New Paragon Report: Obamacare Enrollment Fraud Surged in 2025

Last year, The Great Obamacare Enrollment Fraud revealed that millions of people were improperly enrolled in Obamacare exchange plans. Our new paper, The Greater Obamacare Enrollment Fraud: The Fraud Got Much Worse in 2025, documents the further deterioration of Obamacare exchange integrity over the past year. I authored the paper with Chris Medrano, Niklas Kleinworth, and Jackson Hammond. The Washington Post reported on our new study yesterday. And two weeks ago, Bloomberg had a must-read expose detailing the large-scale  schemes—centered in south Florida—to get rich through lies and ripping off enrollees and taxpayers.

Using the latest federal data, we conservatively estimate that there are 6.4 million ineligible enrollees in exchange coverage—a more than 25% increase from 2024. Fraud is heavily concentrated in federal exchange states, particularly those that have not expanded Medicaid.

Just a few timely blog posts related to The One Big Beautiful Bill before I provide a summary of the new paper.

• I authored a Prognosis explaining how the Senate improved upon the House reconciliation bill’s Medicaid provisions by further reducing states’ ability to money launder through Medicaid.
• Jackson Hammond and Elle Kalisz co-authored a Prognosis explaining how rural hospitals should not be adversely affected by the legislation and have the potential to benefit from policies that reduce waste, fraud, and corporate welfare received by insurers and big hospital systems.

What This Paper Covers

• Massive growth in fraudulent exchange enrollment: Improper enrollment rose from 5.0 million in 2024 to 6.4 million in 2025, with the taxpayer cost projected to exceed $27 billion this year.
• Perverse policy incentives: Enhanced subsidies, weak eligibility verification, and broker/insurer incentives created ideal conditions for fraud.
• State-by-state analysis: The paper compares reported enrollee income to actual likely eligibility in each state. Only two states saw a decline in improper exchange enrollment from 2024 to 2025: North Carolina, which recently expanded Medicaid, still has massive fraud in its exchanges, and Virginia, which transitioned to a state-based exchange with more control and oversight.
• Fraud mechanics: We explain how unscrupulous brokers, insurers, and others exploit direct enrollment pathways and automatic re-enrollment to perpetuate fraud.
• Policy solutions: The paper concludes with legislative and regulatory reforms to reduce improper enrollment and protect taxpayer dollars.

Why Fraud Exploded

Four major factors drove the 2025 surge in improper enrollment:

1. Enhanced Obamacare subsidies for people reporting income between 100–150% of the federal poverty line (FPL) make plans fully subsidized.
2. Biden administration policies prioritized boosting enrollment over verifying eligibility.
3. Limited recapture rules make it difficult for the federal government to recover excess subsidies if income is misstated.
4. Automatic re-enrollment perpetuates improper coverage year after year without requiring updated income verification.

The Scale of the Problem

• Nearly 11 million people (45% of all exchange enrollees) were automatically re-enrolled in 2025.
• Among enrollees who reported income between 100–150% of FPL in HealthCare.gov states, an estimated 62.3% are not actually eligible.
• For every two eligible enrollees, there are more than three ineligible individuals in this income group.
• In 29 states, more people reported income in the 100–150% FPL group than are likely eligible.
• In Florida, we estimate nearly five times as many enrollees in that band as eligible residents.
• In 14 other states—including Texas, Georgia, North Carolina, and Ohio—there are more than twice as many reported enrollees as eligible individuals.

The Incentives to Cheat

• Enrollees have an incentive to misreport income: They get larger subsidies and better cost-sharing with little risk of penalty.
• Brokers get higher commissions for each sign-up and often enroll people—without their knowledge—using only a name, birthdate, and address.
• Insurers benefit from subsidy-driven enrollment and prefer easy, automatic Treasury subsidies over collecting premiums from customers.
• The IRS recoups only a small portion of excess subsidies paid to insurers.

Fraud in Action

• Third-party brokers use HealthCare.gov’s direct enrollment system to sign people up without interacting with the exchange or even the consumer.
• The Biden administration’s emphasis on boosting enrollment made this fraud easy and profitable.
• The Department of Justice recently exposed two major fraud rings in Florida involving brokers and false income reporting.
• Many people are enrolled without their knowledge or consent.
• The number of enrollees for whom the federal government does not know their race or ethnicity has surged to more than half of enrollees—suggesting a spike in fraudulent, unverified enrollments made by brokers who have minimal information on enrollees.

What Needs to Be Done

Paragon’s latest analysis shows the urgent need to stop enrollment fraud. We recommend:

• Ending automatic re-enrollment, which keeps improperly enrolled individuals on the program year after year.
• Recouping the full value of excess subsidies when income is misstated.
• Reversing Biden-era rules that emphasize sign-ups over eligibility.
• Penalizing brokers and insurers who facilitate improper enrollment.
• Allowing the enhanced subsidies to expire after 2025, as current law provides.

Fortunately, reforms are already underway:

• The Trump administration has proposed an important regulation to reverse Biden policies and restore enrollment integrity.
• The One Big Beautiful Bill, passed by the House in May, would:
  • Codify the Trump administration’s proposed reforms,
  • End automatic re-enrollment, and
  • Require full subsidy recapture.

If enacted, the bill would implement five of our six key reforms from last year’s report. Congress should also adopt the sixth and most important: allowing Obamacare’s enhanced subsidies to expire as scheduled after this year.