Answering the Critics: How Paragon Discovered Enrollment Fraud in the ACA Exchanges

Over the last decade, federal taxpayers have spent more than $2 trillion subsidizing health insurance under the Affordable Care Act (ACA). Last year, Paragon published a report revealing rampant fraud in the ACA exchanges stemming from improper enrollment enabled by bad policy and the Biden administration’s lax enforcement. We recently updated those findings with newly available data, showing that the level of fraudulent enrollment surged by more than one-quarter from 2024 to 2025, reaching 6.4 million recipients.

Since then, some organizations have criticized our findings, arguing that our data choices are flawed, that our conclusions conflict with other analyses, and that we conflate innocent mistakes in income reporting with fraud.

Below, we respond to these criticisms and explain why our results likely understate the problem of improper exchange enrollment.

Criticism #1: Other data sources show that fraud in the ACA exchanges is low

Response: Previous reports suffer from serious limitations and use outdated data. Paragon’s analysis corrects for these and is more up to date.

This criticism distorts analyses conducted by the Treasury Inspector General for Tax Administration (TIGTA) and CMS—analyses based on data from before the explosion of improper enrollment. In 2023, the TIGTA released a report on improper premium tax credit (PTC) payments through the ACA exchanges. It found:

“As of May 5, 2022, the Internal Revenue Service (IRS) processed 6.2 million Tax Year 2021 returns with $42.5 billion in PTCs that were either received in advance or claimed at the time of filing. A total of $3.6 billion in APTC reported by these taxpayers was in excess of the amount to which they were entitled…”

These results imply that 8.5 percent of PTCs were improperly distributed in tax year 2021. Strikingly, of the 6.2 million tax returns with PTCs in 2021, 2.0 million (32.3 percent) received excess advanced PTC payments.

But the TIGTA’s calculations understate the current scale of improper PTC payments for several reasons:

1. More than 30 million tax returns for the 2021 tax year processed after May 5, 2022 were not included in the TIGTA’s analysis.
2. The 2021 tax year was the first year the Biden administration implemented its expanded COVID credits. Enrollment in the ACA exchanges has since exploded, rising from 12 million in 2021 to 24 million in 2025. Much of this growth has occurred in the 100 to 150 percent FPL category, which is the focus of Paragon’s work.
3. The IG report does not disaggregate its results by income group. Given that the incentives for fraudulent enrollment are strongest for the 100 to 150 percent FPL group, it is likely the improper payments reported by the IG came disproportionately from this group.
4. The IG report does not capture the main group of improper enrollees: individuals who likely didn’t file tax returns. As our papers explain, much of the fraud in the ACA exchanges is driven by unscrupulous brokers and insurance agents who enrolled people without their knowledge or consent. It is likely that many of the people who fell victim to these schemes had such low income that they did not file a federal tax return. (An estimated 10 million people do not file a federal income tax return each year.) These cases would not have been included in the IG’s analysis, which relied on taxpayers’ income reported on tax returns to determine APTC overpayments.

Critics also cite a 2024 CMS report in an attempt to undermine Paragon’s analysis. This analysis, based on 2022 tax year data, examined a random sample of 2,000 applications to the federal exchange. It found that the improper payment rate in the APTC program was 1.01 percent ($563 million) in tax year 2022.

1. CMS’s reported error rate likely reflects only whether application paperwork was processed correctly—not whether applicants were actually eligible or whether the APTC amounts were accurate. This is a far more limited metric than what Paragon analyzed and does not address the broader and more serious problem of improper enrollment and subsidy overpayments.
2. CMS’s analysis is outdated. Enrollment in the ACA exchanges has increased substantially in the last few years – rising from 15 million in 2022 to 24 million in 2025 – especially among lower-income groups.
3. CMS did not disaggregate the results by income and may not have had adequate statistical precision to capture the level of fraudulent enrollment in the 100 to 150 percent FPL group.

Criticism #2: Existing safeguards preclude large-scale fraud in the ACA exchanges

Response: This claim is laughable considering the Biden administration’s consistent effort to undermine program integrity measures.

To maximize enrollment at any cost, the Biden administration systematically weakened or dismantled program integrity measures, which were meant to prevent fraudulent enrollment in the ACA exchanges. For example, the Biden administration:

1. Required all exchanges to accept enrollees’ self-attestation of income if reported income could not be verified through alternate data sources, such as tax filings. This made it particularly easy for individuals with incomes below 100 percent of FPL (who were already eligible for Medicaid) to sign up for fully subsidized ACA plans, since people in this income group often do not file taxes.
2. Sharply limited the amount the federal government can recover if APTCs are paid on behalf of ineligible enrollees.
3. Opened up a special enrollment period (SEP), based on a claim of low-income and eliminated the need for applicants on federal exchanges to submit proof that they qualify for that SEP and other SEPs, essentially permitting year-round open enrollment.
4. Implemented more aggressive automatic re-enrollment procedures, which increased the number of people who never receive a bill and may have remained enrolled for multiple years without their knowledge.

For a more in-depth summary of these changes, see the section “Biden Policies That Exacerbated Improper Enrollment and Fraud on Federal Exchanges” in our report.

Criticism #3: Combining data from different years invalidates Paragon’s analysis

Response: Using data from different years is standard statistical practice. The organization that made this critique has done this too.

Due to data limitations or lags between data collection and publication, researchers are often compelled to use datasets from different sources and years. This is standard practice in empirical analyses. Ironically, the organization criticizing our data practices did precisely the same thing in a recent paper, combining Census Bureau data from 2023 with CMS data from 2025.

