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| Do they print $6,400 bills? |
The outbreak of large-scale agent fraud in the ACA marketplace, in which agents have switched marketplace enrollees from one plan to another without their authorization or in some cases their knowledge, or have newly enrolled people without their consent or knowledge, has agents and the trade groups that represent them up in arms. There are multiple good reasons for this: their clients are harmed (as the plans they think they’re enrolled in are cancelled), the integrity of the marketplace as a whole is compromised — and their own incomes are denuded, as their commissions are terminated in favor of a new agent of record.
Much of the unauthorized (or inadequately authorized) plan-switching and enrollment appears to be straight-out fraud, along the lines alleged in a putative class action (Conswallo Turner et al. v. Enhance Health, LLC et al.): Leads generated by ads that misrepresent marketplace premium subsidies as cash benefits, fed to agents in call centers who obtain the minimal personal information needed (name, D.O.B. and state*) to switch the enrollee’s plan (or newly enroll her) with a new agent listed as the Agent of Record, without the enrollee’s understanding or consent. (CMS requires agents to obtain consent before acting on an account, and recently clarified that mere check-box consent is “likely not be sufficient to meet…new requirements,” but that soft prohibition seems to have been honored largely in the breach.)
Egregious fraud is happening. But the ease with which agents can alter or create an account on an EDE and collect a commission, coupled with the millions of people eligible for multiple zero-premium plans, further coupled with ads that are misleading to varying degrees, suggests a broader gray area in which some agents may be misleading marketplace enrollees to varying degrees.
To get a sense of the continuum between sloppy practice and deliberate fraud, it’s useful to have a sense of the structure of marketplace insurance brokerage generally. Almost all agents operate as independent contractors, paid directly by insurers via commissions, though many if not most depend on support from larger organizations to varying to degrees. There are large call centers that put hundreds of agents in cubicles and feed them leads, often from online ads. There are Field Marketing Organizations (FMOs) that handle carrier “assignments” for agents — that is, get them registered to represent some or all of the insurers in the markets in which they work — and may also supply other services, such as training, technology and, again, leads. Many agents and agencies of various sizes recruit other agents to work in specific markets and receive “override” commissions from insurers for each agent they recruit. Then there are the “lead generators” — marketing companies, some of them overseas, that run ads for health insurance and sell the responses to one or more agency.
Andy Dastur, President of North American Insurance Services, an FMO that serves about 4,000 health insurance agents, notes that while brokerage in the Medicare Advantage market is dominated by a handful of private equity-owned giants fielding more than 100,000 agents each, the ACA marketplace “still has a ton of local agencies.” He divides agencies into three buckets: megacompanies with over 100,000 agents; mid-sized FMOs like his own, and local agencies with maybe 50-100 agents. There are a lot “guys with rolodexes,” Dastur says, and “mom-and-pop shops that get an override for whatever reason.”
Joshua Brooker, an independent broker and chair of the Individual Markets Working Group at the National Association of Benefits and Insurance Professionals (NAPIB), which has been engaged in anti-fraud efforts, draws a distinction between what he calls “community brokers,” building a local reputation and brand and working largely by personal referral, with those who rely on a lead broker or call center upline for the “promise that you’ll have another person to call when you want to call.” Poor brokerage —not always outright fraud— tends to happen “where the person doing enrollment doesn’t see how the transaction began” — i.e. what the person on the other end of the phone thinks they may be getting.
Adam Van Fossen, VP of Growth at HealthSherpa, the dominant web-broker that claims use by 45,000 ACA marketplace agents, cautions that agency size is not simply inversely related to quality. “While some call centers are drab, and people don’t seem happy to be there, I’ve walked through a lot of others that operate more like navigators” — the nonprofit, federally funded enrollment assisters trained to provide in-depth enrollment support. “Some are kind, caring, compassionate — it depends entirely on the organization.” He adds that some large insurance agencies catering to employers that have entered the individual market provide quality guidance.
Like Brooker, however, Van Fossen does see the fraud and quasi-fraud that’s escalated recently in the ACA marketplace as centered in as centered primarily in large agencies jockeying for share in a high-growth market. Under the FMO model, he says, “we see issues: agencies growing hand over fist out control, with lead quality and agent quality decreasing.”
While enabled by the ease with which agents registered with HealthCare.gov can access and act on accounts, most of the fraud probably originates with ads, mostly online. The class action lawsuit alleging agency fraud, as well as news accounts, cite online ads that outright misrepresent the estimated value of a full-year premium subsidy for lowest income bracket (variously cited $6,400 or $5,400) as a cash benefit. Such ads can be viewed in the Facebook ad library. One reads:
Use this to pay for Rent Groceries Gas and much more…
This $0 Cost Subsidy unlocks $6,400 you don’t have to payback!
Warning: Closes very soon. Tap below and claim now before it’s too late!
Ads highlighting a large subsidy vary, however, from outright lies to misleading innuendos to suggestive vagueness to accuracy. Here, for example, is a hybrid of sorts, mixing accurate information and misleading innuendo:
American's may be eligible to claim $0 Health Insurance or $6,400 in Government Reimbursed Health Credits! These credits can be used to cover the cost of your health insurance resulting in HUGE monthly savings for many who qualify.
