasat

Preshit Kasat is a quality and process excellence professional with over 3 years of experience and considerable insight in driving improvement initiatives across enrollment, billing, payments, and reconciliation in the US ACA marketplace payer business. He is a certified Six Sigma Black Belt with degrees in Mechanical Engineering from Pune University and MBA from SJMSOM, IIT Bombay. LinkedIn - https://www.linkedin.com/in/preshit-kasat/

Arup Ghosh

Arup Ghosh has a dynamic career with over 19 years of experience in process definition, implementation & consultancy (CMMI, AGILE, ITIL, ISO 27001, ISO 9001), continuous process improvement (Lean & Six Sigma), business process reengineering & automation, program management across IT, BPO & Automobile industry. He has a strong experience in driving process transformation & implementing Quality Management System in US healthcare industry. He has done his master’s in Quality Management and is a certified Six Sigma Master Black Belt, ITIL expert and Scrum master. LinkedIn - https://www.linkedin.com/in/arup-ghosh-0237002a/