Trump Weighs In, the Importance of a Minimum Premium Payment, and New Enrollment Numbers Indicate Re-Enrollment of Many Phantoms

This week, President Trump took to Truth Social to share insights from Cato’s Health Policy Director Michael Cannon, arguing that Congress should reject extending enhanced COVID-era Affordable Care Act (ACA) subsidy bonuses and instead pursue regulatory relief and market-based reforms. Trump’s post flagged Cannon’s comments about the major benefits of the 2018 rule that expanded short-term health plans. I authored a 2023 Paragon report on the long-term benefits of short-term plans, which are state-regulated plans that are not subject to the ACA’s costly requirements. My research showed that the ACA market measurably improved in states that fully permitted short-term plans with lower premiums, higher enrollment, and greater insurer participation—disproving claims that expanding access to short-term plans would harm the ACA market.

Today’s newsletter covers three areas:

• The essential role of a well-structured minimum premium payment in reducing ACA fraud, as well as problems with an emerging proposal
• An analysis of the exchange enrollment data released on January 12 and how it shows continued improper and phantom enrollment
• A new Paragon 101 on pharmacy benefit managers (PBMs)

Why a Meaningful Minimum Premium Is Essential to Curb Obamacare Fraud

On January 13, I posted a new Prognosis examining how the COVID subsidy bonuses, which created zero-premium plans, fueled significant fraud and phantom enrollment in the Obamacare exchanges—and the importance of requiring a meaningful minimum premium to reduce fraud and phantom enrollment. In 2025, an estimated 6.4 million people were improperly enrolled in fully subsidized exchange plans. In 2024, 40 percent of fully subsidized enrollees had zero medical claims, a striking indicator of phantom enrollment. As a recent indication of the severity of the problem, the Government Accountability Office submitted 24 fictitious applications for fully subsidized coverage, and the exchanges approved 23 of them.

Before 2021, all exchange enrollees were required to pay a nominal amount if they chose to purchase a silver plan. That requirement has been restored this year with the expiration of the COVID subsidy bonuses. The lowest-income households (those at 100 percent of the federal poverty level) are required to pay about $27 per month for a benchmark plan. This plan carries extremely low deductibles and copayments, and 97 percent of the premium would be paid by taxpayers in the form of a subsidy to the health insurer. These contribution requirements help ensure basic enrollee engagement and deter fraud and phantom enrollment.

Some lawmakers now seeking to revive the COVID subsidy bonuses have proposed a $5 monthly premium with the option to pay the $60 upfront for the entire year—a structure that would invite even more fraud. In the Prognosis, I explain why such a policy would fail. A meaningful minimum premium—at least $25 per month, roughly equivalent to average broker commissions—is necessary to prevent intermediaries from paying premiums on behalf of enrollees. Perhaps more importantly, minimum payments must be monthly, not prepaid, to preserve a continuous enrollment test.

To further strengthen program integrity, I suggest requiring insurers to receive recorded verbal consent at enrollment, enforcing prohibitions on insurers waiving enrollee premium payments, and terminating and recouping subsidies from insurers if enrollees fail to pay their share of the premium. Without these safeguards, subsidies will continue flowing directly from the U.S. Treasury to insurers for coverage for fictitious enrollees or for enrollees who do not want or do not know they have been enrolled.

Exchange Enrollment Trends and the Persistence of Improper Enrollment

The last ACA open enrollment period before large-scale improper enrollment took hold was the 2023 period, which concluded with approximately 16.4 million sign-ups. Fraudulent enrollment schemes appear to have accelerated during 2023 and the 2024 open enrollment period and were further entrenched in 2025 through automatic re-enrollment.

Following the 2024 open enrollment, exchange sign-ups rose to 21.4 million in 2024 and peaked at 24.3 million in 2025. In 2025, 45 percent of sign-ups took no action during open enrollment and were automatically re-enrolled from previous coverage.

As a reminder, many individuals improperly enrolled likely had other coverage. In 2025, CMS noted there were 1.6 million people enrolled simultaneously in both Medicaid and an ACA plan. In 2024, CBO noted there were 21 million individuals nationwide who had multiple forms of coverage.

According to CMS’s new data, exchange sign-ups in the 2026 open enrollment period were 22.8 million. Paragon estimates that improper enrollment accounted for roughly 5.0 million enrollees in 2024 and 6.4 million enrollees in 2025. The enrollment decline from 2025 to 2026 indicates that some improper and fraudulent enrollees have exited the market, but my rough estimate is that about 75 percent of them remain—largely due to automatic re-enrollment mechanisms and continued incentives to misestimate income, particularly in non-Medicaid expansion states.

In a Prognosis two weeks ago, I wrote that initial sign-ups were higher than what many expected because the underlying subsidies are extremely generous, intensified silver-loading has led to even higher subsidies and a proliferation of fully-subsidized bronze and gold plans, and automatic re-enrollment keeps phantom enrollees enrolled. In addition, zero-premium bronze and gold plans create strong incentives for unscrupulous agents and brokers to move enrollees out of silver coverage—even when doing so is not in the enrollee’s best interest—because keeping premiums at $0 maximizes retention and commission payments.

Some fraudulent enrollment will further unwind this year as people do not effectuate coverage by paying their share of the premium—particularly among individuals who are unaware they were enrolled, are already covered elsewhere, or are fictitious. To the extent that phantom enrollees were switched into fully subsidized bronze or gold plans, this unwinding will not occur as those enrollees will not have any premium payments.

Importantly, since many improper enrollees do not use their health plan for any health care services, it is incorrect to imply that enrollment declines also mean fewer people using coverage and less care received.

Policymakers should welcome reductions in fraudulent enrollment rather than seek to preserve inflated enrollment figures with numerous improper and phantom enrollees. To ensure that improper enrollees continue to exit the system, Congress should require a meaningful minimum premium payment for all exchange enrollees and not extend the COVID-era subsidy expansions, which expired as scheduled after 2025.

PBM 101

A new policy 101 by Jackson Hammond reviews the basics of pharmacy benefit managers (PBMs) and their important but controversial role in the pharmaceutical system. This Paragon 101 explains how PBMs impact drug prices and premiums by negotiating rebates. These rebates lower net prices for insurers but incentivize higher list prices, which are typically the basis for patients’ coinsurance. Jackson highlights the essential trade-off these rebates produce: Premiums are lower than they otherwise would be, but patients face higher out-of-pocket costs.

Although research indicates that PBMs generate savings through negotiation, increased generic use, and administrative efficiencies, the growing complexity of the rebate system—a system reinforced by statutory constraints—obscures who benefits and who bears the costs. As just three PBMs have grown to control around 80 percent of the market, PBMs have come under increasing scrutiny from policymakers.