CMS cracks down on agent fraud

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In my last post, I recounted that after months of apparent passivity in response to a rising tide of agent fraud in the federal ACA marketplace (HealthCare.gov, used by 32 states), CMS dropped a hammer in July. To quell unauthorized plan-switching by agents assigning existing enrollees to themselves, CMS required agents seeking to act on an existing account with a different Agent Of Record or with no AOR to either conduct a three-way call with the client and the marketplace center, in which the client authorizes the new agent to act on her behalf, or have the client click the final button after an agent makes changes to the account on a commercial Enhanced Direct Enrollment (EDE) platform.

(For background on the plan-switching scandal see the initial KHN coverage. For background on the role of EDE platforms in marketplace enrollment and agent fraud, see this post.)

In practice, the latter option meant using a workaround deployed by HealthSherpa, the dominant EDE platform, whereby an agent would text a link to the new client’s phone number, enabling the client to execute the changes input by the agent. After that procedure had been operative for a few days, however, CMS shut it down, apparently concerned that some agents might be faking the phone number to which the link was sent. Reportedly, a revised HealthSherpa workaround will go live in September, or at least before Open Enrolment begins on November 1, requiring client i.d.-proofing rather than just a client phone number. While CMS had long resisted deploying the relatively simple two-factor authorization required by Covered California and other state-based exchanges before an agent could be newly assigned to an existing account, CMS has now created a system with more intrusive security measures.

Now it appears that enforcement action against agents suspected of fraud or lesser noncompliant practice may be following the same pattern: a long period of passivity followed by a sudden crackdown.

Egregious fraud, quasi-fraud, and not-quite-fraud in ACA marketplace brokerage

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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.