Why We Did This Report?

In “The Great Obamacare Enrollment Fraud,” we found that nearly half of Affordable Care Act (ACA) exchange signups during the 2024 open enrollment period reported income between 100 percent and 150 percent of the federal poverty level (FPL), qualifying for fully subsidized, 94 percent actuarial value plans. The percentage of people signing up who report income in this range has increased substantially since the enhanced subsidies for exchange plans took effect.

The problem is particularly acute in states that use HealthCare.gov (the federal exchange) as well as states that have not adopted the ACA’s expansion of the program. In nine states (Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina, Tennessee, Texas, and Utah), the number of signups reporting income between 100 percent and 150 percent FPL exceeds the number of potential enrollees. Overall, fraudulent exchange enrollment appears to be a significant problem in nearly half of states. We estimate that fraudulent enrollment at 100 percent to 150 percent FPL is likely upwards of 4-5 million people in 2024. We estimate, conservatively, that this cost will likely be $15-26 billion this year.

In our previous report, we wrote that unscrupulous brokers are certainly contributing to fraudulent enrollment and that the enhanced direct enrollment feature of HealthCare.gov appears to be a problem. This follow-up report was motivated by brokers and agents who contacted us after the initial report with additional details about the problem and is largely based on information that brokers, agents, and tax preparers have provided that describe the enrollment fraud.

What Did We Find?

1. Brokers and insurers have enormous incentives to encourage ineligible applicants to misstate income when applying for coverage.
2. Lead generators are misleading enrollees with promises of free coverage and other enticements.
3. Unscrupulous brokers are fraudulently enrolling people in coverage, leaving some Americans unaware of their enrollment.
4. People may face tax penalties for plans in which they were enrolled without their consent.
5. Rogue brokers are fraudulently switching enrollees’ coverage without their consent.
6. Virtually anyone, including unscrupulous brokers, can abuse special enrollment periods and enroll at any time.
7. People are losing plans they selected, preferred doctors, and needed prescriptions.
8. Automatic re-enrollment amplifies fraudulent enrollments.
9. Many people have duplicate enrollments in public programs.
10. Sophisticated crime in south Florida has reaped windfall profits from enrollment fraud.

Why it Matters?

Several media outlets, including the Wall Street Journal and the Washington Post, have featured Paragon’s findings. The chairs of three key U.S. House of Representatives committees—Energy and Commerce, Ways and Means, and Judiciary—have written letters to the Government Accountability Office and the inspector general at the Department of Health and Human Services (HHS) asking for an investigation based on Paragon’s findings. Ranking member of the U.S. Senate Budget Committee Charles Grassley has written to HHS Secretary Xavier Becerra and the administrator of the Centers for Medicare and Medicaid Services, Chaquita Brooks-LaSure, asking important questions about improper exchange enrollment and spending.

The massive degree of fraudulent enrollment and expenditures is the result of bad public policy and poor HHS management and oversight of HealthCare.gov. HHS is beginning to take long-overdue steps to minimize the ability of brokers to fraudulently enroll and re-enroll people without their consent. However, there are still numerous problems with the continuous special enrollment for people who claim income between 100 percent and 150 percent FPL and a lack of income verification for people who report that income. HHS mismanagement—combined with large financial incentives to misstate income and the widespread availability of fully subsidized plans—have created an environment where fraud, waste, and abuse have flourished in the exchanges. The widespread problems suggest a needed change in direction in both policies and HHS management. The two most important reforms would be Congress permitting the enhanced subsidies to expire and HHS putting in place rules for real income verification.

On June 20, 2024, Paragon released “The Great Obamacare Enrollment Fraud,” which quantified rampant fraudulent enrollment in Affordable Care Act (ACA) exchanges, concentrated in states that use HealthCare.gov—the federally administered exchange—and states that have not adopted Medicaid expansion.¹ We estimated 4-5 million fraudulent enrollees, meaning those claiming income that makes them eligible to receive fully subsidized plans when they are not, in fact, eligible. Further, we estimated fraudulent spending at between $15 billion and $26 billion in 2024 alone.

