Notes on the lawsuit alleging large-scale broker fraud in the ACA marketplace

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My health plan is where?

My last post focused on alleged large-scale broker fraud in the ACA marketplace — chiefly via agents and brokers switching enrollees’ health plans without their authorization (or usually even knowledge) after obtaining minimal personal information (name, D.O.B., state) via responses to misleading ads. KHN’s Julie Appleby, who broke that story early this month, followed up this week with news of a lawsuit filed on behalf of individuals and brokers allegedly harmed by such schemes. The suit names as defendants two Florida call centers, a parent company, a marketing company deploying the ads that generate the leads, and two executives, seeking class action status on behalf of enrollee victims, as well as brokerages that allegedly had their clients poached.

The complaint, filed in U.S. District Court for the Southern District of Florida on April 12, alleges a scheme in which “hundreds” of agents deployed by the call center defrauded “hundreds of thousands” of ACA marketplace enrollees. It’s quite a read and sheds light on several points (including one error) touched on in my prior post.

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Role of EDE. I noted in my first post that most brokers registered with HealthCare.gov (the federal exchange, serving 32 states) execute their enrollments states via commercial web brokers deploying Direct Enrollment or Enhanced Direct Enrollment (DE or EDE). I concluded that web brokers were not a key factor in the fraud, because a) agents and brokers have the same access to existing enrollees’ accounts through HealthCare.gov itself as they do on the web brokers’ EDE platforms, and b) brokers told me that the web brokers they use flag changes to an enrollee’s designated agent or broker and thus help them detect poaching. The complaint alleges, however, that the two call centers alleged to have engaged in large-scale unauthorized plan-switching (and which allegedly deployed hundreds of downline agents in the fraud) have between them owned and deployed three proprietary EDE web brokers. Broker switches enacted via proprietary EDE would be invisible to other web brokers — e.g., to the dominant web broker, HealthSherpa, which in OEP 2024 accounted for 52% of active enrollments in HealthCare.gov states, or just shy of 7 million (passive auto re-enrollment, which accounted for 22% of 2024 enrollment in HealthCare.gov states, is not credited to web brokers). As EDE enrollment is faster than enrollments executed on HealthCare.gov, proprietary web brokers, if controlled by fraudsters, would indeed facilitate large-scale fraud. The three web brokers allegedly owned by the call centers or (a parent company), Benefitalign, Jet Health Solutions, and Inshura, are all listed among CMS’s approved EDE partners.

Role of Private Equity. According to the complaint, Bain Capital Management provided one of the two call centers central to the scheme with $150 million “to finance its call centers and the commissions of its downline agencies.” That well-funded operation also bought two web brokers, which presumably aren’t cheap. Mitt Romney, call your (former) office.

Scale. The complaint alleges that using fraudulent ads deployed by lead generators enabled the two defendant call centers to achieve enormous scale. It cites the CEO of one of them, Enhance Health, boasting in print: “Enhance Health is the largest enroller of ACA plans in the country — we help hundreds of thousands of Americans find health insurance coverage every year.” Of course, frauds similar to those alleged in this complaint may have been executed by organizations that had no connection with those named in the complaint.

Target market. The complaint adds, “Herman also noted that nearly all of Enhance Health’s clients are low-income Americans, stating ‘97% of our embers pay $0 a month in insurance premiums while obtaining the coverage they need.‘“(p. 33). As I noted in my prior post, large-scale fraud was doubtless enabled both by the subsidy increases enacted in March 2021, which rendered benchmark silver plans free at incomes up to 150% FPL ($21,870 for a single enrollee this year), and by the launch in early 2022 of year-round enrollment for those with incomes up to 150% FPL. The complaint alleges that Enhance Health, founded and funded in late 2021, switched its focus from Medicare Advantage to the marketplace specifically to capitalize on the year-round enrollment for low income applicants. For perspective, enrollment in the 100-150% FPL bracket more than doubled in HealthCare.gov states from OEP 2022 to OEP 2024, from 4.1 million to 8.7 million. Zero-premium bronze plans, moreover, are widely available at incomes well above 150% FPL. The claim that 97% of Enhance customers paid zero premium suggests that zero premium was almost a requirement for Enhance Health. HealthSherpa, which enrolled about 7 million people* during OEP 2024 — almost all of them through brokers and agents — stated that 62% of its enrollees paid zero premium. That seems in line with the income distribution of enrollees in HealthCare.gov states, where 55% had income below 150% FPL.

