Phantoms Still Enrolled—Why Initial Obamacare 2026 Enrollment Has Stayed Flat

Despite gross premiums rising 26 percent and the expiration of the COVID-era subsidy bonuses, Affordable Care Act (ACA) exchange enrollment in states using the federal exchange has barely changed relative to last year. According to the Centers for Medicare and Medicaid, enrollment in states using the federal exchange after this open enrollment period was 15.6 million people—down only 3.7 percent (or 600,000 people) relative to last year after open enrollment. CMS has not reported state-based exchange enrollment yet, but they appear to be holding relatively steady as well, with year-over-year enrollment up 3 percent in California, the largest state-based exchange.

Virtually flat enrollment suggests that many, and likely most, of the 3 to 4 million phantom enrollees have been signed up for another year. Phantom enrollees are individuals who are unaware of their coverage or are fictitious. Despite their lack of knowledge of their enrollment status, insurers still receive large subsidies on their behalf. (For more background on phantom enrollees, see “Explaining the Rise of Phantom ACA Patients.”)

In a normal market, soaring prices should lead to lower demand and fewer purchases, as consumers explore alternatives. But the ACA is not a normal market because of the government’s massive role and taxpayer subsidies.

Enrollment has stayed constant despite rising premiums and the loss of the COVID-era subsidy bonuses because the system automatically retains enrollees regardless of eligibility or knowledge, and because inflated underlying subsidies have grown on autopilot, along with states’ use of silver loading. The latter has led to a proliferation of, and transition to, zero-premium bronze and gold plans in many states. Moreover, the One Big Beautiful Bill’s promising reforms that would limit improper and phantom enrollment have not yet taken effect. In addition, one federal judge struck down an important Trump administration rule that would have taken steps beginning in 2026 to reduce improper and phantom enrollment.

After the discussion, I make four recommendations, which would largely restore the ACA to what was intended and improve integrity in the program: 1) reject further COVID-era subsidy boosts, 2) require a meaningful consumer premium contribution, 3) end silver loading, and 4) end advance subsidies after first missed premium payment and penalize insurers that receive subsidies for nonpayers.

DISCUSSION

How auto-re-enrollment exacerbates phantom enrollment

In 2024, 35 percent of all exchange enrollees—and 40 percent of fully subsidized enrollees—had no medical claims. This percentage of zero-claim enrollees is double the pre-COVID subsidy-boost level and more than double the rate observed in normal health insurance markets.

Rather than correcting these failures, the current auto-re-enrollment system simply rolls improper and phantom enrollment forward, triggering another year of taxpayer-funded subsidies paid to insurers. Auto-re-enrollment thus converts one year’s eligibility failures into a multi-year fiscal liability. In 2024, insurers received at least $35 billion on behalf of enrollees who never used their health plan. The One Big Beautiful Bill requires exchanges to verify applicants’ eligibility for advance subsidies before enrolling them, but this does not come into effect until 2028.

Automatic re-enrollment has transformed the ACA exchanges from an opt-in insurance market into a passive entitlement system—one that treats inaction as proof of eligibility and permits improper and even fictitious enrollees to remain in the system year after year. In 2025, roughly 45 percent of exchange enrollees were automatically re-enrolled, without any action by the enrollee. This means people remain enrolled even when they fail to confirm income, residency, or other required eligibility criteria. Meanwhile, the Treasury continues sending insurers large monthly checks, while brokers and agents responsible for the enrollment receive their commission cut.

Historically, more than 10 percent of people who selected plans during open enrollment fail to effectuate coverage, meaning that they do not pay their initial premium. In the early years of the exchanges, the effectuated coverage rate was lower, in part because few zero-premium options existed. By contrast, in recent years—when half of enrollees receive subsidies that produce zero-premium plans—only about 3 percent of enrollees do not effectuate their coverage.

Another major problem is that the advance subsidies are often not reconciled, as legally required, because the necessary tax return information is not filed. In a new report, the Government Accountability Office has estimated that enrollees in federal exchange states failed to reconcile $21 billion of advance subsidies in 2023—almost one-third of the total subsidies advanced to insurers.