Our research design is based on publicly available data from the federal government. To estimate the numbers of ineligible enrollees, we compared information released by the Centers for Medicare and Medicaid Services (CMS) of the number of ACA exchange sign-ups who claim income between 100 and 150 percent of the federal poverty line (FPL) to the estimated number of people with actual income in this range who would be eligible for such coverage.

To determine the size of the population eligible for coverage, we relied on the American Community Survey (ACS), the largest annual survey of the population carried out by the Census Bureau. The ACS surveys about 3.5 million households and produces highly reliable state-level estimates widely used in health policy research. Households surveyed by the ACS are asked a wide range of questions about their social, demographic, and economic circumstances. ACS then collects detailed information about respondents’ ages, source of health insurance coverage, and income levels. We focus on non-elderly adults in households with income between 100 and 150 percent of FPL. These individuals are generally eligible for zero-dollar premium plans on the ACA exchanges under the enhanced Biden COVID credits. We exclude children because, in this income range, they are eligible for Medicaid or CHIP coverage in every state and therefore do not qualify for exchange subsidies. We exclude seniors (age 65 and older) because they qualify for Medicare and therefore do not qualify for exchange subsidies.

As of mid-2025, the most recent available year of ACS data was 2023. So, we incorporated a small adjustment to account for population growth from 2023 to 2025. This helped ensure comparability with 2025 data on open enrollment sign-ups who claimed income between 100-150 percent of the FPL. Our approach is standard for empirical analyses that – due to the lack of data availability – must combine data from different years. In reality, the number of people within income categories changes slowly over time. In most states, our adjustment altered the estimated number of eligible enrollees in 2025 by about 1 percent or less.

Criticism #4: Excess exchange enrollment in the 100 to 150 percent FPL income group reflects simple mistakes, not fraudulent behavior

Response: The disparities are too massive to be simple mistakes.

Though some instances of misreported income are undoubtedly due to good-faith mistakes, there are two reasons to believe that the discrepancies we document predominantly reflect wide-scale fraud.

1. One would expect good-faith mistakes to occur in both directions (i.e., some income misrepresentations would lead ineligible people to improperly obtain coverage, while other income misrepresentations would lead eligible people to be improperly excluded from coverage). The net effect on enrollment would be approximately zero. Yet the data indicates that the former “mistake” occurred millions of times more frequently than the latter.

Enrollment in the 100 to 150 percent of FPL group surged under the Biden administration when incentives for fraud skyrocketed due to the availability of zero-premium plans for this population. If enrollment was driven by good-faith mistakes in income reporting, one would expect to see the same kind of variation in enrollment before fully subsidized plans were available. But the timing of the variation indicates that fully subsidized plans were indeed a powerful incentive for individuals and rogue brokers to fraudulently enroll people. As we discuss in detail in our papers, many instances of misreported income come not from individual enrollees but from brokers and insurance agents, sometimes acting without authorization from – or the knowledge of – the enrollee. Brokers benefit from commissions and know that many people are only willing to enroll if the coverage is ‘free’ to them, and insurers also benefit from the fraud because it helps them maximize revenue. So, every key actor—enrollee, broker, and insurer—has a positive incentive for income manipulation and fraud.

Our Estimates are Likely Too Conservative

Paragon’s estimates of ACA exchange fraud likely understate the scale of the problem. For example:

• We exclude states (Minnesota, New York, and Oregon) that use the Basic Health Plan, a state-administered, federally funded Obamacare option that provides taxpayer-funded insurance to low-income individuals with income above Medicaid eligibility. We also excluded the District of Columbia due to inadequate data. As a result, our estimates of the extent and expense of the fraud problem nationally do not include potential fraud occurring in these jurisdictions – despite evidence, for example, of extensive enrollment irregularities in New York’s health programs. Bill Hammond, a health policy expert at the Empire Center, calculated in 2024 that more than three million enrollees in New York appear to have incomes above the eligibility limits for either Medicaid or the Essential Plan, based on an analysis of Census Bureau data.
• We also assume that all those between 100 and 150 percent FPL who are eligible for a plan on the ACA exchanges are enrolled. However, a take-up rate of 100 percent is implausible. Prior to the ACA, take-up rates among adults eligible for Medicaid were estimated to be, at most, about 80 percent; some studies reported take-up rates as low as 32 percent. Moreover, while take-up rates in the ACA exchanges may have originally been higher than in Medicaid due to the incentives created by the exchanges’ limited open enrollment period, the Biden administration essentially eliminated this incentive for exchange enrollees between 100 percent and 150 percent FPL by creating a year-round special enrollment period, allowing individuals in this income bracket to wait until they were sick to sign up for coverage. Therefore, Medicaid take-up rates are likely reasonable proxies for those in our population of interest. Even if the true take-up rate in the ACA exchanges is higher than these estimates, but still below 100 percent, the actual level of fraud likely exceeds our reported estimates.
• Due to data limitations, we are unable to exclude undocumented immigrants, people who receive veterans’ health care, and those with access to affordable coverage from an employer. Accounting for these people would result in an even smaller number of exchange-eligible people (since these groups do not generally qualify for exchange coverage) and higher estimates of fraud.

There’s no getting around it: Greatly expanded subsidies and negligent stewardship of the ACA exchanges have led to widespread enrollment fraud, costing federal taxpayers at least $27 billion this year. Importantly, Paragon’s work has helped inform federal rulemaking and congressional efforts to limit fraud in the ACA exchanges. Paragon’s 2024 paper, “The Great Obamacare Enrollment Fraud” was cited seven times in CMS’ final rule to improve program integrity in the exchanges, and CMS adopted our methodology for its own analysis of improper enrollment in the exchanges.