The report described how brokers and insurers are incentivized to encourage unqualified enrollees to purposely misstate their income. Brokers make commissions they never would have earned, and insurers acquire additional customers whose premiums are largely—and often entirely—paid by the government. Moreover, these enrollees receive premium and out-of-pocket cost subsidies for which they are not eligible, and they do not need to be fully paid back if their actual income turns out to be different than the income that they claim.² A major class-action lawsuit filed in south Florida alleges that misleading advertisements about cash benefits has caused hundreds of thousands of people to provide information enabling unscrupulous brokers to enroll them in coverage that they did not want.³

Fraudulent enrollment has exploded for two reasons. First, Congress passed and President Biden signed legislation that increased subsidies between 2021 and 2025 for people who enroll in exchange plans. This increase fully subsidizes the premiums for plans with the most generous cost-sharing subsidies for enrollees who claim income between 100 percent and 150 percent of the federal poverty level (FPL).

Second, the Biden administration has poorly managed HealthCare.gov, eschewing common-sense program integrity protocols, according to brokers who reached out to us and statements brokers and tax preparers have made in online forums. This lax oversight has permitted what one broker has described as a “wild west” atmosphere.⁴ The evidence is clear: Following the law is optional. This atmosphere rewards dishonest enrollees for lying on applications and gives unscrupulous brokers (and insurers) the opportunity to make considerable profits by enrolling people or switching peoples’ plans, often without the consent or knowledge of the enrollees. In particular, enhanced direct enrollment (EDE)—a feature of HealthCare.gov but not state-based exchanges—enables brokers and agents, including web brokers, to more easily enroll people in coverage. Federal regulators have also created a year-round special enrollment period (SEP) for those claiming income between 100 percent and 150 percent FPL, creating more opportunities for unscrupulous brokers to perpetrate fraud.

After Paragon’s first report, brokers contacted us and expressed frustrations with unscrupulous brokers and lead generators and with lax policy and poor oversight by the Centers for Medicare and Medicaid Services (CMS). This information forms the basis of this report.

In addition, citing Paragon’s report, the chairs of three U.S. House of Representatives committees—Energy and Commerce, Ways and Means, and Judiciary—sent letters to the Government Accountability Office⁵ and the inspector general at the Department of Health and Human Services (HHS) requesting an investigation.⁶ Senator Charles Grassley, the ranking member of the Senate Budget Committee, also citing Paragon’s report, sent a letter to HHS Secretary Xavier Becerra and CMS Administrator Chiquita Brooks-LaSure asking for information related to the enrollment fraud.⁷ Congress’s inquiries should shed more light on the extent of fraud within the exchanges and CMS’s management of the program. Five Democratic senators introduced legislation on July 24, 2024, that would impose civil monetary penalties on brokers who commit fraudulent enrollments or engage in authorized plan switching and would impose common-sense and long-overdue program integrity steps such as requiring that enrollees be made aware when brokers make changes to their plans.⁸ On July 19, 2024, under congressional and public pressure, CMS issued system changes to prevent an agent or broker from making changes to a consumer’s exchange enrollment unless the agent is already associated with the consumer’s enrollment.⁹

This follow-up report details key takeaways from agents, brokers, and tax preparers who have witnessed egregious practices and the problems caused by misguided public policy and CMS’s poor management of HealthCare.gov.

Agents and brokers assisted with 62 percent of enrollments through HealthCare.gov or private direct enrollment partners’ websites in 2022.¹⁰ Brokers are generally paid monthly commissions per individual they enroll in ACA-subsidized plans for the entire period that each plan is active (and an additional bonus for “new” enrollees), varying by state and insurance carrier. Brokers and insurers make money only if people enroll, and those who misstate peoples’ income to make the coverage “free” or heavily discounted obtain greater commissions from increased enrollments.

The ACA’s subsidies overwhelmingly take the form of advanced premium tax credits (APTCs) sent each month to the insurer that administers the plan chosen by the enrollee. The APTCs are based on estimated income, so for the 2024 plan year, people—or the agents or brokers working with them—estimate their income for that year in the fall of 2023 when they apply. The APTCs thus depend on “good faith” income estimates. But the incentives for brokers to maximize commissions and enrollees to maximize subsidies, coupled with the lack of verification and enforcement by the federal government, severely weakens this “good faith” expectation.

