How brokers gamed the ACA marketplace, roiling subsidy debate in Congress

The Florida insurance brokers offered an enticing deal to unemployed and homeless people: Enroll in a Healthcare.gov health plan they weren’t eligible for in exchange for gift cards, food, alcohol, or cash. They coached them to lie about their income to qualify for heavily subsidized coverage, according to court documents. Sometimes they enrolled people without their knowledge.

A federal jury convicted Cory Lloyd and Steven Strong last month of collecting millions of dollars in commissions between 2018 and 2022 through a widespread plot to defraud the federal insurance marketplace. People earning at least the federal poverty level can get income-based subsidies to help them afford monthly premiums for plans sold through the Affordable Care Act. Under Lloyd and Strong’s scheme, the federal government paid at least $180 million in ineligible subsidies.

Many more agents and brokers — likely thousands, according to two career staffers at the Centers for Medicare and Medicaid Services, who spoke on the condition of anonymity because they weren’t authorized to speak to press — are gaming the marketplace where 24 million Americans get health insurance.

Corruption among Healthcare.gov agents and brokers had emerged as a sticking point in Washington as Congress failed to reach a deal to halt the year-end expiration of enhanced subsidies for insurance premiums, which will drive up the cost of plans for millions of Americans. Republicans invoked the fraud to argue against extending the subsidies while Democrats said the solution is better enforcement rather than withholding assistance from Americans who need it.

Last year, the Biden administration temporarily suspended 850 insurance agents and brokers suspected of fraudulent or abusive conduct. CMS hasn’t terminated any agents or brokers this year — although spokesman Christopher Krepich said the agency has “initiated terminations” — even as it sets up stricter enrollment rules for customers amid Administrator Mehmet Oz’s promises to root out fraud.

Around 100,000 agents and brokers are authorized by Healthcare.gov. They facilitate more than three-quarters of enrollments. For each person enrolled, insurers pay them a small monthly commission, typically between $5 and $20. Florida, where Lloyd and Strong operated, offers the largest commissions in the country, averaging $28 per enrollee, according to the nonpartisan health policy organization KFF.

A new government report underscored how easy it is to game the marketplace.

When the Government Accountability Office, which evaluates federal programs and spending, submitted 20 fraudulent applications to Healthcare.gov for coverage this year, 19 were initially approved even though the agency didn’t submit documents requested to prove income, citizenship, and Social Security numbers. The marketplace terminated one enrollee for insufficient documentation. The government is still paying more than $10,000 a month in subsidies for 18 remaining enrollments.

Investigators also discovered misuse of Society Security numbers — in one case, a single number was used for 125 policies in 2023 — and identified serious shortcomings in how CMS assesses marketplace fraud.

Stopping marketplace fraud is “not a priority” for CMS, said Seto Bagdoyan, a director at GAO who worked on the report.

Krepich said the agency has undertaken “a thorough investigation into improper agent and broker activity” and is committed to “ensuring consumers are never enrolled in coverage without their knowledge or consent.”

Democrats complain the Trump administration is doing little to fix the problem despite its bluster about waste, fraud, and abuse in federal health programs.

Rep. Lloyd Doggett (Texas), the top Democrat on a subcommittee overseeing CMS, wrote a letter to Oz last week requesting closer scrutiny of the reinstated agents and brokers. “The remedy is not to deny a mother access to care for her sick child,” Doggett said in a statement. “What we need is effective law enforcement.”

Like brokers for Lloyd and Strong, who did not return requests for comment, many have enrolled people without their knowledge, switched their plan without their consent or created fake enrollments to maximize commissions.

The GAO concluded that the enhanced subsidies worsened fraud in recent years as bad actors seized upon the beefier assistance to lure new customers. As enrollments on Healthcare.gov skyrocketed under the extra subsidies, fraudulent sign-ups grew too. The Congressional Budget Office estimated those misstating their incomes to get more subsidies nearly doubled from 1.3 million to 2.3 million between 2023 and 2025.

“We believe that the expansion of the subsidies — which put more money in the pool — invigorated the financial incentive to sign up as many people as possible,” Bagdoyan said.

The GAO’s findings were among the hurdles to Republicans in Congress agreeing to extend extra subsidies for a marketplace they’ve accused of failing to sufficiently police from bad actors.

“These findings validate long-standing Republican warnings: Obamacare’s subsidy system lacks even the most basic guardrails and has created an environment where criminals, identity thieves, and unscrupulous brokers can exploit taxpayers with ease,” House Speaker Mike Johnson (R., La.) said in a statement last week.

Democrats say the proper response isn’t to let the extra subsidies expire but to go after the brokers.

“I’ve always said any fraud is too much,” said Sen. Ron Wyden (Oregon), the top Democrat on the Senate Finance Committee, which has oversight of healthcare issues.

Wyden introduced a bill to create new civil penalties for brokers who commit fraud. He said Republicans haven’t signed onto his bill or offered similar measures.

After receiving hundreds of thousands of complaints about fraud, the Biden administration started requiring customers to hold a three-way call with their broker and the marketplace call center in July 2024. But the new policy left plenty of loopholes, agents told GAO. The rule didn’t apply to new enrollees. And the marketplace took only “limited steps to verify the identity of the consumer on the three-way call,” the report says.

Oz has been vowing to root out the abuse, slamming the prior administration for rules he said were too lenient and touting stricter enrollment rules CMS released in June. Those rules don’t include any direct, new restrictions on agents and brokers but could indirectly make fraud harder by ending year-round enrollment for people earning less than 150% of the federal poverty level, roughly $23,000 for an individual.

“The past administration prioritized achieving big program enrollment numbers over protecting program integrity,” Oz said in a video posted recently to X.

CMS is also preparing to implement stricter verification requirements laid out in Trump’s sweeping tax-and-spending law he signed this summer. That legislation bans the marketplaces from awarding subsidies before verifying a customer’s personal information, including their income and legal status, before awarding any subsidies, which could make it harder for bad actors to sign people up.