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Unauthorized plan-switching in the ACA marketplace, whereby health insurance agents access an existing enrollee’s account, list themselves as the agent of record (AOR), and switch the enrollee into a different plan without the enrollee’s knowledge or consent (or with nominal, uncomprehending consent), obviously hurts enrollees who try to use their health insurance and find that they’re no longer enrolled because they’ve been switched to a different (often inferior) plan.
The poaching also hurts other agents, who in many cases find their clients poached en masse, often by large call centers engaged in wholesale fraud. Agents and their trade organizations, such Health Agents for America (HAFA) and the National Association of Benefits and Insurance Professionals (NAPIB) have long complained that CMS has not acted vigorously enough to quell the fraud. That changed rather suddenly last month, when CMS dropped a hammer — or a series of hammers — on agents’ access to enrollees’ accounts. Why?
First, as quickly as possible, some background on the unauthorized plan-switching scandal, news of which Julie Appleby of Kaiser Health News first broke in April (that story is an excellent introduction; see also this from me on gray-area fraud). While agents’ licenses impose professional obligations, and agents must put their name and identifying number on an account to get paid by insurers, unauthorized plan-switching in the 32 states that use the federal exchange, HealthCare.gov, has been mechanically easy for agents via federally approved commercial Enhanced Direct Enrollment (EDE) platforms, which streamline the enrollment process and provide agents with various CRM tools. More than three quarters of enrollments in HealthCare.gov states are agent-assisted, and more than 80% of broker-assisted enrollments are via EDE (none of the 19 state-based marketplaces have as yet enabled EDE enrollment; most have their own agent portals which function similarly). Until last month, agents could locate and act on any existing account armed only with the enrollee’s name, date of birth, and state of enrollment. While agents are legally obligated to obtain and document client consent before acting on an account, that requirement was until recently loosely enforced. Agents engaged in plan-switching obtain their leads through often-unscrupulous ads, which misrepresent premium subsidies as cash that can be used for other expenses. Those ads are often sold to multiple agencies, which then compete for the same respondents to the misleading incentives.
Unauthorized plan-switching and new enrollments received major stimulus from the enhancements to marketplace premium subsidies created by the American Rescue Plan and implemented in March 2021, which rendered benchmark silver plans free to enrollees with incomes up to 150% of the Federal Poverty Level (FPL). Plan-switching received further stimulus from a rule implemented in early 2022 that provided applicants in states using the federal exchange with income below 150% FPL (the threshold for free silver coverage) with access to a Special Enrollment Period (SEP) in any month of the year — that is, they can enroll year-round, and change plans monthly. (16 of the 19 state-based marketplaces (SBMs) have implemented this SEP as well.)
In a very real sense, there is no off-season in HealthCare.gov states, though Open Enrollment Period (OEP) only runs from Nov. 1 to Jan. 15.In HealthCare.gov states, 55% of all enrollees in 2024 (just shy of 9 million) claimed incomes below 150% FPL. The vast majority of them — 87% — were in the 10 states that have refused to enact the ACA Medicaid expansion (they include behemoths Florida and Texas). In those states, eligibility for marketplace premium subsidies begins at 100% FPL, compared to 138% FPL in expansion states, where people with income below that threshold are eligible for Medicaid. Nearly all of these enrollees qualify for free benchmark silver coverage, and millions more with higher incomes qualify for free bronze coverage. The dramatic ACA enrollment growth of the past three years is concentrated in those states — as is the agent fraud.
In July, CMS changed gears
As fraud escalated through 2023 and 2024, agents and their trade groups have urged CMS to take preventive measures. Most of the SBMs require some form of two-factor authorization from the client before an agent can act on an existing account that has a prior AOR, or no AOR. CMS has rather gloried in the near-100% enrollment growth in enrollments in the federal exchange from 2021-2024. Much of that growth is attributable to increased agent engagement: the ranks of agents registered with the federal marketplace increased from 49,000 in 2018 to 83,000 in 2024. The growth is concentrated among low-income enrollees who often can be hard to reach and may have difficulty with two-factor authorization. CMS seemed reluctant to implement measures similar to those deployed by SBMs, where enrollment growth has been much slower. In May, Ronnell Nolan, president and CEO of HAFA, told KHN’s Julie Appleby about CMS, “We’ve given them a whole host of ideas…They say, ‘Be careful what you wish for.’”
