Colorado Did Not Always Comply With Federal Requirements When Expending Federal Establishment Grant Funds Allocated for Its Shared Eligibility System Costs

Connect for Health Colorado (Colorado marketplace), the health insurance exchange established by the State of Colorado under the provisions of the Patient Protection and Affordable Care Act, did not always comply with Federal requirements when expending Federal establishment grant funds allocated for the Shared Eligibility System (SES) costs. (This audit focused on the allocation of SES costs to the Colorado marketplace by the Colorado Department of Health Care Policy and Financing (HCPF), the State Medicaid agency, for the development and implementation of the SES, which is an automated system modified from HCPF’s existing Medicaid eligibility system.) Specifically, the Colorado marketplace allowed (1) SES costs to be allocated to it on the basis of an arbitrary, 50/50 cost allocation ratio, contrary to Federal requirements and to Centers for Medicare & Medicaid Services (CMS) supplemental guidance that the methodology for allocation be based on expected transactions and expected program population and not be arbitrary; and (2) SES costs totaling $2.1 million that were incurred, either entirely or in part, during the initial Cost Allocation Plan (CAP) period to be improperly allocated to it because the marketplace used the cost allocation ratio in effect for the revised CAP period.