A high-stakes political and policy battle is currently unfolding over the future of enhanced Affordable Care Act (ACA) subsidies, with the health insurance costs for millions of Americans hanging in the balance as a legislative deadline looms. This contentious debate centers on fundamentally different interpretations of the prevalence, cause, and appropriate solution for fraud within the ACA marketplaces. On one side of the aisle, many congressional Republicans and conservative policy experts contend that the enhanced subsidies, first introduced in 2022, have cultivated a system ripe for widespread abuse, thus necessitating their expiration. Conversely, state-level Obamacare officials, congressional Democrats, and some health policy researchers argue that fraud is a localized, operational issue tied to the structure of the federal marketplace, HealthCare.gov, and that leveraging it to eliminate subsidies is a “red herring” for a broader ideological opposition to the ACA itself. The outcome will have significant financial consequences for families across the nation.
The Core of the Conflict Competing Narratives on Fraud
The Republican Case Subsidies as an Invitation to Fraud
The central argument advanced by opponents of the enhanced subsidies fixates on their structure, particularly the significant expansion of “zero-dollar premium” plans that became available to a wider swath of the population. Experts like Brian Blase of the Paragon Health Institute assert that these plans have effectively “invited fraud, waste and improper payments” into the system. The mechanism for this alleged fraud involves rogue agents or brokers who enroll individuals without their knowledge or consent, creating what are being called “phantom enrollees.” These bad actors are motivated by the sales commissions they can pocket for each enrollment, regardless of whether the consumer is aware of or uses the plan. This creates a scenario where taxpayer dollars fund policies for individuals who never sought them, while the fraudulent brokers profit. The perceived ease of this scheme, enabled by the lack of a consumer-paid premium, is presented as the primary driver of the problem.
As compelling evidence for their position, critics of the subsidies point to alarming federal data concerning medical claim submissions. In 2024, an analysis revealed that nearly 40 percent of the 12 million individuals fully subsidized under the ACA had no medical claims filed on their behalf throughout the year. This rate is double what it was in 2021, prior to the subsidy enhancements, and stands in stark contrast to the 15 percent no-claim rate typically found in the employer-sponsored insurance market. Brian Blase estimates that approximately half of these zero-claim individuals are phantom enrollees, suggesting a problem of massive scale involving widespread improper payments. In response, prominent GOP figures, including Senators Bill Cassidy and Mike Crapo, are championing a major policy shift. They propose letting the subsidies expire and instead channeling federal funds into government-funded Health Savings Accounts (HSAs), arguing that HSAs are inherently more fraud-resistant because they demand direct consumer engagement and verification, making surreptitious enrollment virtually impossible.
The Counter Argument A Pretext for Ideological Opposition
Health policy experts and Democrats offer a sharp rebuttal, suggesting that the intense focus on fraud serves as a politically convenient pretext for achieving a long-standing ideological goal. Sabrina Corlette of Georgetown University’s Center on Health Insurance Reforms has characterized the fixation on fraud as a “red herring,” arguing that the true motivation is a deep-seated resistance to publicly funded health care and the ACA in particular. She illustrates the perceived flaw in the Republican approach with a simple analogy: “If you have a problem with car thieves in your community, the policy solution is not to make cars more expensive for residents to buy.” The direct consequence of letting the subsidies expire, she warns, would be a dramatic spike in premiums that would force countless families to drop their health coverage altogether. This sentiment is backed by hard numbers from the health policy research firm KFF, which estimates that without the subsidies, the average enrollee’s annual premium payments would more than double, reaching $1,904 in 2026.
Further deconstructing the technical claims, Matthew Fiedler of the Brookings Institution argues that while zero-premium plans are indeed an “ingredient” in these fraudulent schemes, eliminating the enhanced credits would not eradicate the problem. Many low-income individuals would still qualify for zero-premium Bronze-tier plans under the ACA’s original, less generous subsidy structure. Moreover, he points out that a determinedly crooked broker could easily circumvent the system by paying a small premium on a consumer’s behalf to secure a much larger commission, rendering the policy change ineffective against sophisticated fraud. Fiedler also provides a crucial non-fraudulent explanation for the high rate of zero-claim enrollees, noting that it is not uncommon for insured people to have no claims in a given year. This rate is likely inflated in the ACA market because many enrollees only maintain coverage for a portion of the year, between jobs or during other life transitions. He concludes that while coherent arguments against the subsidies may exist, using fraud as the justification for their elimination is a “poorly targeted and ineffective” strategy.