Then, on July 19, CMS gave agents perhaps more than they had wished for, announcing System Changes to Stop Unauthorized Agent and Broker Marketplace Activity. From that point forward, agents seeking to act on an existing account with a different AOR or with no AOR would have to conduct a three-way call with the client and the marketplace center “or to direct the consumer to submit the change themselves through HealthCare.gov or via an approved Classic Direct Enrollment or Enhanced Direct Enrollment partner website with a consumer pathway.”
To unpack the latter option as implemented (briefly —see below) by HealthSherpa, the dominant EDE: An agent could make changes on a new client’s existing account but, prior to execution, would receive an error message to be forwarded to the client, with a link that the client could click on to complete and execute the application.
On message boards, agents commenting on the three-way calls worried that the lines would seriously back up during the upcoming Open Enrollment Period, but most who did the calls reported that they went pretty smoothly (although, in accord with existing policy, the call center agents are obligated to read through the entire application before enabling a change). HealthSherpa’s faster workaround appeared to be working with minimal friction.
But then, on August 2, CMS paused the HealthSherpa procedure , apparently worried that some agents might be faking the address or phone number to which the link was sent. HealthSherpa has submitted a request to CMS to reactivate the procedure with ID proofing instead of 2-factor authentication. I.D. proofing in the marketplace is based on information provided by Experian. To complete changes to an application made by an agent newly attaching to the account, an enrollee would have to provide her Social Security number and other personally identifiable information, then answer a series of questions, such as whether they ever lived at a given address.
HealthSherpa’s Adam Van Fossen pointed out to me that i.d. proofing requires a credit history, which many low-income people, particularly immigrants, don’t have. Requiring i.d. proofing introduces more friction than two-factor authorization, which CMS had previously seemed reluctant to introduce. 2FA appears to be effective in the SBMs, where agent fraud does not appear to be an acute problem — though that is partly because all of the 19 SBM markets (18 states and DC) have expanded Medicaid, which vastly reduces the target market of low-income enrollees eligible for zero-premium coverage (who are less likely to notice unauthorized plan switches, as they do not pay their insurers monthly). Van Fossen said that the two-factor process HealthSherpa deployed was not generating widespread fraud (e.g., by agents attributing a phone number of their own to the client), and that the company was putting further controls into place before CMS shut the process down.
CMS also seems to be expressing a new leeriness about agent-assisted enrollment generally, after years of cheerleading growing agent engagement (beginning in the private market-friendly Trump administration but very much continued by Biden’s team. In an Aug. 13 email bulletin asking recipients to “help CMS spread the word about marketplace fraud prevention” promotes this message to consumers: “For free, non-biased personal help, call the Marketplace Call Center at 1-800-318-2596… Marketplace Call Center representatives don’t get any incentives for signing you up” (my emphasis).
CMS has also started to ramp up suspensions of agents suspected of fraud or bad practice — though HAFA’s Ronnell Nolan complained as recently as late July that the 200 agents CMS had reported suspending as of July 19 was a “very low” total.
Something or someone seems to have lit a fire under CMS. Who and why?
One might infer that political pressure kicked in. Republicans have seized on the reports of widespread agent fraud (which hit mainstream news this past April) to deploy arguments against extending the life of the premium subsidy enhancements, currently funded only through 2025 (widespread free coverage, they argue, has stimulated widespread fraud). On the Democratic side, Senate Finance Committee Chair Ron Wyden and five colleagues have introduced legislation that would impose stiff fines on agents for submitting incorrect information, subjecting them to criminal liability for outright fraud, and “establish a consent verification process for new enrollments and coverage changes that includes notifying individuals when there has been a change in their enrollment, agent of record, or tax subsidy.”
In a high-stakes election season, shutting down fraud seems to have trumped juicing enrollment as a priority. Perhaps the pressure has emanated from the White House, or from the Harris campaign. Speculation, but the change in CMS’s approach does seem abrupt.