Serial victims. Appleby reported that some victims had their plans switched multiple times. The report details high-volume switching by named plaintiffs — one of whom allegedly had his plan switched twenty times.

Crime? The complaint alleges that the alleged malfeasance — sharing clients’ Personally Identifiable Information (PII) in violation of multiple ACA requirements, misrepresenting premium tax credits as cash benefits, enrolling or plan-switching targets without their knowledge or consent — is not only fraud, for which the perpetrators should be liable for treble damages, but also “indictable offenses under 18 U.S.C. §§ 1341 and 1343 [mail fraud and wire fraud], in that they directed and carried out a scheme or artifice to defraud or obtain money by means of materially false misrepresentations or omissions” (p. 55).

Ronnell Nolan, president of CEO of Health Agents for America, told me last week that the fraud seems to have emanated from south Florida, where the defendants in this suit are based. Here’s hoping that this suit takes the measure of whatever fraud may be occurring and that there aren’t unrelated actors working at similar scale.

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* While CEO George Kalogeropoulos cited more than 7 million enrollments on January 4, a HealthSherpa executive tells me that the total was pared down post-OEP to account for plan selections that were never effectuated and cancellations prior to the end of OEP.

On unauthorized plan-switching in the ACA marketplace

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How did this get in my pocket?

Julie Appleby of Kaiser Health News reported last week that health insurance brokers are switching a number of ACA marketplace enrollees in HealthCare.gov states from one plan to another “without their express permission” and often without their knowledge.

Unauthorized enrollment or plan-switching is emerging as a serious challenge for the ACA, also known as Obamacare. Brokers say the ease with which rogue agents can get into policyholder accounts in the 32 states served by the federal marketplace plays a major role in the problem, according to an investigation by KFF Health News.

Indeed, armed with only a person’s name, date of birth, and state, a licensed agent can access a policyholder’s coverage through the federal exchange or its direct enrollment platforms. It’s harder to do through state ACA markets, because they often require additional information.

The story is well-sourced and illustrated, with individuals recounting that they suddenly were unable to use the plans they thought they were enrolled in. In one case, a victim found himself on the hook for months of tax credits after disenrolling because he’d obtained employer-sponsored insurance and then being re-enrolled in another plan by a broker unknown to him. Appleby also cites brokers who claim that hundreds of their clients were poached and re-enrolled in plans other than the ones they’d chosen. Appleby links to key CMS documents, online ads, and insurer advisories.

I spoke to brokers and web brokers to delve further into how the fraud works, how the harms are redressed, and how it might be prevented. A few takeaways below.

Is there any remaining "upper coverage gap" in nonexpansion states?

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What's left of the upper coverage gap?

For some years, the Kaiser Family Foundation (KFF) has published estimates of people in the “coverage gap” in states that have refused to enact the ACA Medicaid expansion — that is, uninsured people who would be eligible for Medicaid if the state enacted the expansion. (As of now, 10 “nonexpansion states” remain.) In some briefs, KFF has divided the estimate into two groups: uninsured below 100% FPL, who in most cases are ineligible for government-supported insurance in nonexpansion states, and uninsured in the “upper coverage gap” — those with income in the 100-138% FPL range, who are eligible for subsidized marketplace coverage.

KFF estimates of the uninsured are based on the Census Bureau’s American Community Survey, which generally lags ACA enrollment data by two years. In April 2021, I noted that marketplace enrollment at 100-138% FPL in nonexpansion states in 2020, laid beside KFF’s estimates of uninsured in that cohort as of 2019, indicated that a bit more than half of those eligible for marketplace coverage in this income bracket had enrolled in plans. In a followup post, I noted that enrollment gains in 2021 at 100-138% FPL (a 17% increase in the 12 nonexpansion states then remaining) should be making inroads on the uninsured population in the upper coverage gap.

At the time of that writing, the American Rescue Plan Act (ARPA) had just rendered benchmark silver coverage with Cost Sharing Reduction free at incomes up to 150% FPL, and an emergency Special Enrollment Period, which extended through August 15, 2021, was just gathering steam. Since then, enrollment at 100-138% FPL (85% of which is in the remaining nonexpansion states) has more than doubled, from 3.3 million as of the end of the Open Enrollment Period (OEP) for 2021 to 6.9 million in OEP 2024.

Just last month, KFF updated its estimates of the uninsured in the coverage gap, including the upper coverage gap (100-138% FPL). The estimate, again, is based on the American Community Survey and only goes through 2022. Since that point, enrollment gains the 100-138% FPL income bracket exceed — in fact, more than double — KFF’s 2022 estimate of uninsured in the bracket. Enrollment figures below are from the Marketplace Open Enrollment Period Public Use Files, 2022 and 2024.

