Hawkeye Reporter

U.S. Senator Chuck Grassley (R-Iowa) has renewed his call for increased oversight of the Affordable Care Act (ACA) marketplace following reports and information indicating widespread fraud in the system. Grassley, a senior member and former chairman of the Senate Finance Committee, highlighted that improper subsidies paid out under Obamacare reached an estimated $20 billion in 2024, with projections suggesting this figure could surpass $27 billion in 2025.

Grassley's office received information detailing how insurance agents are using targeted internet advertisements to enroll consumers fraudulently by submitting false income verification extension requests. These practices have reportedly exploited vulnerabilities within the ACA’s design, particularly affecting states that use the federally-facilitated marketplace rather than state-based exchanges.

Last year, Grassley sought answers from leaders in the Biden administration about efforts to address waste, fraud, and abuse in the ACA marketplace but did not receive a response.

In a letter addressed to Centers for Medicare & Medicaid Services (CMS) Administrator Mehmet Oz, Grassley wrote: “The Biden administration’s failure to adequately oversee these subsidies has had expensive consequences … The Wall Street Journal reported that in 2024 five million consumers may have inappropriately received health insurance coverage through subsidized Affordable Care Act (ACA) federal marketplace plans based on falsified income information, which may have cost the taxpayer an estimated $20 billion.”

Changes made by the Biden administration in 2021 expanded premium tax credits for higher-income earners and reduced cost sharing through 2025. This policy allows individuals with incomes between 100% and 150% of the federal poverty level to qualify for fully subsidized health insurance plans. According to Grassley, these changes have compromised program integrity.

Multiple sources have documented fraudulent enrollments linked to insurance agents and brokers exploiting gaps in ACA oversight. For example, CMS data shows there were over 183,000 complaints related to enrollments without consent and more than 90,000 complaints regarding unauthorized plan switches. Reports also indicate rising concerns about unauthorized sign-ups and switching of ACA plans without consumer permission (https://kffhealthnews.org/news/article/aca-obamacare-plans-switched-without-enrollee-permission-investigation/).

Grassley's letter referenced a February indictment by the Trump Department of Justice involving Cory Lloyd and Steven Strong for their roles in a $161 million ACA enrollment fraud scheme. According to DOJ statements cited by Grassley: “Lloyd and Strong targeted vulnerable, low-income individuals experiencing homelessness, unemployment, and mental health and substance abuse disorders, and, through ‘street marketers’ working on their behalf, sometimes offered bribes to induce those individuals to enroll in subsidized ACA plans.” Further details noted that misleading sales scripts were used “to convince consumers to state that they would attempt to earn the minimum income necessary to qualify for a subsidized ACA plan.”

Information provided to Grassley's office described similar schemes involving online ads promising free health insurance. Consumers would fill out webforms with personal data which agents then used—sometimes via platforms like HealthSherpa—to sign people up for plans offering maximum subsidies by manipulating reported incomes.

Grassley's letter asked CMS for detailed information about steps taken against such fraud schemes; estimates on fraudulent enrollments since 2019; coordination with IRS efforts on recouping excess payments; procedures following agent terminations; agency-level consequences; and statistics on agent terminations due to improper behavior.

“The Biden administration’s failure to adequately oversee these subsidies has had expensive consequences,” Grassley reiterated.

The full text of Senator Grassley's letter is available online (https://www.grassley.senate.gov/imo/media/doc/grassley_to_hhs_and_cms_-_aca.pdf). Additional background can be found at The Wall Street Journal (https://www.wsj.com/articles/the-20-billion-obamacare-subsidy-fraud-abd89b0d), Paragon Health Institute (https://paragoninstitute.org/wp-content/uploads/2024/06/The-Great-Obamacare-Enrollment-Fraud_FOR_RELEASE_V2.pdf), KFF Health News (https://kffhealthnews.org/news/article/aca-obamacare-plans-switched-without-enrollee-permission-investigation/) as well as other government documents.