Aggressive silver-loading results in fully subsidized bronze and gold plans

In October 2017, the Trump administration complied with a court order that cost-sharing reduction (CSR) payments to insurers were unlawful because Congress had not appropriated funds. In most states, insurers generally responded by inflating premiums on silver-tier plans to cover the cost of CSRs that they were still required to provide. Under the ACA’s subsidy formula, premium subsidies are tied to the cost of the second-lowest-cost silver plan, known as the benchmark. As a result, premium subsidies increased.

Silver loading has intensified over time. In 2018, the benchmark plan cost 91 percent of the lowest-cost gold plan. By 2025, the benchmark plan was 98 percent of the lowest-cost gold plan nationally. In 2026, insurers have further increased benchmark premiums—up to 102 percent of the lowest-cost gold plan nationally—likely in anticipation of the COVID-era subsidy bonuses expiring on schedule at the end of 2025.

Silver loading is distortionary in several ways. First, silver loading raises silver plan premiums by an average of 15 to 20 percent (more in some states and less in other states), making coverage less affordable for people who do not receive subsidies. Second, by inflating subsidies, silver loading reduces the net cost of non-silver plans like bronze and gold, encouraging enrollment shifts that do not reflect consumer preferences and instead maximize subsidies.

The expiration of the COVID-era subsidy bonuses ensures no more fully subsidized silver plans. However, even when COVID-era subsidy enhancements expire, many enrollees will experience little or no premium increase, because silver loading keeps benchmark subsidies artificially high and preserves zero-premium or low-premium options in bronze or gold plans.

Underlying subsidies are extremely generous and getting more so on autopilot

The ACA subsidies cap the amount that people pay for a benchmark plan. In 2014, the typical enrollee (a 50-year-old at 2 times the federal poverty level) paid about one-third the premium, with the U.S. taxpayer covering two-thirds of the cost. By 2020, the enrollee’s share was down to 20 percent, with the taxpayer picking up 80 percent of the cost. During the COVID subsidy boost era (2021-2025), the enrollees’ share declined to about 7 percent. With the COVID subsidy boost expiring, the enrollee share will return to about 20 percent next year.

Overall, the COVID subsidies increased exchange-market subsidization so that taxpayers covered nearly 85 percent of premiums, up from 75 percent prior to 2021. As the benchmark premium continues to escalate, the taxpayer share of the overall cost will continue to rise—on autopilot and even after the expiration of the COVID subsidy bonuses.

Enrollment intermediaries are undoubtedly still scamming

As exposed by Bloomberg News as well as other outlets, including Paragon, over the past 18 months, enrollment intermediary conglomerates have developed sophisticated schemes to enroll many people into exchange plans regardless of applicant eligibility or awareness. The combination of aggressive silver loading and permissive enrollment rules creates powerful incentives for bad-actor brokers and agents to exploit the design of the subsidies.

Because subsidies are inflated by silver loading, many enrollees can be placed into zero-premium bronze or even gold plans. For unscrupulous brokers paid on a per-enrollee basis, this creates an obvious opportunity: such brokers can enroll individuals without meaningful interaction or verification, leading to phantom enrollees. Moreover, there is little risk that such enrollees detect that they are enrolled because they never receive a bill for a premium payment. As subsidies increasingly make non-silver plans appear “free,” enrollment will shift from silver plans toward bronze and gold options that carry inflated subsidies, masking improper enrollment and allowing both real and fictitious enrollees to remain covered without ever affirmatively choosing or using coverage. This dynamic not only facilitates fraud and abuse by bad actors, but also further distorts plan selection, inflates federal spending, and undermines the integrity of the individual market. Once created, these enrollments are unlikely to unwind on their own, because zero-premium plans eliminate the friction that would otherwise prompt enrollees—or insurers—to disengage.

Continuing or Removing Phantoms in Coverage for 2026

In 2024, 35 percent of all enrollees and 40 percent of fully subsidized enrollees had no medical claims. Given the rise in enrollment and the rise in the percentage of enrollees in fully subsidized plans from 2024 to 2025, the number of zero-claim enrollees potentially rose further. On an annualized basis, roughly 8 million enrollees made no use of their coverage in 2024. Accounting for legitimate enrollees who never use services, Paragon estimated about 3 to 4 million phantom enrollees in 2024, with approximately 2.5 to 3.5 million concentrated in federal exchange states, many of whom have been repeatedly re-enrolled year after year.