ACA Enrollment assistance in 2024: A conversation with Shelli Quenga

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The enrollment doctor is in

Last week I caught up with Shelli Quenga of the South Carolina-based nonprofit Palmetto Project, who has been an ACA enrollment assistor and enrollment project director since the ACA marketplace’s first Open Enrollment Period (OEP) in fall 2013.

In the Obama years, the Palmetto Project was South Carolina’s chief grantee under in the federally funded Navigator enrollment assistance program. When the Trump administration gutted the program’s funding*, Palmetto Project converted its enrollment assistance program to a nonprofit brokerage in advance of OEP 2019. At that point, the program was operating on a shoestring, with five employees. Now, Quenga told me, they are up to 11 employees, with a couple of more hires planned.

After 11 years on the front lines of marketplace enrollment assistance, Quenga has a deep understanding of how people find their way to coverage through the ACA — or fail to. Her reflections shed light on the dynamic of the enrollment explosion of the pandemic years — particularly in the ten remaining states (including South Carolina) that have refused to enact the ACA Medicaid expansion. Enrollment overall is up 87% since OEP 2020, 147% in nonexpansion states, and 167% in South Carolina, from 214,040 in 2020 to 571,175 in 2024. In 2024, enrollment growth was concentrated at the lowest subsidy-eligible income levels, up 61% nationally in the 100-138% FPL bracket. In South Carolina, enrollment at 100-138% FPL almost doubled in OEP 2024, from 133,787 to 253,158.

Among the key points:

ACA Marketplace in 2024: low-income enrollment up, silver plan selection down

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CMS has published its 2024 Marketplace Open Enrollment Period Public Use Files, providing detailed breakouts of enrollment by income, metal level selection, demographics, etc.

We already knew that enrollment increased by 31% nationally this year, spurred in part by the Medicaid unwinding — that is, the resumption of Medicaid redeterminations and disenrollments after a three-year pandemic-induced moratorium. While there’s always much to explore in the PUFs, two facts jump off the page for me:

• Enrollment growth was heavily concentrated at low incomes — up 61% at 100-138% FPL and 54% in the slightly broader 100-150% FPL bracket. That’s perhaps not surprising, given that CMS announced that 2.4 million Medicaid disenrollees had enrolled in the 32 states using the federal platform, HealthCare.gov (and perhaps 2.9 million nationally, by Charles Gaba’s estimate). Year-round enrollment at incomes up to 150% FPL has likely also boosted enrollment in this bracket [added 3/23/24].

• The decline in silver plan selection at low incomes that I flagged last March has continued. That is, growing numbers of low-income enrollees are forgoing Cost Sharing Reduction, available only with silver plans. At incomes up to 200% FPL, CSR makes silver plans roughly equivalent to platinum. Since March 2021, at least two CSR-enhanced silver plans in each rating area, with an actuarial value of 94%, are available at zero premium to enrollees with income up to 150% FPL. In the 150-200% FPL bracket, the benchmark (second cheapest) silver plan costs 0-2% of income (topping out at about $45/month for a single person) and has an actuarial value of 87%. Yet silver plan selection in the 100-150% FPL bracket was just 76.4% in HealthCare.gov states, down from 84.9% in 2022 and 89.3% in 2017. In the 150-200% FPL bracket, silver crashed from 69.5% last year to 56.7% this year. It was 83.2% in 2017.

Let’s look first at enrollment growth by income.

Biden administration to ACA enrollment assistors: Please credit yourselves

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Please add my 13-digit ID

CMS is apparently working to redress the Trump administration’s attack on the effectiveness of the nonprofit enrollment assistors chartered by the ACA and partly funded by the federal government.

Earlier this week CMS sent this memo to enrollment assistors:

The memo spells out the rationale for ensuring that navigators, CACs and EAP, who have no direct financial incentive to credit themselves on marketplace enrollments they facilitate, do so anyway:

Including your assister ID will help the Centers for Medicare & Medicaid Services (CMS) to better understand the support that the assister community provides and continue to improve the consumer experience….

Understanding your reach as an assister is important to enhancing the support CMS provides you and the consumers you assist.

There is a long history behind this exhortation.

