Gregory M. Davids State Representative District 288, Fillmore and Houston Counties Minnesota House of Representatives ‘COMMITTEES: CHAIR, TAXES, (COMMERCE AND REGULATORY REFORM VETERANS AFFAIRS DIVISION WAYS AND MEANS November 3, 2015, Mr. Daniel Kane, Director Office of Acquisition and Grants Management Centers for Medicare and Medicaid Services 7500 Security Boulevard Baltimore, MD 21244 via electronic delivery Director Kane, After months of concem expressed by state lawmakers over the budget of Minnesota's health insurance exchange, MNsure, I tum to your office for assistance. These concems stem from several years of dysfunctional technology and underachievement, as well more recent inconsistencies and misleading statements by those in charge of MNsure regarding its financial health. On July 20, 2015, MNsure’s Board of Directors approved a three-year budget plan that lists “CCHO Establishment Grants” as a primary source of revenue for fiscal years 2016 and 2017 (which cover the time period July 2015 through June 2017). In presenting the budget plan, board member Tom Forsythe explained that CCIIO guidance provided “a longer time frame in which our establishment grants can be used. And some of that will actually extend into 2017 which will affect that budget as well.” This is reflected, without caveat, in MNsure’s 2015-2017 budget documents.! Ata mecting of the Minnesota Legislature’s MNsure Legislative Oversight Committee (LOC) on August 20, 2015, MNsure’s interim CEO, Allison O'Toole, testified that “CHO has given guidance that has extended the time period over which funding can be used for certain targeted activities that are necessary during the completion of the IT build or fo allow states greater opportunity to meet their enrollment targets in private plans.” Ms. O”Toole further stated that MINsure has “the benefit of using federal grant dollars through the end of next year.” * pins “FY 2016 Badger Seng 7.202015," bss 2018 inl seoessea sq0n01s PO. Box 82, Peston, MN 55965 (607) 951-3008, 585 State Ofice Building, 190 Rex. Dr ul, Minnesota 55155-1206 (cst) 206-927 ep. oreg.davidsthouse mmConcerned that MNsure’s FY 2015 administrative expenses exceeding its gross premium tax revenue could imply improper backfilling of ongoing operational costs with establishment funds, [requested documentation of the federal government's approval for extension of exchange grant funds through 2016. This is especially worrisome given MNsure’s inability to fulfill promises of being financially self-sufficient by the end of 2014, To date, I have received no such documentation from MNsure, At the September 29, 2015 hearing of the U.S. House of Representatives Energy and Commerce Committee's Subcommittee on Oversight and Investigations, Ms. O"Toole testified that MNsure has “a balanced, conservative and sustainable budget that is based on real numbers and real experience.” While unclear whether the 2015-2017 budget document was presented af this hearing, the published testimony contains no uncertainty regarding the availability of federal funding beyond 20152 Two weeks later, at the October 15, 2015 meeting of the MNsure, exchange executives again stated that their budget and spending follow applicable federal regulations. Documentation of approval to spend federal funds beyond this year, as well as to spend on budget items other than original authorized, was again requested Only through a subsequent exchange of letters with MNsure were state lawmakers made aware that MNsure has not yet received approval to spend federal funds beyond 2015, MNsure was sold to Minnesotans as a financially self-sustaining project, but nearly half of its FY 2015 budget and a third of its FY 2016 budget rely on federal funds. In addition, 11% of its FY 2017 budget relies on spending money that MNsure does not have authority to spend, While we are aware that MNsure was granted authority to spend federal funds; in 2015, we are deeply concerned about the indefinite retiance on federal funding that was originally scheduled to end almost a year ago, ‘The reliance on federal funding to sustain MNsure’s operations is made more troubling by two further developments. First, MNsure’s FY 2016 and 2017 budgets rely on revenue from the gross premiums tax that is based on unsupported and unrealistic enrollment growth. The most recent projections indicate that MNsure will grow from 45,000 enrollees for 2014 to 53,000 by the end of this year.® Yet, its premium tax projections rely on anticipated enrollment growth of 30,000 in each of the next two years. Given that original models predicted the fastest enrollment in MNsute’s first years, we are troubled that MNsure is projecting greater than 50% enrollment growth next year, When questioned on the basis for these enroliment projections, Ms. 0” Toole referred to Mr. Forsythe’s July 20 presentation. However, upon reviewing video of that meeting, no explanation is given for how MNsure arrives at such enormous expected growth. Not is this growth adequately explained by substantial increases in Minnesota's individual market health insurance premiums, which were not released until two months after MNsure adopted its budget. 