There are four distinct scenarios with phantom enrollment going forward.

• For phantom enrollees who are fictitious and who are re-enrolled into another zero-premium plan, the fraud continues unabated. Because no premium payment is required, there is no friction to trigger disenrollment, and insurers continue receiving federal subsidies on behalf of people who do not exist or who never knowingly enrolled.
• For phantom enrollees who are fictitious and who are moved into a plan with even a modest premium, the enrollment should unwind naturally because those enrollees will not pay premiums. This assumes insurers follow the law and disenroll these enrollees.
• For real individuals who are unaware they are enrolled, re-enrollment into another zero-premium plan allows improper coverage to continue indefinitely. These individuals receive no price signal and no reason to investigate their coverage status.
• For real individuals who are in a zero-premium plan but who are moved into a plan with a premium—even a heavily subsidized one—they will be alerted to the enrollment and forced to make an affirmative decision about whether coverage is worth the cost.

Taken together, these four pathways explain why zero-premium plans are uniquely dangerous. They allow both fictitious and unaware enrollees to persist, while plans with required premium contributions create a natural and effective screening mechanism that removes phantoms and prompts real consumers to actively choose coverage.

Policy Recommendations

1. Do not restore the COVID-era subsidy bonuses

The market is saturated in government subsidies. More subsidies make zero sense and would only lead to higher prices in health care and the broader economy. Given that premiums have significantly increased and enrollment stayed flat, the market is already over-subsidized with just the underlying ACA subsidies.

2. Require an actual consumer contribution

Zero-premium plans are a major driver of improper and phantom enrollment because they eliminate any requirement for an affirmative consumer choice. Policymakers should require that all enrollees pay at least a nominal premium, ensuring that enrollment reflects an affirmative choice and that ineligible or fictitious enrollments naturally unwind.

3. End silver loading

Silver-loading has severely distorted the ACA’s pricing and subsidy structure, inflated federal spending and disconnected subsidies from actual plan costs. Policymakers should unwind silver-loading practices and restore a transparent relationship between premiums and underlying actuarial value. To do so, Congress should appropriate CSRs and ban silver loading. If Congress does not act, CMS should take actions to restrict silver-loading.

4. Significantly penalize insurers who do not remove enrollees who pay no premiums

Enrollees must generally make a “binder” payment (often the first month’s premium) for coverage to be effectuated, and CMS requires the deadline be no later than 30 days after the coverage effective date (with no binder required when the net premium is $0). After coverage begins, enrollees receiving advance premium tax credits who become delinquent after paying at least one full month’s premium are entitled to a three-month grace period: issuers must pay claims during the first month and may pend claims during the second and third months, with coverage terminated retroactively to the end of the first month if the enrollee fails to cure by the end of the grace period. During this grace period, issuers continue to receive APTC and must return APTC for months two and three if the grace period is exhausted without payment.

Insurers are legally required to terminate coverage for subsidized enrollees who fail to pay their share of the premium after the grace period is exhausted, but current rules allow insurers to continue receiving advance subsidies during months of non-payment. Policymakers should require advance subsidies to cease after the first month of delinquency and significantly penalize insurers that continue to accept federal payments for enrollees who do not pay their share of the premium.

Conclusion

Initial 2026 exchange enrollment has remained flat despite sharply higher premiums and the expiration of the COVID-era subsidy enhancements because the ACA market is already heavily subsidized. Underlying subsidies remain extraordinarily generous and are growing further on autopilot and through more aggressive state silver-loading, while automatic re-enrollment continues to roll forward millions of improper and phantom enrollees who never affirm eligibility or make an active choice to purchase coverage. As a result, enrollment levels no longer reflect consumer demand or affordability, but rather a system that passively retains coverage and channels ever-larger federal payments to insurers regardless of eligibility, awareness, or premium payment. To improve integrity into this program, it’s essential to go back to the original design by rejecting further COVID-era subsidy boosts, requiring a meaningful consumer premium contribution, ending silver loading, and aggressively enforcing and penalizing insurers that retain non-paying or zero-claim enrollees.