Tax Preparer A writes:

There is a lot of fraud in this [APTC] area. I’ve heard of brokers deliberately telling people to underreport their income to pay lower premiums [throughout] the year.¹¹

Lead generation companies facilitate the buying and selling of personal information used to fill out applications. So-called web brokers and lead generators start by using deceptive marketing tactics and online ads, including on Facebook, to target lower-income individuals by marketing $0 health coverage, misrepresenting the value of the ACA subsidy as a cash benefit, and offering gift cards to enrollees. Once an individual clicks on the ad, the person is prompted to provide his or her name, date of birth, state of residence, and phone number. Critically, this is the information any web broker can use to create or access an application account for that person. This information is then sold to agents, large broker agencies, and call centers.

CMS has failed to combat this deceptive marketing, a marked contrast to its oversight of the marketing for Medicare Advantage plans.¹² CMS’s failure has led to large conglomerate practices of third-party EDEs with the same ownership as agent call centers, marketing agencies, and lead generation companies.

Broker A writes:

I got a call last week from [a] director at CMS and brought up with him about all the leads that are being generated promising a cash subsidy and how many people are calling in so desperate for money that I can even tell them that isn’t true.… I am taking a break from selling ACA. It is a s*** show right now. I don’t care how much money there is to make.

Below are two examples of these deceptive internet ads.

Ad one¹³

Ad two¹⁴

According to brokers and subject matter experts, once the personal information is collected, rogue marketing agencies and lead companies sell it to multiple agents and brokerages who then presume they have the individual’s consent to enroll in a plan.¹⁵ While agents are required to have documented client consent to make application changes, this requirement is not enforced, and the federal exchange does not require proof of consent to be uploaded. Instead, the agent checks a box indicating client consent. Despite recent attempts to strengthen consent and documentation requirements,¹⁶ Joshua Van Drei, a deputy director of compliance at CMS’s Center for Consumer Information and Insurance Oversight, remarked on April 8, 2024, “The consent we’re getting 80% of the time does not include all the required elements.”¹⁷

With this manufactured consent, individuals can then be enrolled in an exchange plan with a subsidy—often without notification of enrollment. The rogue agents then proceed to collect monthly commission checks. Paragon interviewed several brokers who indicated that oftentimes insurance carriers are failing to notify enrollees of coverage. One broker told Paragon, “If you’re in a zero dollar plan, some of [the insurance companies] will not even send you an invoice. They just activate the plan and move on.”¹⁸

In a comment exchange between Broker B and Tax Preparer B:

Broker B (self-proclaimed dual ACA agent and tax preparer): There are a lot of bad agents who put people on these $0 premium plans without the person’s consent. Then if the incorrect income was reported that taxpayer will have to pay the tax credits back. I am a licensed health agent and a tax preparer. Hopefully, the government will put stricter laws on the marketplace plans.

To clarify—people who underestimate their income and receive too much APTC are required to pay a portion or all of it back, but people who overestimate their income in states that did not adopt the ACA’s Medicaid expansion do not have to pay back any of the excess APTC. Also, the reference above and throughout to the “marketplace” refers to the federal health insurance exchange, HealthCare.gov.

Tax Preparer B: [A] lot of my clients are shocked to find out they had it because all they did was inquire. Is there an incentive for these agents when they sign people up?

Broker B: Yes, we get a monthly commission for each month they have the plan. It adds up the more people you have on plans…. Sometimes people have coverage, and they don’t even know they have it. Likely someone got their information and put marketplace insurance. I am a health insurance agent and see this a lot!

If people are fraudulently enrolled in exchange plans with APTCs and they have other qualified coverage—most often employer plans—or they earn income above 400 percent FPL, they are liable to pay all of the subsidies back when they file their taxes. Thus, CMS’s irresponsible management of HealthCare.gov will result in enormous stress and financial penalties for people who through no fault of their own were fraudulently enrolled in coverage. Many low-income enrollees likely do not file taxes (even though they are required to do so if they received APTCs), which complicates enforcement.

