CMS just canceled approximately 315,000 Affordable Care Act Marketplace enrollments covering more than 760,000 people.

Let that sink in for a minute.

More than three-quarters of a million people were enrolled in health insurance policies that CMS and insurance companies determined were unauthorized.

Those cancellations are expected to return approximately $2.2 billion in federal premium subsidies. CMS says it will continue investigating questionable enrollments and attempt to recover additional improper subsidy payments. (Centers for Medicare & Medicaid Services)

The story was recently reported by NPR, but this problem has been building for quite some time.

And I'm having a hard time acting surprised.

The Fraud Is Real

Before somebody turns this into another political argument about whether Obamacare is good or bad, there is something much simpler happening here.

There has been fraud.

A lot of it.

CMS says agents who first registered for the Marketplace for 2026 represented a relatively small portion of broker-assisted enrollments, yet their business produced substantially more warning signs.

Their enrollments were 2.8 times more likely to have unresolved income-verification problems and 2.7 times more likely to be missing Social Security numbers. Citizenship or immigration verification problems were 2.6 times more common. These new agents were also 1.6 times more likely to use Special Enrollment Periods that weren't subject to verification.

CMS has sent termination notices to more than 200 agents and brokers since January. Another 569 received notices of intent to terminate after submitting applications that were missing important applicant information.

This isn't somebody imagining a fraud problem.

CMS is documenting one.

So CMS Is Closing The Door On New Brokers

The government's response is pretty dramatic.

Beginning September 22, CMS stopped new agents and brokers who didn't have an active 2026 Exchange agreement from registering for the federally facilitated Marketplace for 2027.

The moratorium currently runs through February 1.

That means legitimate new insurance agents who were planning to enter the ACA market this fall are locked out right along with the people CMS is trying to stop.

CMS acknowledges the economic impact itself. The agency estimates about 6,956 agents and brokers will be affected. Its regulatory analysis projects roughly $71 million to $98 million in commission revenue could shift from those new agents to brokers already participating in the Marketplace. CMS even acknowledges possible job losses and sunk investments by agencies that already spent money recruiting, licensing and training people who now cannot participate. (thefederalregister.org)

That's a pretty serious consequence.

The question is whether it actually fixes the problem.

I'm skeptical.

Government Money Attracts People Who Want Government Money

Here is where my view probably differs from some people.

When government and large corporate entities (or any person really, businessman, politicians etc..) become financially intertwined, the opportunity for corruption and abuse grows with it. I don't mean every government employee is corrupt, every insurance company is corrupt or every broker is corrupt. Obviously they aren't.

I'm talking about incentives.

The federal government subsidizes Marketplace premiums. Private insurance companies receive those premium dollars. Brokers can receive commissions when people enroll.

That's a lot of money moving through a system involving government, corporations, third-party enrollment platforms, marketing companies, lead generators and insurance agents.

Bad actors are going to look for weaknesses.

We shouldn't be surprised when they find them.

The scale of the problem isn't new either. In 2024, CMS reported more than 183,000 complaints of consumers being enrolled in federal Marketplace coverage without their consent between January and August alone. There were another 90,000-plus complaints involving unauthorized plan switches.

CMS responded with additional security measures that year, including preventing an unrelated broker from simply attaching himself to an existing enrollment. CMS said the change reduced updates to agent commission information by nearly 90%.

Good.

That's exactly the kind of enforcement we need.

But it also tells us something.

The system itself was too easy to manipulate.

Banning New Brokers Doesn't Necessarily Remove The Incentive

This is my problem with the latest response.

Suppose somebody's entire business model is based on fraudulent enrollments.

Does anyone really believe that person sees the new CMS rule and says, "Well, I guess I'll find an honest line of work"?

Of course not.

They'll look for another opening.

Maybe that's a state-based exchange. Maybe it's another insurance market. Maybe they find an existing writing number or agency relationship they can exploit.

That's what fraudsters do.

Meanwhile, the 24-year-old who just got his health insurance license and legitimately wanted to start selling ACA plans gets told to come back later.

There has to be a better way.

Go After What Makes The Fraud Possible

The federal government has already demonstrated that targeted controls can work. The 2024 change restricting unauthorized broker-of-record changes reportedly reduced commission-information changes by nearly 90%.

I'd like to see more attention paid to vulnerabilities like that.

Special Enrollment Periods deserve scrutiny. CMS itself says the new brokers generating questionable business were 1.6 times more likely to use SEPs that were not subject to verification.

That should get everyone's attention.

High-volume enrollment operations deserve attention too. If somebody is submitting an amount of business that doesn't make sense for an individual agent, investigate it.

When enrollments repeatedly cancel without meaningful consumer interaction, look at the pattern.

And when somebody is caught intentionally enrolling consumers without permission, don't punish the rest of the agent population with another training module.

Get that person out of the business.

Medicare Should Be Part Of This Conversation

This issue doesn't end with the ACA.

Anyone who works in Medicare knows exactly what I'm talking about.

Turn on daytime television during enrollment season.

The message often isn't, "Let's carefully evaluate your healthcare coverage."

It's benefits.

It's money.

It's what you supposedly aren't getting.

Medicare Advantage has legitimate benefits and serves millions of people. The problem isn't the product.

The problem comes when an enrollment system creates enough opportunities and financial incentives that aggressive marketing can turn into unauthorized or inappropriate switching.

Federal regulators have rules against misleading marketing and unauthorized enrollment. Enforcement of those rules matters because the consumer ultimately pays the price when a plan gets changed without understanding what happened.

The same principle applies to the ACA.

Make it harder to commit the fraud.

Don't just make it harder to become an agent.

There Is A Lesson Here

A market-oriented critique of the ACA has always been that when government becomes deeply involved in financing a private market, incentives can become distorted.

Supporters of the Marketplace subsidy structure make a legitimate counterargument: subsidies have allowed millions of Americans to obtain coverage they otherwise might not have been able to afford.

Both things can be true.

Helping people afford insurance doesn't require pretending the system is immune to abuse.

The federal government has enormous purchasing power. Whenever billions of taxpayer dollars move through private companies and intermediaries, strong verification and enforcement aren't optional.

That's where I think government should be aggressive.

Protect the taxpayer. Protect the consumer. Prosecute fraud when appropriate.

But be careful about responding to failures in government program design by simply putting another barrier in front of legitimate businesses trying to participate.

CMS has identified a real problem.

Now it needs to make sure the cure actually attacks the disease.

Because if the underlying vulnerabilities remain, the fraud won't disappear.

It'll just move somewhere else.