A new audit report finds that the state did not make sure people who used MNsure to enroll in public health insurance programs were eligible for the benefits they received.

In some cases, taxpayer money was spent on coverage for people who weren’t even eligible for the programs, according to the report Wednesday from the state legislative auditor. In other cases, the state paid more because people were in the wrong program.

The audit looked at a sample of 193 people who enrolled in the programs between October 2013 and April 2014, and found that nearly 17 percent received wrong answers about the benefits they should receive.

The report stoked partisan debate during a hearing near the State Capitol, where MNsure officials reported progress in preparing the health exchange website for open enrollment that starts Saturday.

“We certainly found evidence that these errors were costing taxpayers money,” Cecile Ferkul, the deputy legislative auditor, said in an interview.

Just how much money is unclear, since the report includes no tally and it’s not known how widespread the errors are beyond the cases reviewed by auditors.

Minnesota launched the MNsure health exchange in 2013 to implement the federal Affordable Care Act. People can use the exchange to purchase commercial insurance policies, but the audit released Wednesday dealt with its other primary function — determining eligibility for public health insurance programs.

Human Services faulted

MNsure started processing new applications for the programs on Oct. 1, 2013. Through June, the state paid $376 million in benefits for people MNsure enrolled in the state’s public health care programs.

The report from Legislative Auditor James Nobles faulted the state’s Department of Human Services (DHS), which is using MNsure for eligibility determinations in Medical Assistance, MinnesotaCare and the Children’s Health Insurance Program.

When the report was presented during a meeting of the MNsure Legislative Oversight Committee, one Republican said the results are the latest example of how MNsure isn’t working for Minnesotans. Her party opposed DFL-backed legislation passed in 2013 to create the exchange.

“We’ve just fallen woefully short when it comes to making sure that we’re delivering on promises to Minnesotans who are depending on these programs and to taxpayers who are footing the bill,” said state Rep. Tara Mack of Apple Valley.

DFLers said that while the report points to problems that must be solved, accurate eligibility determinations in the public health insurance programs have been challenging for years. “This problem has lasted a lot longer than MNsure,” said state Sen. Kathy Sheran, DFL-Mankato.

Nobles agreed that creating a system for eligibility determinations is “extraordinarily complicated,” but he added: “We decided to build our own Minnesota insurance exchange, so it’s the challenge that we have to meet.”

‘In a very different place’

More than 300,000 people have used the MNsure system to determine eligibility for public programs. But it’s unclear whether the problems identified in the audit apply to all those recipients.

The audit looked at cases through April 2014 — at which point about 167,000 people had used MNsure to enroll in public programs — and problems in the system at that point have since been fixed, said Lucinda Jesson, the state Human Services commissioner.

In June, a consultant hired by the state to guide fixes to the troubled MNsure website reported that the system was making accurate eligibility determinations, Jesson said.

“We are in a very different place with the MNsure IT system today than we were at the end of April,” she said. “A large number of the eligibility problems identified in this report — we identified, we fixed, and I believe the IT system is doing a much better job of making correct eligibility determinations today.”

Even so, Jesson wrote in a letter to Nobles that’s included in the report: “These findings are serious, and we are working to improve compliance as we move forward with technology improvements.”

In some cases, the audit looked beyond the 193-person sample and found issues. In one such case, the DHS paid $44,993 for health care benefits because 24 people were able to create duplicate accounts through MNsure. In those cases, health insurance companies that are hired by the state to manage care for people in public programs got multiple payments for managing the care of just one beneficiary.

The department is recovering funds in those cases, Jesson said.

The audit did not tally how much public money was spent buying coverage that people didn’t qualify for, said Ferkul, the deputy auditor. Nor did the report estimate an overall budget impact across the 167,000 people who were enrolled in public programs through MNsure as of April.

But some examples are particularly troubling, Ferkul said, pointing to one situation where a child received Medical Assistance coverage even though the family’s household income was about $95,000. In that case, the child would have been eligible for Medical Assistance if the household income were below $53,708.

It’s also not clear how many people went without benefits they should have received, Ferkul said, because the audit focused on those deemed eligible for the programs — not those who weren’t allowed in.

Overpayments

Medical Assistance is the state’s version of Medicaid, which provides zero-premium coverage for those with the lowest incomes. MinnesotaCare provides coverage for a slightly higher-income group, and in most cases charges a monthly premium ranging from $4 to $50, depending on a recipient’s income.

The audit found several cases where the DHS provided Medical Assistance and MinnesotaCare benefits for people whose incomes exceeded federal and state program limits. Out of 137 people in Medical Assistance cases reviewed by the auditor, 11 were found to have too much income to qualify for the program. On MinnesotaCare, one of 41 recipients had income that exceeded the program’s limits.

“We also found one Medical Assistance recipient who received benefits before the eligibility worker verified his income,” the report states. “As a result, DHS overpaid $17,421 in health care costs for these 13 recipients.”

Once people are enrolled in public health insurance programs, recipients are supposed to report income changes that could make them ineligible. In the past, the DHS made quarterly checks of income data, but stopped doing so in 2014 when the regulation was repealed by the federal Affordable Care Act, according to the audit report. If the DHS had continued making the checks, “it would likely have detected the errors we found in our sample test,” the report states.

Eligibility can vary depending on a recipient’s household size, and the DHS decided to not verify household size or family relationships, the audit noted. As a result, the department likely overpaid health care costs for four of 100 households tested, according to the report.

Medical Assistance provides coverage to individuals with incomes below $15,516 per year, although pregnant women and children can qualify at higher income levels. MinnesotaCare covers individuals with incomes between $15,516 and $22,980. Income limits change with household size.

During Wednesday’s committee hearing, MNsure Chief Executive Scott Leitz said last-minute fixes to the MNsure website are going well. Last week, state officials described efforts to fix about 10 issues affecting website performance; Leitz said the problems have been resolved, although testing continues.

“We haven’t identified any issues at this point in time that would block us from going live,” he said. “We’re working 24/7 — and I mean that quite literally — and all hands are on deck.”

Twitter: @chrissnowbeck