2 testimony of Allison "Toole, Interim CEO, MNsure,” 929°2015, habs howe gevsnestinelt SOPRULONTOL AMIRI 02. accessed 1OBN2015 ® NINswe, “Premium Withold Revenue ~ PY 2016 Budoet Seti Assumptions,” 7202015, liso, ms enacts suum pl, accessed 10302015Second, MNsure has seen its share of well-publicized troubles in the first two years of operations, From chaos after its launch, to giving taxpayer-funded bonuses to top executives, to an ill-advised and costly Paul Bunyan-themed marketing campaign, missteps have been frequent. While there have been improvements, ‘on the surface, the MNsure system remains deeply flawed. Unfortunately for Minnesota consumers, MNsure’s website is still unable to fulfill basic promises made two years ago. Recently, the Minnesota Department of Human Services revealed three major issues stemming from the deeply flawed MNsure enrollment, case management and billing systems. Tens of thousands who rely on public health programs have been left waiting months to make changes to their insurance because MNsure cannot process those changes. Even more troubling, DHS has stopped using MNsure for billing of Basic Health Plan (MinnesotaCare) premiums, and announced that flaws in MNsure have inhibited DHS from sending bills to BHP enrollees since the beginning of this year MNsure’s commercial insurance arm remains unable to send applications to the insurer of choice in a timely or accurate manner. This results in delays of weeks or months between application and the time when people receive their insurance cards. The SHOP exchange isin disarray — nowhere near enrollment projections and also unable to process billing through MNsure. Rather than build basic functionality that would enhance the consumer experience, stch as a complete broker-navigator portal or the clinic and provider search fool, MNsare continues to pour resources into costly band-aids that are outside the scope of the original design Problems on the commercial and public side of MNsure result in massive uncertainty for consumers, delayed health care because of the lack of proof of insurance, significant lost BHP premium revenue, and ‘added costs for state taxpayers. In fact, after spending over $3 million for the faitec| MNsure billing system, DHS is now spending an additional $850,000 to upgrade the decades old financial system for public health programs to accommodate BHP billing.’ Ultimately, it seems unlikely that MNsure will ever be financially self-sustainable, and it is concerning that MNsure would present a budget as balanced based on federal funds it does not have permission to spend. I do not believe MNsure deserves any additional authority to spend federal funds, but hope that if approval is given enhanced scrutiny is applied to their requests for extensions and modifications, Additionally, I would appreciate copies of any correspondence or other communication with MNsure where direction is provided on whether federal funds may be spent in 2016. In ligh« of the inconsistencies detailed above, and the implications for our state budget, it is important for state lawmakers to understand the timeline of MNsure’s request(s) for extension of time to spend federal funds. “Iba also troubling hain is revsod BHP Blueprint submit to CMS in Decesber 2014, Minnesota DHS wrote that it “san coma compute sa premivn for ech Miaaesolacate ero, se 3 prem invoice ad veep! the premium payments” and that rots oscrred in "les hah [iP of cases. An audi of MNsute and DHS by the Minnesota Office ofthe Legislative Auditor publsted in Noverber 2014 bad found thet “DHS ha ot bled MinnesotaCare recipients forthe Jury to March 2614 penis a of Sepember 2014. ts rexponge to the aad, OHS. sid it intended to ey elena yea 20 bling eos and scr statement to elles by June 2013 DHS a testified to the MNsute LOC that they do not know the tal anount cf unhiled. BHP premiams. See Minnexoia Basic Health Plan Bluprnt, (2102014, apse mea ube bandon ondsinmnesu-pstupecedecemt pl MN OLA Financial Audit Division Rept 12 22 AVI22O14, jy Few spd 22 al 5 Sowbeck, Christopher, “Stat paying $850k for MNsueallemative on MineesotaCare invoies,” 1302018, up ty ibuns comvssme-eig-8S0k-so- ms alemnais-emiuesctacaresiaGsc/ S378, accessed 1112018‘Thank you for your attention to this serious matter. Please do not hesitate to contact me if we can clarify any points or provide additional information. Sincerely, 7 Representative Greg Davids District 288, Co-Chair, MNsure Legislative Oversight Committee copies (via electronic mail) Ms. Mary Beth Green, Director, Division of Grants Management, Office of Acquisition and Grants Management, CMS Ms. Vivian Smith, Grants Administration Specialist, Division of Grants Management, CMS. The Honorable Fred Upton, Chair, U.S. House Energy and Commerce Committee The Honorable Tim Murphy, Ph.D., Chair, U.S. House Energy and Commerce Committee « Subcommittee on Oversight and Investigations