How the Trump administration handled the ACA marketplace, Part 3: Regulation

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This post is Part 3 of an assessment of Trump administration policy with respect to the ACA, most specifically the ACA marketplace. Part 1 overviewed the administration’s early encouragement of state reinsurance programs, Trump’s cutoff of direct reimbursement of insurers for Cost Sharing Reduction subsidies, and the defunding of the Navigator enrollment assister program, paired with considerable support for health insurance brokers.

Part 2 reviewed the effective repeal of the individual mandate penalty, paired with regulations designed to boost an alternative market of ACA-noncompliant plans. Here, we’ll look at how Seema Verma’s CMS loosened rules for insurers and tightened them for marketplace applicants.

How the Trump administration handled the ACA marketplace, Part 2

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The Trump administration stretched the clock for short-term, limited duration health plans

This post is Part 2 of an assessment of Trump administration policy with respect to the ACA, most specifically the ACA marketplace. Part 1 overviewed the administration’s early encouragement of state reinsurance programs, Trump’s cutoff of direct reimbursement of insurers for Cost Sharing Reduction subsidies, and the defunding of the Navigator enrollment assister program, paired with considerable support for health insurance brokers.

Below, we’ll look at the effective repeal of the individual mandate penalty (the one legislative initiative considered), and regulations designed to boost an alternative market of ACA-noncompliant plans.

As each part keeps ballooning as I write it, we’ll leave other administrative changes, loosening requirements on insurers and tightening them on prospective enrollees, to a Part 3.

Zeroing out the individual mandate penalty. After the Republican Senate in the summer of 2017 declined to take up the ACA “repeal and replace” bill passed by the House and then failed to pass its own repeal/replace alternative, John McCain famously scotched a final attempt to pass a “skinny” repeal bill that would have simply repealed the individual mandate and brought the Senate into conference with the House, perhaps to make one more run at a more comprehensive repeal/replace alternative. Following those failures, Republicans reduced the mandate penalty to zero in their massive tax cut bill passed in December 2017.

As an expression of intent to dismantle the ACA, the zero-penalty mandate’s chief function was to enable Republicans’ final attempt to void the ACA through the courts. In February 2018, a group of 20 states, led by Texas, sued to have the mandate declared unconstitutional, and the entire ACA statute voided. The suit sought ACA nullification on the ridiculous grounds that a) the 2012 Supreme Court decision upholding the constitutionality of the mandate did so only on the basis that the mandate is a tax, and within Congress’s taxing power; b) a zeroed-out mandate is no longer a tax; and c) since the Democratic Congress passed a resolution in 2010 declaring that the mandate was an “essential part” of the ACA’s overall “regulation of economic activity,” the whole law (including myriad parts unconnected with the ACA marketplace) had to be vacated. In June 2021 a 7-2 Supreme Court majority dismissed the suit, finding that the plaintiffs did not have standing because no one was harmed by a $0 penalty. The litigation did enable the Trump administration, 20 Republican attorneys general, and 126 House Republicans who signed an amicus brief in support of the plaintiffs to display root-and-branch opposition to the ACA for another three years after the legislative repeal drive failed.

Negation of the mandate was expected to drive healthier enrollees out of the market, raising premiums and thus further reducing enrollment. In 2019, CBO forecast (p. 11) that the $0 mandate penalty would increase the uninsured population by 7 million, or a bit more than 2%, and reduce marketplace enrollment by 4 million.

How the Trump administration handled the ACA marketplace, Part 1

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In the wake of Trump’s vow to repeal the ACA if elected, Larry Levitt, Kaiser Family Foundation, outlines the former president’s past and purported future healthcare agenda.

One of Trump’s biggest political failures as president was his inability to persuade Congress to repeal the Affordable Care Act (ACA). However, the Trump administration did make significant changes to the ACA, including repealing the individual mandate penalty, reducing federal funding for consumer assistance (navigators) by 84% and outreach by 90%, and expanding short-term insurance plans that can exclude coverage of preexisting conditions. And, the Trump administration supported an ultimately unsuccessful lawsuit to overturn the ACA.

In one of the stranger policy twists, the Trump administration ended payments to ACA insurers to compensate them for a requirement to provide reduced cost sharing for low-income patients. At the time, Trump said this would cause Obamacare to be “dead” and “gone.” But, insurers responded by increasing premiums, which in turn increased federal premium subsidies and costs to the federal government, likely strengthening the ACA.

In the current campaign, Trump has vowed several times to try again to repeal and replace the ACA, saying he would create a plan with “much better health care.”

