Saturday, April 20, 2024

Notes on the lawsuit alleging large-scale broker fraud in the ACA marketplace

 Note: All xpostfactoid subscriptions are now through Substack alone (still free), though I will continue to cross-post on this site. If you're not subscribed, please visit xpostfactoid on Substack and sign up.

My health plan is where?

My last post focused on alleged large-scale broker fraud in the ACA marketplace — chiefly via agents and brokers switching enrollees’ health plans without their authorization (or usually even knowledge) after obtaining minimal personal information (name, D.O.B., state) via responses to misleading ads. KHN’s Julie Appleby, who broke that story early this month, followed up this week with news of a lawsuit filed on behalf of individuals and brokers allegedly harmed by such schemes. The suit names as defendants two Florida call centers, a parent company, a marketing company deploying the ads that generate the leads, and two executives, seeking class action status on behalf of enrollee victims, as well as brokerages that allegedly had their clients poached.

The complaint, filed in U.S. District Court for the Southern District of Florida on April 12, alleges a scheme in which “hundreds” of agents deployed by the call center defrauded “hundreds of thousands” of ACA marketplace enrollees. It’s quite a read and sheds light on several points (including one error) touched on in my prior post.

Role of EDE. I noted in my first post that most brokers registered with (the federal exchange, serving 32 states) execute their enrollments states via commercial web brokers deploying Direct Enrollment or Enhanced Direct Enrollment (DE or EDE). I concluded that web brokers were not a key factor in the fraud, because a) agents and brokers have the same access to existing enrollees’ accounts through itself as they do on the web brokers’ EDE platforms, and b) brokers told me that the web brokers they use flag changes to an enrollee’s designated agent or broker and thus help them detect poaching. The complaint alleges, however, that the two call centers alleged to have engaged in large-scale unauthorized plan-switching (and which allegedly deployed hundreds of downline agents in the fraud) have between them owned and deployed three proprietary EDE web brokers. Broker switches enacted via proprietary EDE would be invisible to other web brokers — e.g., to the dominant web broker, HealthSherpa, which in OEP 2024 accounted for 52% of active enrollments in states, or just shy of 7 million (passive auto re-enrollment, which accounted for 22% of 2024 enrollment in states, is not credited to web brokers). As EDE enrollment is faster than enrollments executed on, proprietary web brokers, if controlled by fraudsters, would indeed facilitate large-scale fraud. The three web brokers allegedly owned by the call centers or (a parent company), Benefitalign, Jet Health Solutions, and Inshura, are all listed among CMS’s approved EDE partners.

Role of Private Equity. According to the complaint, Bain Capital Management provided one of the two call centers central to the scheme with $150 million “to finance its call centers and the commissions of its downline agencies.” That well-funded operation also bought two web brokers, which presumably aren’t cheap. Mitt Romney, call your (former) office.

Scale. The complaint alleges that using fraudulent ads deployed by lead generators enabled the two defendant call centers to achieve enormous scale. It cites the CEO of one of them, Enhance Health, boasting in print: “Enhance Health is the largest enroller of ACA plans in the country — we help hundreds of thousands of Americans find health insurance coverage every year.” Of course, frauds similar to those alleged in this complaint may have been executed by organizations that had no connection with those named in the complaint.

Target market. The complaint adds, “Herman also noted that nearly all of Enhance Health’s clients are low-income Americans, stating ‘97% of our embers pay $0 a month in insurance premiums while obtaining the coverage they need.‘“(p. 33). As I noted in my prior post, large-scale fraud was doubtless enabled both by the subsidy increases enacted in March 2021, which rendered benchmark silver plans free at incomes up to 150% FPL ($21,870 for a single enrollee this year), and by the launch in early 2022 of year-round enrollment for those with incomes up to 150% FPL. The complaint alleges that Enhance Health, founded and funded in late 2021, switched its focus from Medicare Advantage to the marketplace specifically to capitalize on the year-round enrollment for low income applicants. For perspective, enrollment in the 100-150% FPL bracket more than doubled in states from OEP 2022 to OEP 2024, from 4.1 million to 8.7 million. Zero-premium bronze plans, moreover, are widely available at incomes well above 150% FPL. The claim that 97% of Enhance customers paid zero premium suggests that zero premium was almost a requirement for Enhance Health. HealthSherpa, which enrolled about 7 million people* during OEP 2024 — almost all of them through brokers and agents — stated that 62% of its enrollees paid zero premium. That seems in line with the income distribution of enrollees in states, where 55% had income below 150% FPL.

Serial victims. Appleby reported that some victims had their plans switched multiple times. The report details high-volume switching by named plaintiffs — one of whom allegedly had his plan switched twenty times.

Crime? The complaint alleges that the alleged malfeasance — sharing clients’ Personally Identifiable Information (PII) in violation of multiple ACA requirements, misrepresenting premium tax credits as cash benefits, enrolling or plan-switching targets without their knowledge or consent — is not only fraud, for which the perpetrators should be liable for treble damages, but also “indictable offenses under 18 U.S.C. §§ 1341 and 1343 [mail fraud and wire fraud], in that they directed and carried out a scheme or artifice to defraud or obtain money by means of materially false misrepresentations or omissions” (p. 55).

Ronnell Nolan, president of CEO of Health Agents for America, told me last week that the fraud seems to have emanated from south Florida, where the defendants in this suit are based. Here’s hoping that this suit takes the measure of whatever fraud may be occurring and that there aren’t unrelated actors working at similar scale.

* While CEO George Kalogeropoulos cited more than 7 million enrollments on January 4, a HealthSherpa executive tells me that the total was pared down post-OEP to account for plan selections that were never effectuated and cancellations prior to the end of OEP.

Wednesday, April 10, 2024

On unauthorized plan-switching in the ACA marketplace

Note: All xpostfactoid subscriptions are now through Substack alone (still free), though I will continue to cross-post on this site. If you're not subscribed, please visit xpostfactoid on Substack and sign up.

How did this get in my pocket?

Julie Appleby of Kaiser Health News reported last week that health insurance brokers are switching a number of ACA marketplace enrollees in states from one plan to another “without their express permission” and often without their knowledge.

Unauthorized enrollment or plan-switching is emerging as a serious challenge for the ACA, also known as Obamacare. Brokers say the ease with which rogue agents can get into policyholder accounts in the 32 states served by the federal marketplace plays a major role in the problem, according to an investigation by KFF Health News.

Indeed, armed with only a person’s name, date of birth, and state, a licensed agent can access a policyholder’s coverage through the federal exchange or its direct enrollment platforms. It’s harder to do through state ACA markets, because they often require additional information.

The story is well-sourced and illustrated, with individuals recounting that they suddenly were unable to use the plans they thought they were enrolled in. In one case, a victim found himself on the hook for months of tax credits after disenrolling because he’d obtained employer-sponsored insurance and then being re-enrolled in another plan by a broker unknown to him. Appleby also cites brokers who claim that hundreds of their clients were poached and re-enrolled in plans other than the ones they’d chosen. Appleby links to key CMS documents, online ads, and insurer advisories.

I spoke to brokers and web brokers to delve further into how the fraud works, how the harms are redressed, and how it might be prevented. A few takeaways below.