The accompanying video asserts, “You’re free to spend savings however you like, whether it’s on groceries, rent, gas…” The text above the video thumbnail uses similar language. That’s literally true, in the sense that money you didn’t spend, and would never have spent (the target audience would be highly unlikely to pay $6,400 annually for insurance), can be used for other essentials.
Another ad has only incidental misinformation (you don’t have to be a citizen to qualify for ACA subsidies, and nothing has “just been announced):
Health Credits Insider
$6,400 Subsidy Program for American Citizens has just been announced. Take a short quiz to see if you qualify.
Finally, here’s one with some downright useful context/targeting:
Healthcare of America
You May Qualify for $0 Health Insurance
Check now to claim your $0/month health insurance plan.
If you are losing or recently lost Medicaid, now is the time to apply
HealthSherpa’s Van Fossen points out that agencies buying the leads generated by these ads (e.g., name, D.O.B. and phone number of those who respond) often have no idea what ad generated the lead. The large call centers may buy 150,000 leads and farm them out to a host of call center agents. The problem metastasizes when lead brokers not only deceive consumers with ad the content but “sell the lead to ten, 15, 20 agencies,” whose agents then “fight over the same leads.”
In an April ACA forum, Joshua Brooker likewise spotlighted “non-exclusive lead generators,” who “will resell a name to multiple producers who will all presume that they have consent…I’ve heard a lot of agencies that say ‘we bought the lead, we have a consumer that wanted a quote,’ but the reality is that multiple producers are interacting with that account.” Brooker told me that in some low-income accounts in nonexpansion states, the client record visible in an EDE platform “sometimes shows that four, six, nine brokers have interacted with an account.”
In the same forum, Josh Van Drei, a deputy director of compliance at CMS, asserting that compliance documentation by ACA agents is usually inadequate: “The consent we’re getting 80% of the time does not include all the required elements.”** He cautioned that “there’s a difference between noncompliance and outright fraud.”
Van Fossen further notes that ad quality is partly a function of cost: “Most lead companies are operating off two metrics: how much they can sell a lead for, and how much it costs to acquire that lead.” In a competitive market, terms likely to bring the best-targeted leads, such as “Obamacare” or “affordable health care,” are relatively expensive. Ads get vaguer when they use cheaper search terms such as “government benefits” or “subsidy.” Vaguer terms not only reduce acquisition costs, they “widen the lens [the lead generator'] can market to,” i.e. draw response from people whose primary interest may not be health insurance.
While a setting in which the selling agent is “stages removed from initiation” of contact is problematic, Van Fossen points out that the ripest conditions for fraud are those alleged in the lawsuit cited above, where the agencies, the marketing company and the EDE platform on which plan switches or new enrollments are executed are all either under common ownership or collaborating closely. In the normal course of business, according to Van Fossen, the various points along this chain — insurers, FMOs, agents upline and downline from each other, EDE web brokers — provide quality checks on one another. An EDE web-broker (e.g., HealthSherpa, Van Fossen’s employer) will flag an FMO whose agents are engaged in mass plan-switching; an agency receiving bad leads from a lead generator will drop that service.
“What’s concerning,” Van Fossen says, “is the trend we’ve seen — consolidation of all these components under one fully-owned entity. If you have a proprietary EDE solution, you run your own marketing, and you have your own call center, then it’s easy for you to be in cahoots on these bad strategies to stitch them together and not have the accountability outside of a lawsuit or a report to CMS. The more people or entities stay accountable to each other the better the system operates.”
It’s unclear how much of the unauthorized plan-switching and enrollment that escalated in 2023/2024 is attributable to a handful of high-volume rogue operators, how much of it is outright fraud, and how often the enrollee has no idea of what’s been done, as opposed to a poor understanding. Observers engaged with the problem do seem to assume that most bad practice originates in high-volume call centers. If good-faith government survives the next election, we might hope for fuller reporting from CMS — not to say effective measures to quell the fraud and improve less-than-fraudulent practice.
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* In the 32 states using the federal HealthCare.gov exchange, agents execute enrollments mainly through commercial Enhanced Direct Enrollment (EDE) platforms. An agent registered with HealthCare.gov needs only a client’s name, D.O.B. and state to access and execute changes on an her account. The dominant EDE platform, HealthSherpa, executed about half of active enrollments in the 32 states using HealthCare.gov in Plan Year 2024 (that total excludes passive auto re-enrollments).
** According CMS’s September 2023 guidance, “examples of acceptable documentation that would be sufficient to demonstrate compliance with § 155.220(j)(2)(iii)include documents that capture the date consent was provided, along with the signature of the consumer or authorized representative (electronically or otherwise), verbal confirmation by the consumer or authorized representative that is captured in an audio recording, a written response (electronic or otherwise) from the consumer or authorized representative to a communication sent by the agent, broker, or web-broker, or other similar means.”
Photo by Kayla Linero
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