Trump certainly meant harm to the ACA. His comments in the wake of abruptly cutting off direct reimbursement of insurers for the value of Cost Sharing Reduction, cited by Levitt above, show his intent, as does his pressure on Republicans in Congress to pass legislation gutting its core programs. Should Trump regain the presidency, there is no question that he will pursue the agenda that Levitt outlines in his conclusion, including the ACA-related parts:

Trump’s record as president from 2017 to 2021, combined with recent comments on the campaign trail, suggest he would pursue policies to weaken the ACA, reduce federal spending on Medicaid, restrict access to abortion and family planning, and scale back benefits for immigrants if reelected as president in 2024.

Moreover, should Trump regain the presidency, he would lead a Republican party even more subservient to his will than in his first term. A Republican Congress would almost surely roll back the ACA Medicaid expansion and impose sharp spending caps on surviving Medicaid programs, as well as deregulating and largely defunding the ACA marketplace, as failed Republican legislation aimed to do in 2017. Should Democrats control one or both houses of Congress, an HHS Department filled with MAGA partisans, in line with plans currently being laid by well-funded right-wing organizations like the Heritage Foundation to root out technocratic expertise and install Trump loyalists at every level in all federal departments, would doubtless pull out all stops to undermine the marketplace and reduce Medicaid enrollments.

In Trump’s first administration, his appointments to HHS and CMS also were hostile to the structure of the ACA marketplace and the Medicaid expansion. Most notably, CMS administrator Seema Verma encouraged states to impose work requirements on “non-disabled, working age Medicaid enrollees — with some success, although the measures were largely checked by the courts. She also pushed states to conduct more frequent income and eligibility checks on Medicaid enrollees, encouraging the kind of procedural disenrollments (often of people who never received demands for information) now plaguing the post-pandemic Medicaid unwinding. '

But Verma and HHS Secretaries Tom Price and Alex Azar were also more constrained by conventional political incentives and the needs of corporate, state and individual constituents than their successors in a second Trump administration would likely be. The administration’s record with respect to ACA marketplace administration was mixed. Some measures harmed product quality and enrollment; some measures boosted enrollment and retention.

Unkind unwinding: Health Policy Valentines 2024

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In a year of existential threats, and an era in which the corporate practice of medicine knows few curbs, there is still a stream of health policy wins worth serenading in the time-honored (since 2012!) tradition of #HealthPolicyValentines. This year’s mash notes below.

In a year of existential threats, and an era in which the corporate practice of medicine knows few curbs, there is still a stream of health policy wins worth serenading in the time-honored (since 2012!) tradition of #HealthPolicyValentines. This year’s mash notes are below.

The Medicaid unwinding
is often blind and cruel.
But spare some V-day love
For ex parte renewal.

* * *

A valentine from Democrats,
enacted, but hardly trending:
An annual Part D cap
on out-of-pocket spending.

* * *

What’s sweeter for seniors
than sugar and spices?
Medicare negotiating
selected drug prices.

* * *

Send flowers, chocolate and smiles
for keeping insurers squirmin’
over AI-driven denials
to Casey Ross and Bob Herman.

* * *

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O ACA, flawed child,
I’ll no longer carp
so long as your subsidies
remain enhanced by the ARP.

* * *

For low-income tar heels,
nothing can be finer
than Medicaid expansion
in North Carolina.

* * *

Let’s honor legislation
little known, in point of fact,
preventing harm, unnoticed:
The No Surprises Act.

* * *

As oligarch-funded theocrats
harm the women of this nation,
my love goes to the National
Abortion Federation.

* * *

And one for my wife as I join her on the far side of the age-65 threshold:

After 40 years of love
we’ll take no crap
from MA insurers —
thanks to Medigap.

* * *

While dredging up healthcare doggerel like this, I always end up with some bitter snippets, then remind myself they’re not um, valentines. Since they now exist, however, and at the risk of spoiling the mood, I’ll share a little rage rhyming:

The Supreme Court’s out of control,
but had better not go postal
by voiding the FDA rule
for Mifepristone and Misoprostol.

* * *

Nothing’s more dangerous
for those with colon polyps,
financially speaking,
than private equity rollups.

Take a trip down ACA memory lane with a visit to the Health Policy Valentines archives: Surprise! No Surprises (2023), Flowers in the graveyard (2022), Institutional edition (2021), But love grows old and waxes cold (2020), The Water is Wide: Health Policy Valentines (2019),  HPV (2018), Love Knows No Repeal (2017),  Love in the Time of Obamacare (2016), love, 2015, and Romance of the Rose, Health Policy Edition (2014).

Photo by Aykut Aktemur