An Operational Divide Federal Flaws vs State Successes
A Tale of Two Systems The Federal vs State Marketplace Disparity
A critical element that challenges the narrative that subsidies are the root cause of fraud is the starkly contrasting experiences reported by state-run insurance exchanges versus the federally facilitated marketplace. Officials from state-based exchanges, such as Covered California, have publicly stated that they have not observed any significant increase in fraudulent activity. Jessica Altman, the executive director of Covered California, affirmed this, stating, “I don’t think that our experience or our data shows there has been any increase in fraud … before or since the enhanced premium tax credits.” This experience is mirrored in other states that manage their own marketplaces. For example, Kentucky’s state-run exchange reported receiving no consumer complaints related to unauthorized enrollments or plan switching between 2023 and 2025, a period during which complaints directed at the federal platform surged dramatically. This significant disparity leads supporters of the subsidies to question the fundamental premise of the Republican argument.
The evidence strongly suggests that if the enhanced subsidies themselves were the primary driver of fraud, the problem would be rampant and distributed evenly across all exchanges, both state and federal. The concentration of the issue on the federal platform points instead to an operational and structural failure. Ellen Montz, a former official at the Centers for Medicare and Medicaid Services (CMS) and now with Manatt Health, highlights the key distinction: most state-run exchanges directly operate and tightly control the web portals that agents and brokers use for enrollment. This direct oversight enables them to implement and enforce stringent regulations and verification measures. For instance, some states mandate a three-way call between the state, the consumer, and the agent to finalize any enrollment, a powerful deterrent against fraud. In stark contrast, HealthCare.gov, which serves residents in 30 states, does not operate its own portals. Instead, it allows private-sector contractors to establish them, creating a decentralized system with less direct oversight and more potential vulnerabilities for bad actors to exploit.
The Federal Response A Race to Patch Vulnerabilities
The scale of the problem on the federally run platform is undeniable and has been documented by the very agency that oversees it. In 2023, the Centers for Medicare and Medicaid Services (CMS) acknowledged a notable increase in consumer complaints regarding unauthorized plan switching and enrollment. The numbers for the following year were even more alarming. From January to August 2024 alone, CMS received a staggering 275,000 such complaints from consumers using the HealthCare.gov platform. Of these, 183,553 were related to entirely unauthorized enrollments, while another 90,376 pertained to unauthorized changes made to existing plans. This data confirms that fraudulent activity is not a generalized, nationwide phenomenon but is instead heavily concentrated within the 30 states that rely on the federal exchange for their ACA marketplace, underscoring the platform’s unique vulnerabilities compared to its state-run counterparts.
In response to this surge in fraudulent activity, CMS has begun to implement stronger countermeasures aimed at bolstering the security and integrity of the HealthCare.gov platform. In 2024, the agency started requiring agents to conduct a joint verification call with the consumer and the CMS call center before they could switch a consumer’s plan. As of November of that year, it also mandated that any enrollment facilitated through a broker must include a verified Social Security number. Furthermore, the agency finalized a rule intended to increase eligibility checks for applicants. However, these efforts have encountered significant challenges. A federal judge issued a pause on parts of the new rule, and CMS faced bipartisan criticism over its decision to reinstate 850 brokers who had been suspended in 2024 for suspicious activity, an action publicly protested by Democrats like Rep. Lloyd Doggett. With 2025 complaint data not yet released, it remains unclear if these new measures have been successful in curtailing the widespread fraud.
The Path Forward
The debate over ACA subsidies ultimately crystallized around two divergent paths. One path involved dismantling a core financial pillar of the nation’s health insurance framework, based on fraud statistics that were overwhelmingly concentrated within a single federal platform. This approach risked penalizing millions of legitimate enrollees for the security failures of a system they were required to use. The alternative path focused on a more targeted solution: addressing the documented operational vulnerabilities of HealthCare.gov itself. This strategy aimed to bolster the federal platform’s security protocols, bringing them in line with the successful, fraud-resistant models that had been effectively demonstrated by numerous state-run exchanges. The resolution of this conflict determined not just the immediate financial fate of millions of insurance holders but also set a significant precedent for how federal policy addresses the critical interplay between program integrity and public access to essential services.
