The idea that the Affordable Care Act's markets are riddled with fraud has become a major talking point among Republicans as lawmakers in Congress debate whether to expand expanded tax credits that help offset the cost of covering health care markets for low- and middle-income people. Those ACA subsidies are set to expire at the end of the year, and they have become a flashpoint in the fight for government funding.
“Tax breaks are given to some people for good reason. And we think the tax breaks actually go toward waste and fraud in the insurance industry,” Vice President J.D. Vance said during recent interview on CBS News. “We want to make sure the tax benefits go to the people who need them.”
The key to the Republican argument about widespread fraud is report published in August by the Paragon Health Institute, a Republican-leaning think tank. The report focuses on “phantom participants” in ACA markets.
Paragon President Brian Blase said these “phantom enrollees,” who do not use any health care for a year, exceed a percentage of “what would be expected in a normal, functioning health insurance market.”
Blase and his team say they quantified the percentage of participants with zero claims in the ACA marketplace by analyzing the Centers for Medicare and Medicaid Services. data published in August.
This highlights one of the central problems with the CMS data: it tracks the number of plan enrollees, not individual enrollees.
According to Cynthia Cox, vice president and director of the ACA program at KFF, a nonprofit health information organization that includes KFF Health News, the federal data Paragon analyzed may count enrollees twice if they changed plans during the year.
According to these data, in 2021 the percentage of admissions without any medical requests was 19%. In 2024, that percentage jumped to 35%.
According to Blaze and Paragon, this increase in zero-claim applications is evidence of fraud. They say this indicates that fraudulent insurance brokers are signing up people who don't exist, who don't qualify, or who have other insurance and don't need ACA coverage.
“Essentially what happened was that insurers benefited, brokers benefited financially, and there were just a ton of people enrolled in the program,” Blase said. This is where these phantoms appear. “They have no idea that they have been recorded and therefore do not receive any medical care.”
In 2021, former President Joe Biden signed the American Rescue Plan Act, which included expanded ACA subsidies it made plans available at low or no cost to some low-income people and expanded eligibility for subsidies to some middle-income people. These credits were extended through 2025 as part of the Inflation Relief Act signed into law in 2022.
News show me how easy it is insurance brokers in some states could sign people up for free ACA insurance plans without consumers' knowledge. Department of Health and Human Services tried it To deal with about these fraudulent activities.
But health policy experts and analysts caution against looking too deeply into the number of zero-claim enrollees.
“It’s not that he’s wrong, but I think he’s exaggerating,” Michael Cannon, director of health policy research at the libertarian Cato Institute, said of Blaise’s analysis.
According to Cox, there is evidence that the number of plan changes has increased, in part due to the extension of open enrollment periods. Switching plans more frequently could lead to more people being double-counted in federal data and increase the percentage of enrollees with zero claims over the years. Some enrollees also may have been enrolled in an ACA plan for only part of the year, which would have made them less likely to file a claim.
“We're not trying to say there's no fraud. It's a real thing. But the question is, how big is the problem?” – Cox said. “To simply assume that anyone who doesn't use health care is a fraud is not true. A lot of people don't use health care.”
In the insurance market, it's not uncommon for healthy people to not use their insurance in a given year, according to health policy experts. And thanks to the expansion of ACA subsidies, more people signed up for market coverage. Registration data shows that it did Market population is youngerand younger members may be less likely to use their insurance. A recent report found that each year from 2018 to 2022, an average of 23% of employer-sponsored plan participants did not use their health insurance.
“Somehow the idea that people don't use health insurance is kind of a problem – maybe it is. But fundamentally it's not,” said Joseph Antos, a health policy expert and senior fellow at the right-leaning American Enterprise Institute. “The fact is, in order for insurance to work, you need people who don’t make claims on insurance.”
The major professional associations of insurers and hospitals, AHIP and the American Hospital Association, also disputed Paragon's characterization of federal data and even published blog posts destruction their arguments. AHIP rejected the idea that the insurance industry profits from increased subsidies, saying existing law limits profits from health plans.
Paragon was founded by Blaze in 2021 and has become widely influential in Republican health policy circles. The organization's alumni are members of the Trump administration and House Speaker Mike Johnson's office, so it follows that the group's findings will become a talking point among Republicans.
It's also no news to the Republican Party that government programs are riddled with fraud. During negotiations over the One Big Beautiful bill, Republican lawmakers insisted that the Medicaid program would not be cut to cover the cost of tax cuts, but that “waste, fraud and abuse” in the health care program would be eliminated.
Now the ACA is at the center of the ongoing federal government shutdown, with Democrats pushing Congress to extend current ACA subsidies that are set to expire at the end of the year. And fraud, again, is the central Republican argument. Democrats take a different view of the extent of fraud in the program, instead emphasizing that expiring subsidies will lead to higher premiums.
“It's become a boondoggle. It's a subsidy for insurance companies,” Speaker Johnson said of the ACA's subsidies for closing press conference last week. “When you subsidize the health care system and pay insurance companies more, prices go up. That's the problem.”
KFF Health News Senior Correspondent Julie Appleby contributed to this report.
KFF health news is a national newsroom that produces in-depth journalism on health issues and is one of the core operating programs of KFF, an independent source of health policy research, polling and journalism. Find out more about KFF.
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