The Obamacare ‘Phantom’ Menace
Republicans insist the program is full of fake enrollees. Meanwhile, millions of real people are losing coverage.
IT HAS BEEN SIX MONTHS since Donald Trump and congressional Republicans refused to renew temporary, enhanced subsidies for the Affordable Care Act, causing premiums to jump for more than 20 million Americans. And at first, it seemed like things might not work out so badly, all things considered.
In January, the administration reported that initial signups were down by just 1.5 million. That would represent a relatively modest fall in a program that serves more than ten times that number, even if it was the largest year-to-year decline on record.
But since then, a handful of states have released their enrollment numbers. Based on that data—and ongoing survey information—several independent analyses have all come to basically the same conclusion: Enrollment is likely to fall by several million more.1
It will be a few weeks (at least) before the federal government releases final coverage statistics and we learn just how many millions of Americans have dropped their insurance coverage because of the canceled subsidies.2 Meanwhile, though, it’s worth remembering that the people dropping insurance aren’t the only ones feeling the pain. The expiring of the subsidies is also hitting many millions of people still getting insurance through the program who are now paying more for their coverage or who have shifted into skimpier plans that, though cheaper on a month-to-month basis, leave them exposed to higher out-of-pocket costs.
This is precisely what Democrats (and a handful of Republicans) warned would happen in the final months of last year, when there was a debate over whether to extend the subsidies. And in theory that argument could still carry the day. Trump and the Republicans could still decide to appropriate the money and offer the assistance retroactively. It’s been done before, and it could potentially bring the GOP some political relief heading into the midterms, given how big an issue affordability is shaping up to be.
But nobody thinks that is going to happen. Trump and the Republicans have signaled clearly they intend to stick by their decision and defend it, mostly by denying the harm it’s causing. Yes, enrollment is falling. But, they say, that’s mostly because they’ve culled from the program “phantom enrollees” who either gave deceptive information to qualify for financial assistance or were signed up without their knowledge by unscrupulous agents and brokers.
This argument fits seamlessly into one of the administration’s favorite narratives—that social welfare programs have exploded in cost and scope because of fraud, and that aggressively thinning enrollment in these programs is necessary to preserve them for the truly needy. “If you care about the ACA, then you’ll want us to take the fraud out,” Mehmet Oz, the Trump administration official who oversees federal insurance programs, said at a White House briefing earlier this month.
Oz is right that anybody who cares about the Affordable Care Act should support efforts at eliminating fraud. He’s also right that fraud has been a problem. But the available evidence suggests it was a lot less pervasive than Republicans claim—and that it could have been addressed in a way that would have allowed the extra financial assistance to stay in place.
Republicans have used a bazooka to kill an ant colony. And now they want you to believe that the smoldering crater is a figment of your imagination.
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ONE PLACE YOU CAN REALLY SEE the impact of the expiring subsidies is Georgia, one of the states where hard numbers are now available. As of April, enrollment in the state’s marketplace had fallen by one-third, according to data the CurrentGA and Georgia Recorder obtained via public-records request.
That comes as no surprise to Linda Williamson, an insurance broker in Atlanta. Most of her clients saw their premiums go up by hundreds of dollars a month, Williamson told me in a phone interview, and many have responded by switching into plans with higher out-of-pocket costs because they came with lower monthly payments. Still others are dropping their Affordable Care Act insurance altogether, Williamson said, with many opting instead for alternative forms of coverage like indemnity plans that have limited benefits.
That last part is an especially revealing window into what’s really happening. The problem with indemnity plans is that they typically pay fixed amounts per medical service, even if the provider charges more, and they stop paying altogether when the bills exceed a fixed threshold—anywhere from $250,000 to a million dollars for the policies Williamson sells.
The costs from a catastrophic medical event can easily exceed that, as Williamson knows personally: About twenty years ago, she had to refinance her house and borrow from retirement funds to pay off more than $100,000 in medical bills following a car accident and (separately) a bilateral pulmonary embolism that hit in her early forties.
The other catch with indemnity and short-term plans is that they usually entail what’s known as “medical underwriting,” which means that insurers will charge higher premiums—or deny coverage altogether—to anyone with pre-existing conditions. Williams told me she’s already had one client get approved for an indemnity plan only to have the coverage rescinded a few weeks later because the insurer went through the client’s records following a hospital visit and determined it was related to a past medical episode.
