Last year, reports emerged of unscrupulous health insurance brokers enrolling people in marketplace coverage or switching enrollees to different plans without permission. These scams netted commissions for the perpetrators, while exposing consumers to unexpected costs and jeopardizing their access to care. Federal regulators have since adopted countermeasures to tamp down on the abuses, but more could be done. While some blame the marketplace premium tax credit for encouraging fraud and suggest drastically reducing the help consumers receive, policymakers can combat broker misconduct effectively without punishing its victims.
What Happened?
Between January and August 2024, federal regulators received roughly 275,000 complaints about unauthorized enrollments or plan changes. Notably, misconduct has been concentrated in states that use the federal marketplace, HealthCare.gov. There has been no indication to date of similar problems in states that operate their own marketplaces.
This divergence largely stems from a policy difference regarding enhanced direct enrollment (EDE), an enrollment service that is allowed in the federal marketplace but not in the state-run marketplaces.1 EDE enables federally approved insurers and web brokers to enroll consumers in marketplace coverage using private websites, without the consumer needing to visit HealthCare.gov. The EDE entity processes the enrollment and shares data with the federal marketplace behind the scenes.
EDE allows approved entities to offer a more streamlined and customized shopping experience, subject to federal guardrails. Millions of people now use it without incident to obtain marketplace coverage. However, it appears that weaknesses in the interface between EDE platforms and the federal marketplace allowed unscrupulous brokers to enroll consumers or change coverage without consent.
People have found themselves moved to plans with higher deductibles, a different network, or a different drug formulary. These unexpected changes cause disruptions in care and expose consumers to higher costs, including surprise bills from out-of-network providers. In certain cases, victims could incur tax bills for coverage subsidies they did not know about. The many brokers who play by the rules are also harmed, suffering reputational damage and losing clients and commissions to fraudsters.
How Have Regulators Responded?
Federal regulators have closed systems loopholes, increased oversight and enforcement, and tightened verification procedures, while working with insurers and the IRS to ameliorate consumer harms. In July 2024, officials began preventing new brokers from changing existing coverage through EDE channels until consumer consent is verified through a three-way call with the marketplace. Following implementation of this safeguard, broker-initiated plan changes dropped nearly 70 percent and changes that redirect a commission from a consumer’s original broker to a new one — an indicator of potential misconduct — fell almost 90 percent. Federal officials suspended hundreds of brokers suspected of misconduct and revoked authorization of two EDE platforms. Meanwhile, in early January 2025, regulators issued rules that clarify federal authority to address larger-scale broker misconduct orchestrated or facilitated by broker agencies.
What Other Steps Could Policymakers Consider?
While the federal response appears to be working, policymakers can do more. For example, they could:
- Hold brokers who offer marketplace coverage to a federal standard of conduct that obligates them to act in the best interest of the consumer and be held liable if they do not.
- Require that documentation of consumer consent be submitted and verified before a broker receives a commission.
- Ensure federal agencies have sufficient resources to help consumers, including by ensuring victims don’t face liability for tax credits they didn’t receive.
- Require third-party marketing entities (i.e., lead generators), which have been driving unauthorized enrollments with misleading consumer advertisements, to register with the marketplace and meet marketing standards.
The Baby and the Bath Water
In 2021, Congress expanded eligibility for and the generosity of the premium tax credit for marketplace coverage. These enhancements have increased marketplace enrollment substantially and helped reduce the uninsured rate to historic lows, but will expire after 2025 unless renewed.
Some observers who have endorsed the “common-sense” proposals bulleted above have simultaneously urged policymakers to end the expanded premium tax credit, on the theory that cheap coverage attracts unscrupulous brokers and facilitates fraud.
There’s some logic there: by bringing marketplace coverage within reach of many more Americans, the expanded premium tax credit made this market more appealing to brokers, the law-abiding and the minority who aren’t, alike. But the conclusion doesn’t follow: attempting to deter fraudulent enrollments by making it harder for people to afford coverage is like trying to prevent car theft by making it more difficult for people to own cars.
Before federal officials cracked down, misconduct by unscrupulous brokers affected hundreds of thousands of consumers. The expanded tax credit has made coverage more affordable for 19 million people, 4 million of whom will likely lose coverage if this help goes away.
Looking Forward
Broker misconduct has been a real problem, and it deserves ongoing scrutiny. There are calibrated responses policymakers can take — strengthening oversight of entities involved in selling coverage — that directly address fraud and ensure program integrity. And there are other options that are calibrated very differently. Choosing to cut the premium tax credit for marketplace consumers may align with other policy priorities, and it may indirectly affect fraudsters. But the biggest impacts will be felt by the nearly 20 million Americans whose monthly costs will rise.