Tax Preparer C writes:

I am an agent too. But an ethical one. So I don’t do this but this is how it’s happening. Persons click on link advertising free gift cards. They fill the form out with ONLY name, state and birthday, bam[—]they are signed up for low-income SEP fraudulently by an unethical agent. Just gave the bad news that one of my clients owed 9k back because they are high earners and had employer coverage.

We address the SEP problems in section #6.

Tax Preparer D writes:

My daughter-in-law was scammed by a Marketplace salesperson, too. They didn’t explain how it actually worked and when she told them her income they said, ‘I’ll just put that you make $28,000.’ I told her they must get a kickback for signing for the first time because of it. When she called the rep back the rep told her to take it to court and then blocked her number. Ridiculous.

Julie Appleby of Kaiser Health News has reported that many brokers fraudulently switch exchange enrollees’ coverage without the enrollees’ consent.¹⁹ A rogue agent, after locating the enrollee’s application on the federal exchange, switches the enrollee to a new plan. This agent then becomes the “agent of record” (AOR). The original broker who facilitated enrollment is removed from the application, ending that broker’s commission and control of the applicant’s plan. The monthly commission is transferred to the rogue agent.

Currently, the federal exchange does not send notifications to either enrollees or their original brokers about plan switches, relying on insurance carriers to mail invoices or notify enrollees. Unauthorized plan switching prompted Senator Ron Wyden (D-OR), chair of the Senate Finance Committee, to send a letter to CMS Administrator Chiquita Brooks-LaSure to “express outrage with reports that agents and brokers are submitting plan changes and enrollments in the Federal marketplace without the consent of the people who rely on these plans.”²⁰

CMS has failed to implement adequate safeguards, such as requiring two-factor authentication from enrollees to approve plan or AOR changes or requiring that the agent provide the enrollee’s Social Security number to verify an application. CMS offers two-factor authentication for enrollees accessing their own applications but does not require enrollees to approve or authenticate changes to their applications by web brokers. Thus, rogue agents and brokers can make application changes and switch plans without enrollee knowledge or approval. Previously, CMS officials have cited two Biden administration executive orders²¹ as hurdles to implementing enrollee approval for application changes and also expressed fears of complicating the enrollee application process.²²

A broker who spoke anonymously to Paragon reported asking CMS on June 26, 2024, why the agency had not implemented two-factor authentication or other enrollee verification tools. The CMS official responded that the agency did not want to do anything to slow down enrollment for consumers.²³

There are many such experiences with plan-switching fraud.

A Facebook post explains Broker C’s own experience of plan switching:

About to raise some H*** against the following agent. I wrote my OWN ACA policy for me and my family last week. Even made my first premium payment and setup auto pay. I wondered why I hadn’t received a thing from the company. What happened? This agent went and changed my plan to another insurance company with a $0 premium and a crazy high deductible and max [out-of-pocket]. I’m pissed…. It is not right! Here I was trying to get things in place because my son has specific medication that he has to take and it took me a crazy amount of hours to find a plan that would fit our needs.

Broker D writes:

So crazy I actually had done my own ACA plan for my husband and I and had it all paid and done. I looked at it and turns out some other guy agent had become AOR on it. Crazy. I hate this ACA biz. It’s ridiculous. How did this agent even get my info? I never signed up anywhere else. I also had the AOR changed to another agent right while I was working on a client and she saw it happen too. Crazy. Something needs to be fixed on this system.

The Biden administration opened a special enrollment period (SEP) for people with income between 100 percent and 150 percent FPL to use at any point during the year. CMS does not require documentation or verification to trigger this SEP. This means that anyone who claims income in this category can enroll any time during the year, not just during the open enrollment season. This gives unscrupulous brokers the chance to manipulate the application process to enroll people in coverage or switch their plans without authorization throughout the entire year. Ronnell Nolan of Health Agents for America told Paragon, “Under the Biden Administration no documentation is required to prove triggering an SEP.”²⁴

Broker E writes:

If you estimate 100-150% income [the enrollee will] get the SEP.

An exchange between Broker F and Broker G highlights lack of agency oversight:

Broker F: Are there any SEP’s I’m not aware of right now? Monkeypox? COVID? War in Ukraine? Need to get creative for a client but it’s not looking good. Thanks!

