Federal Government Takes Aim at Marketplace Fraud with New Eligibility Standards

Recent allegations of widespread fraud in ACA Marketplace enrollments have prompted significant changes to enrollment and eligibility standards, as outlined in the Trump administration’s final Marketplace integrity and affordability rule and the newly enacted 2025 budget reconciliation law.

The Centers for Medicare and Medicaid Services (CMS) has cited “dramatic levels of improper enrollment” in Marketplace plans, which they claim involve fraudulent actions by some agents, brokers, and web brokers. In response, new standards for consumers have been implemented, ranging from additional paperwork requirements to verify household income to new administrative steps and payments for continuing coverage.

However, critics note that few changes address oversight of the entities alleged to have engaged in fraudulent activities.

Understanding Marketplace Fraud vs. Improper Enrollment

The ACA gives the Department of Health and Human Services broad authority to combat fraud, with multiple agencies involved in protecting program integrity, including the Center for Consumer Information and Insurance Oversight, the Center for Program Integrity, and the HHS Inspector General.

It’s important to distinguish between fraud and improper enrollment. Marketplace fraud requires an intentional act to deceive or misrepresent facts to obtain benefits. By contrast, improper enrollment often stems from the inherent difficulty many consumers face in estimating their future income—a requirement of the Marketplace application process.

KFF analysis shows that individuals with low wages and unstable work experience significant income fluctuations throughout the year. Three in five people with starting incomes below poverty end the year with income more than 20% different than their income during the first three months of the year.

Recognizing this challenge, Congress initially provided a process to “reconcile” advance premium tax credit (APTC) payments at the end of the year and included provisions prohibiting the government from requiring lower-income individuals to repay the full amount of excess premium tax credits. The 2025 budget reconciliation law eliminates these repayment limits.

The Role of Brokers in Enrollment and Fraud

Brokers have become increasingly important in Marketplace enrollment, with broker-assisted enrollments growing from 55% of active plan selections in HealthCare.gov states in 2021 to 78% by 2024.

Between January and August 2024, CMS received over 183,000 complaints of unauthorized enrollments and nearly 91,000 complaints of unauthorized switching of plans. This led to the suspension of 850 brokers for suspected fraudulent behaviors. Many of these allegations involved web brokers who operate websites that interface with the Marketplace to assist consumers with enrollment.

These fraudulent activities typically involved either enrolling individuals without their consent or switching consumers to different plans without authorization. The alleged schemes often used deceptive social media ads promising cash rewards to collect consumer information, which was then used to enroll them in coverage without their knowledge.

While these issues received national attention in 2024, federal investigations of agents and brokers date back to at least 2018, before the availability of enhanced APTCs and the Biden administration’s enrollment changes. Justice Department indictments and HHS reports document investigations of broker misconduct going back several years.

Regulatory Oversight of Agents and Brokers

Both federal and state governments regulate agents and brokers who assist in Marketplace enrollment. The federal government has developed requirements that agents and brokers must meet to assist consumers, while states license these professionals and have their own authority to address fraud.

The introduction of Direct Enrollment (DE) and Enhanced Direct Enrollment (EDE) pathways, which allow consumers to enroll in coverage directly through broker websites without visiting HealthCare.gov, has increased enrollment but also raised concerns about potential fraud. By 2021, these pathways were utilized for 37% of all active HealthCare.gov plan selections.

In response to continuing consumer complaints, the Biden administration implemented new requirements for agents and brokers to verify that application information has been reviewed and confirmed by consumers before submission. Additional standards allow CMS to hold “lead agents” accountable for misconduct and clarify CMS’s authority to take immediate action against brokers who pose an “unacceptable risk” to enrollees.

New Regulations Focus on Consumer Requirements Rather Than Broker Oversight

The recent final regulation and budget reconciliation law primarily address fraud concerns by implementing stricter consumer-facing verification procedures and limiting enrollment opportunities, with few reforms to agent and broker oversight.

Key changes include requiring Marketplaces to generate data matching inconsistencies for consumers with estimated incomes between 100% and 400% of the federal poverty level, requiring documentation to confirm income when tax return data is unavailable, removing the low-income special enrollment period, and requiring consumers automatically re-enrolled in zero-premium plans to confirm their eligibility or face a $5 monthly charge.

The budget reconciliation law further removes APTC repayment limits, prohibits eligibility for APTCs for certain special enrollment periods, eliminates eligibility for certain lawfully present immigrants, and establishes new verification requirements before consumers can receive APTCs.

The only provision specifically addressing agents and brokers in the final rule clarifies that CMS must use a “preponderance of the evidence” standard when terminating a broker contract.

As these changes take effect over the coming years, their impact on both reducing fraud and maintaining consumer access to health coverage remains to be seen.