“They investigated and decided retroactively she never would have qualified for the policy, dissolved her policy, and left her with the medical bills,” Williamson said. “There’s nothing she could do, nothing she could qualify for. She’s paying out of pocket now, until we can get to January 1 and next year’s open enrollment, to get her back into an ACA plan.”
Stories like that used to be a lot more common in the days before the Affordable Care Act, when insurers selling individual coverage routinely subjected buyers to medical underwriting, as well as those retroactive reviews that frequently lead to rescissions like the one Williamson described to me. Putting a stop to those practices was one of the big motivating reasons to pass “Obamacare” in the first place. Now those practices are creeping back into the world of health insurance, at least for people for whom Affordable Care Act coverage has become too expensive.
It’s part of a larger story of backsliding on the Affordable Care Act’s progress just now coming into view—a story that affects middle- and upper-middle-income workers and small business owners, like the type Williamson tends to advise, as well as lower-income workers for whom even seemingly small premium increases of $20 or $30 a month strain budgets.
“What we’re hearing from our [enrollment counselors] is that a lot of these people are working multiple jobs, didn’t have health insurance until a few years ago when the extra credits got them into the ACA marketplaces, and now they’re going back to being uninsured” Whitney Griggs, director of health policy at Georgians for a Healthy Future, told me. “We have also heard about folks who are trying to pay that first premium and just could not keep up that cadence, and dropping their coverage.”
TRUMP ADMINISTRATION OFFICIALS have been preparing to explain away declining Affordable Care Act enrollment at least as far back as March, when Oz told NBC News “the fact that we have 23 million makes me think we have too many participants in the ACA—it’s too high of a number.”
The reason, the celebrity doctor claimed, was that millions of enrollees had either lied about their incomes to qualify for big subsidies or had been signed up under false pretenses by unscrupulous brokers and agents. To back up this explanation, officials like Oz frequently cite data showing that a little more than one-third of enrollees filed zero claims last year—proving, they say, that millions of people on the program are there unwittingly, and in some cases illegitimately.
This claim dates back to last year’s debate over whether to extend the subsidies. And it remains as flimsy as it was then. Lots of relatively healthy people don’t file insurance claims in a given twelve-month period. And by design, the Affordable Care Act marketplaces include lots of people getting coverage for just a few months—say, when they are between jobs. Adjust for that and some other relevant facts, as Brookings Institution economist and former Obama administration official Matthew Fiedler has in a set of calculations, and the percentage of enrollees making no claims lines up nicely with the percentage who do so in employer plans, which nobody would suggest are prone to enrollment fraud.
To support their argument about fraudulent enrollment, Oz and other officials have drawn heavily on reports by the Paragon Health Institute, a right-leaning think tank, which argue that the Biden administration’s efforts to grease the wheels for enrollment enabled fraud on a mass scale. “Obamacare enrollment over the last few years has been inflated by improper and phantom enrollees, and those enrollees are expensive to the taxpayer,” Brian Blase, a veteran of Trump’s first administration who is Paragon’s founder and president, told the Washington Post earlier this month.
Nobody disputes that the Affordable Care Act marketplaces attracted some agents and brokers who enrolled people using unethical, possibly illegal methods—like signing up people or switching their plans without permission—to get commissions. And it seems likely that Biden administration efforts to ease enrollment, undertaken in the name of expanding coverage, made fraud easier to pull off. But the scale of that problem is what’s in dispute. The estimate in a recent Paragon report that there are more than 6 million improper or fraudulent enrollees rests on some assumptions that are highly contestable—and, in fact, have been strenuously contested.3
One part of the Paragon report nobody contests is that improper enrollment is skewed geographically. There’s a lot of it in states like Florida and Texas where people enroll through the federal website, HealthCare.gov, and relatively little in states like Massachusetts and California that run their own marketplaces. Among those who can vouch for that is Jessica Altman, executive director of Covered California. “We have no evidence of systematic fraud at Covered California at all,” she told me in a recent interview.
But as Altman also noted, this strongly suggests the fraud problem isn’t mainly a byproduct of the extra subsidies—which, after all, were available in states like hers as well. Rather, it reflects some differences in the ways the online marketplaces operate. Probably the biggest is that states like California never gave agents and brokers the kind of direct enrollment access that the federal government has allowed on HealthCare.gov—a feature of the website, by the way, that was put in place not by Biden’s team but by Trump’s back in 2018.