Broker G: Low income.

Broker F: When stating that they are losing credible coverage, have you had to actually provide proof to the marketplace?

Broker G: Not usually.

When enrollees have coverage switched without their knowledge or consent, oftentimes their doctors and prescriptions are no longer covered by their new plans.²⁵ This can result in enormous frustration and anxiety, not to mention uncovered medical expenses and prescriptions as well as higher deductibles and out-of-pocket maximum limits.

Broker H writes:

My only pain in losing a client is when the client’s life is flipped upside down due to the flip. The commission is whatever, but the pain and suffering and chaos created in the client’s life…. I see red. Dealing with two clients now [who] are unable to get the treatment they need due to being switched 3x by the same agent. Another month [in which] he can’t get treatment.

Broker I writes:

I had someone call one of my clients claiming they worked for me and needed to verify all his [information] was correct before his enrollment started on May 1st. Long story short they switched his plan and now he can’t receive the back surgery he desperately needs because they enrolled him in a $0 high-deductible plan without telling him.

CMS automatically re-enrolls exchange plan enrollees from one year to the next, even enrollees who are enrolled in fully taxpayer-subsidized plans. Automatic re-enrollment presents major program integrity concerns, particularly given that many enrollees were originally fraudulently enrolled. Automatic re-enrollment perpetuates fraudulent spending and windfall profits for brokers and insurers who had already unjustifiably benefitted from the initial fraud.

Tax Preparer E writes:

[T]he client was 100% sure that he did not have health coverage [through the] marketplace. However, when we called marketplace, we were told that my client [has] had it since 2022 and it auto renew[ed] in 2023.

Tax Preparer F writes:

Most [facing APTC tax return denial] were automatically ENROLLED! It’s stated that they must have DECLINED THE OFFER before enrollment began.

This statement indicates that people often have problems with the previous year’s APTC but are not aware of those problems until after they have been automatically enrolled for another year of coverage. This was made worse by CMS’s 2023 regulation to wait for two years to terminate coverage after an enrollee has failed to properly file a tax return and reconcile the APTC.²⁶ Automatic re-enrollment amplifies and extends improper enrollment and spending.

According to broker reports, there are many people throughout the country who are dually enrolled in Medicaid and subsidized exchange plans, meaning that insurers (often two different insurers) are receiving multiple government payments on behalf of the same enrollee. In “The Great Obamacare Enrollment Fraud,” we found that several hundred thousand people in North Carolina were likely enrolled in both Medicaid and exchange plans with large subsidies.²⁷

One reviewer of “The Great Obamacare Enrollment Fraud” indicated that our analysis was missing a major portion of fraud. Specifically, they indicated that brokers enroll children on exchange plans to gain greater commissions even though these children are eligible for the Children’s Health Insurance Program. Doing this raises federal costs. As with other issues raised in this paper, further research and quantitative analysis would be useful in assessing the magnitude of this problem.

Broker J describes Medicaid difficulties and Broker K responds:

Broker J: I’ve looked at several of my clients’ tax returns including their 1095A information and they have both ACA coverage and Medicaid and still they’re getting the subsidy which is making their ACA coverage free.

Broker K: I’m understanding these answers to be this: for the purpose of PTC reconciliation, there is no recoupment process for people [who] received a PTC but were also enrolled in Medicaid. Marketplace and the States are supposed to share eligibility info and if the member fails to cancel their ACA policy, it should automatically cancel when the data share identifies the dual coverage. Keep in mind that the current administration is a huge proponent of the Marketplace and has not been shy about the fact that they have not been enforcing penalties due to COVID.

A recent Paragon study of enrollment fraud found extensive evidence of Florida as a hot spot for fraud. We estimated that nearly four times more people signed up for exchange plans and reported income between 100 percent and 150 percent FPL than were eligible.²⁸

A class-action complaint filed in April 2024 in the U.S. District Court for the Southern District of Florida alleges that two health insurance call centers in Florida, a lead-generating company in Florida, and corresponding parent companies (TrueCoverage and Enhance Health) purposefully targeted lower-income Americans with deceptive advertising, leading to both fraudulent ACA health insurance plan enrollment and unauthorized plan switching.²⁹ Consumer plaintiffs allege that the defendants obtained personally identifiable information from callers responding to advertisements that mischaracterized APTCs as direct subsidies and cash benefits to pay for everyday expenses such as groceries, rent, and gas. The complaint alleges that the false ads “resulted in hundreds of thousands of enrollments by class members.” The complaint further alleges that agents then exploit weaknesses in the enhanced direct enrollment system to fraudulently enroll individuals in health insurance plans and receive commissions.

