New Paragon Report Shows ACA Vulnerabilities Encourage Improper and Phantom Enrollment

WASHINGTON, June 3, 2026 /PRNewswire/ -- Paragon Health Institute today released a major new research paper, The Persistent Obamacare Enrollment Fraud, which reveals that widespread improper enrollment and phantom coverage continue to plague the Affordable Care Act (ACA) exchanges, costing taxpayers up to $25 billion in improper subsidy payments—nearly one-quarter of projected ACA subsidy spending—in 2026.

Building on Paragon's 2024 and 2025 reports, the new study analyzes 2026 open enrollment data alongside Census Bureau population estimates. It finds that approximately 6.2 million exchange sign-ups—roughly 27 percent of all ACA exchange enrollments—were improper. These enrollments involve individuals claiming income between 100 and 150 percent of the federal poverty level to qualify for the largest subsidies, far exceeding the number of potentially eligible people in that income bracket. The paper also provides state-by-state estimates of improper enrollment for both 2025 and 2026.

"Despite the expiration of COVID-era subsidy boosts and Trump administration efforts to reverse negligent Biden-era policies, excessive subsidies, zero premium plans, weak verification systems, automatic re-enrollment, and misaligned incentives for enrollment intermediaries have created a perfect storm for improper and phantom enrollments that drain tens of billions from taxpayers while undermining program integrity," said Brian Blase, Ph.D., president of Paragon Health Institute. "The findings also suggest that a significant share of the enrollment declines expected over the next two years will reflect the removal of duplicate, improper, and phantom enrollment rather than losses of legitimate coverage."

Key findings from the study include:

• Improper enrollment is overwhelmingly concentrated in states using the federal HealthCare.gov platform. In HealthCare.gov states, 56 percent of sign-ups claimed the lowest income category qualifying for maximum subsidies in the 2026 open enrollment period.
• Enrollment patterns defy normal consumer behavior: Large numbers of low-income enrollees selected bronze or gold plans despite silver plans offering far superior value at little or no extra cost—a pattern strongly indicative of unauthorized enrollments or intermediary-driven enrollment meant to maintain commissions through enrollment in a zero-premium plan rather than the plan with the best value.
• The share of enrollees reporting unknown race or ethnicity reached nearly 60 percent in HealthCare.gov states, a pattern consistent with unauthorized or incomplete enrollment activity.

Much of the improper enrollment translates into phantom enrollment—fictional enrollees, those with other coverage, or those unaware of their enrollment. In 2024, 35 percent of exchange enrollees generated no medical claims, and CMS found that an average of 1.6 million people per month were simultaneously enrolled in Medicaid and subsidized exchange coverage.

Many of the enrollment reductions expected in 2026 and 2027 are likely to reflect stronger verification efforts, the removal of duplicate, improper, and phantom enrollment, and the requirement that enrollees contribute more than a nominal amount toward their coverage costs. These reductions should not automatically be interpreted as losses of legitimate coverage. Even after the expiration of the enhanced COVID-era subsidy boosts, exchange coverage remains heavily subsidized, with taxpayers continuing to cover at least three-quarters of the premium costs for the vast majority of enrollees—with nearly three-in-ten enrollees in fully-subsidized plans this year.

"The ACA exchanges cannot function effectively if millions of sign-ups improperly receive taxpayer-funded subsidies and enrollment systems remain vulnerable to unauthorized and phantom enrollment," the report concludes. The Trump administration has taken important initial steps to strengthen ACA exchange integrity, including removing individuals simultaneously enrolled in Medicaid and subsidized exchange coverage, and terminating coverage for enrollees who failed to reconcile prior advance subsidy payments. The administration and Congress have also adopted additional program-integrity reforms, including stronger eligibility verification and fuller recovery of excess subsidies.

Recommendations include strengthening eligibility verification, tightening automatic re-enrollment, enhancing identity authentication, aggressively investigating and suspending brokers and enrollment intermediaries involved in unauthorized enrollment activity, and reducing subsidy distortions that incentivize fraud.

The full paper is available at https://paragoninstitute.org/private-health/the-persistent-obamacare-enrollment-fraud/.

About Paragon Health Institute

Launched in late 2021 by Brian Blase, Paragon Health Institute provides health policy research as well as market-based policy proposals for improved outcomes in the public and private sectors. A 501(c)(3) non-profit, the organization is funded by donations from foundations and individuals. Paragon does not accept any funding from industry and does not conduct any lobbying. Journalists and health care analysts can review Paragon's latest studies and commentary at paragoninstitute.org.

Contact:
Anthony Wojtkowiak
media@paragoninstitute.org
703.527.2734

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SOURCE Paragon Health Institute