Changes to protect HealthCare.gov from fraud are underway, some of them dating back to the Biden administration and others being put in place today. Time will tell how effective they are. But the lapsing of subsidies is raising costs for people now, even in states like California that avoided the Florida-like fraud problems.4
“We have a lot of evidence that these are real people—people who are telling us their stories, who are calling us, trying to make impossible decisions, and ultimately choosing to drop their coverage,” Altman said.5
THE HIGHER INCIDENCE of (possibly) fraudulent enrollment in states like Florida and Texas likely isn’t simply a function of their reliance on HealthCare.gov. There’s also the fact that ten of the fifty states—all Republican-led—have not expanded Medicaid to cover all legal residents with incomes below or just above the poverty line, as the Affordable Care Act’s architects envisioned all states doing before the Supreme Court in 2012 effectively made expansion optional.
The reason is a wrinkle in the way the law’s subsidies work. Because the Affordable Care Act’s authors assumed the lowest-income Americans would get coverage through Medicaid, they restricted subsidized marketplace coverage to people with incomes above the poverty line.
That has created a “coverage gap,” mostly in the South, among poor people who have no Medicaid but make too little money to get Affordable Care Act subsidies. It’s safe to assume—as critics of the program, like Paragon’s scholars, have argued—that some of those people are lying about their incomes, saying they make more than they really do, to qualify for subsidies. They may be doing so on their own, or under coaching from agents and brokers.
It’s certainly possible to argue that this violates the letter of the law, and that it’s driving up costs for the federal government. But it’s difficult to take seriously pleas for fiscal rectitude from an administration lighting far bigger sums on fire every week with its war in Iran. It’s even tougher to swallow arguments about integrity from the most nakedly corrupt presidential administration in history.
It’s also worth pausing to think about who this particular group of supposed Affordable Care Act fraudsters are.
Yes, they have qualified for subsidized private coverage illegitimately by overstating how much money they expected to make in a year. But they would already have government-backed insurance—in the form of Medicaid—if they didn’t live in states where the likes of Ron DeSantis and Greg Abbott and their GOP allies are in charge.
And that’s not to mention the fact that these are extremely poor people, many of them with multiple jobs and unpredictable incomes. Some probably overstated their incomes inadvertently—especially because, as KFF executive vice president Larry Levitt told me, ”the ACA has enormously complicated eligibility rules . . . plenty of people get tripped up by those complexities.”
But fewer people getting coverage through public programs is the outcome Trump and his supporters have long said they wanted. That is why they have been trying to get rid of the Affordable Care Act ever since it became law. And while they haven’t succeeded, they’ve managed to weaken it—as more than 20 million Americans are now discovering.
Check out the analyses put out by the Commonwealth Fund and Georgetown University, KFF, and the Wakely Consulting Group. Also check out health care analyst Charles Gaba, whose Substack includes multiple entries documenting the many ways lapsed subsidies are causing people to drop coverage, pay more for it, or switch into less protective plans.
In May, Paige Winfield Cunningham of NOTUS reported that the administration had—but was not releasing—documentation to show that a significantly higher number of enrollees were failing to make payments on their premiums, and losing coverage as a result.
Health analyst Andrew Sprung has written on his Substack a lengthy critique of the latest Paragon report. It has a lot in common with a similar critique—about an earlier version of the Paragon arguments—that Sprung published in 2024. And there’s been somebody else on the case: Norm Spier, who in addition to writing his own Substack is a regular reader and commenter on The Breakdown. (Thanks, Norm!)
Florida in particular has long been a hotbed of health insurance fraud schemes. And as I explained last fall, it’s entirely possible fraud will become more pervasive, not less, because of changes that Trump and the Republicans have unleashed. The difference is that, going forward, the fraud is more likely to affect consumers directly, leaving them exposed to high medical bills because they were duped into buying skimpy or bogus policies.
California and a handful of other blue states have appropriated some of their own money to soften the blow, and California Gov. Gavin Newsom just proposed adding more. But it’s still far short of what it would take to fully offset the magnitude of the lapsed federal money.
JMHO, but let us consider that GOP/MAGA bring up the possibility of fraud because they don't believe that people ought to have health care. Period.
The irony being that most of the fraud can be traced back to insurance brokers in states where the insurance industry is most lightly regulated: Texas and Florida.
And less fraud in the regulatory "hellscapes" of California and Massachusetts.
Why doesn't Dr. Oz ask Senator Rick Scott of Florida to explain it to him? He knows all about defrauding the government. The company that made him one of the richest persons in Congress had to pay the (at that time) largest settlement in American history due to their fraudulent Medicare/Medicaid billing practices.