Additionally, in a May 2024 letter to Congress,³⁰ Florida Chief Financial Officer Jimmy Patronis wrote about the widespread fraud occurring and that his office has opened more than 900 investigations. Patronis wrote that consumer complaints were up 95 percent in 2023, and as of May 2024, his office had already received more complaints than in all of 2023.³¹

Multiple sources of information suggest that the alleged fraud is centered in South Florida—a current epicenter of Medicare fraud.³²

Broker L writes:

Not saying all Florida agents are bad—the fact for me is that 90+% of these fraud changes are from Florida—Boca Raton, Miami, etc.

One month after Paragon published “The Great Obamacare Enrollment Fraud,” CMS took long-overdue actions to crack down on egregious enrollment practices by brokers and agents. On July 19, 2024—years after being made aware of rampant unauthorized plan switching and only after extensive reporting, analysis, and letters from Congress—CMS issued system changes to stop unauthorized agent and broker activity through HealthCare.gov. The notice sent to brokers read, “CMS will block an agent or broker from making changes to a consumer’s [exchange] enrollment unless the agent is already associated with the consumer’s enrollment.”³³ CMS now requires an agent or broker to conduct a three-way call with the enrollee and the Marketplace Call Center or to direct the consumer to submit the change through HealthCare.gov or via an approved “Classic Direct Enrollment or Enhanced Direct Enrollment partner website”³⁴ with a consumer pathway.

While this is a welcome policy change, it will do little to prevent a rogue agent from submitting duplicate applications or making changes for an enrollee for whom he or she is already the AOR. The restrictions by CMS will add obstacles to committing fraud but are cumbersome and resource-intensive, and they still leave gray areas for unauthorized plan switching and other types of fraud. As this report details, fraudulent actors have extensive financial resources, enrollee information, and call centers at their disposal, which can and will be used to perpetuate fraud beyond CMS’s three-way-call obstacle. Without appropriate oversight, CMS’s proposal will do little to address incentives for bad actor brokers or deceptive practices used against enrollees.

On July 24, Senate Finance Chair Ron Wyden (D-OR) and five other senators introduced the Insurance Fraud Accountability Act to “protect consumers and hold unscrupulous brokers and marketers accountable.”³⁵ The bill introduces civil monetary penalties for agents and brokers who submit incorrect or fraudulent information, requires CMS to establish a consent verification and change notification process, regulates third-party marketers, and requires periodic audits of agent and broker enrollments to investigate complaints and fraud. This legislation is a common-sense solution, but it does not address the core underlying issue of the large incentives for enrollees, brokers, and insurers to misstate income during the application process.

The Biden administration prioritized exchange enrollment over program integrity and permitted a “wild west” atmosphere with rampant amounts of unauthorized enrollments and unauthorized plan switching. Years later and with tens of billions of dollars in fraudulent spending out the door, CMS is taking common-sense actions to require enrollee consent to enrollment and plan changes.

These actions, as well as the proposal from Senator Wyden, are welcome but would leave significant fraud in place. The main problem is that enrollees, brokers, and insurers all have large financial incentives to misstate enrollee income during the sign-up period. The policy stew of basing subsidies on estimated income, limiting the amount that people have to repay if the government sends too much subsidy to the insurer of the plan they choose, and making fully subsidized plans so widely available has created an environment for rampant fraud. To ensure that public dollars are creating maximum value, it is vital that Congress permit the enhanced subsidies to expire after 2025. Other reforms—such as increasing the repayment amounts for people who misstate income and permitting an enrollee to receive a portion of the subsidy as a health savings account deposit rather than a direct subsidy to insurers—would reduce waste and fraud and improve the value of the ACA.³⁶