The idea that Affordable Care Act marketplaces are riddled with fraud has become a major talking point among Republicans, as lawmakers in Congress argue about whether to extend the enhanced tax credits that are helping offset the cost of health care marketplace coverage for low- and middle-income people. Those ACA subsidies expire at the end of the year and have become a flash point in the government funding showdown.

“The tax credits go to some people deservedly. And we think the tax credits actually go to a lot of waste and fraud within the insurance industry,” said Vice President JD Vance during a recent interview on CBS News. “We want to make sure that the tax credits go to the people who need them.”

Key to the Republican argument of widespread fraud is a report published in August by the Paragon Health Institute, a Republican-aligned think tank. The report focuses on “phantom enrollees” in the ACA marketplaces.

Paragon president Brian Blase said these “phantom enrollees,” who don’t use any medical care in a year, exceed the percentages of “what you would expect in a normal, functioning health insurance market.”

Blase and his team say they have quantified the percentage of zero-claim enrollees in the ACA marketplace by analyzing Centers for Medicare & Medicaid Services data released in August.

This highlights one of the central issues with the CMS data: It tracks the number of plan enrollments rather than individual enrollees.

The federal data that Paragon analyzed could count enrollees twice if they’ve switched plans during the year, said Cynthia Cox, a vice president and the director of the Program on the ACA at KFF, a health information nonprofit that includes KFF Health News.

Per that data, in 2021, the percentage of enrollments without any medical claims was 19%. That percentage jumped to 35% in 2024.

To Blase and Paragon, this increase in zero-claim enrollments is evidence of fraud. It indicates, they say, that rogue insurance brokers are signing up people who don’t exist, don’t qualify, or have other insurance and don’t need ACA coverage.

“Basically, what happened is you had insurers benefit, brokers benefit financially, and just massive numbers of people got put on the program,” Blase said. That’s where these phantoms come in. “They have no idea that they’re enrolled, and, as such, they use no medical care.”

In 2021, former President Joe Biden signed into law the American Rescue Plan Act, which included enhanced ACA subsidies that made plans available at low or no cost to certain low-income individuals and expanded eligibility for subsidies to some middle-income people. Those credits were extended through 2025 as part of the Inflation Reduction Act, signed in 2022.

News stories show how simple it could be for insurance brokers in certain states to sign people up for zero-cost ACA insurance plans, unbeknownst to the consumers. The Department of Health and Human Services has tried to crack down on those fraudulent practices.

But health policy experts and analysts have cautioned against reading too deeply into the numbers of zero-claim enrollees.

“It’s not that he’s wrong, but I think he’s overinterpreting,” said Michael Cannon, director of health policy studies at the libertarian Cato Institute, of Blase’s analysis.

Cox said there’s evidence that plan-switching has increased, due in part to extended open enrollment periods. Increased plan-switching could make the number of people being double-counted higher in the federal data and increase the percentage of zero-claim enrollees over the years. Some enrollees also may have been on an ACA plan for only part of the year, which would make them less likely to make a claim.

“We’re not trying to argue there is no fraud. It’s a real thing. But the question is, how big of a scale is this problem?” Cox said. “Just suggesting that anyone who’s not using health care is a fraudulent enrollee — that’s not true. Plenty of people don’t use health care.”

It’s not uncommon for healthy people in an insurance marketplace not to use their insurance in a given year, according to health policy experts. And with the enhanced ACA subsidies, more people signed up for marketplace coverage. Enrollment data shows that it made the marketplace population younger, and younger enrollees may be less likely to use their insurance. A recent report found that each year from 2018 to 2022, an average of 23% of enrollees in employer-sponsored plans didn’t use their health insurance.

“Somehow the idea that people not using health insurance is some sort of a problem — it might be. But in principle it isn’t,” said Joseph Antos, a health policy expert and senior fellow emeritus at the right-leaning American Enterprise Institute. “The point is that for insurance to work, you need some people who are not making claims on the insurance.”

The main trade associations for insurers and hospitals, AHIP and the American Hospital Association, have also disputed Paragon’s characterization of the federal data and even published blog posts breaking down their arguments. AHIP pushed back on the idea that the insurance industry is profiting from the enhanced subsidies by stating that existing law caps health plan profits.

Paragon was started by Blase in 2021 and has become widely influential in Republican health policy circles. Alumni of the organization are staffers in the Trump administration and in House Speaker Mike Johnson’s office, so it follows that the group’s takeaways would become Republican talking points.

It’s also not new for the GOP to say that government programs are full of fraud. During the negotiations over the One Big Beautiful Bill, Republican lawmakers insisted Medicaid wouldn’t be cut to pay for the tax cuts, but that “waste, fraud, and abuse” in the health program would be eliminated.

Now, the ACA is center stage in the ongoing federal government shutdown, with Democrats pushing for Congress to extend the current ACA subsidies, which are set to expire at the end of the year. And fraud, again, is a centerpiece of the argument for Republicans. Democrats take a different view on the amount of fraud in the program, instead emphasizing how the subsidies’ expiration will increase insurance premiums.

“It’s become a boondoggle. It’s a subsidy for insurance companies,” Speaker Johnson said of the ACA subsidies at a shutdown press conference last week. “When you subsidize the health care system, and you pay insurance companies more, the prices increase. That’s been the problem.”

KFF Health News senior correspondent Julie Appleby contributed to this report.

KFF Health News is a national newsroom that produces in-depth journalism about health issues and is one of the core operating programs at KFF—an independent source of health policy research, polling, and journalism. Learn more about KFF.

Close to midnight on Nov. 12, 2020, Bisi Bennett was sitting on the couch in her pajamas and feeling uncomfortable. She was about seven months pregnant with her first child, Dorian, and the thought that she could be in labor didn’t even cross her mind.

Then, she felt a contraction so strong it knocked her off the couch. She shouted to her husband, Chris, and they ran to the car to start the 15-minute drive to AdventHealth hospital in Orlando, Florida. About halfway through the trip, Bennett gave birth to Dorian in her family’s Mitsubishi Outlander. Her husband kept one hand on his newborn son’s back and one hand on the wheel.

Born breech, meaning his head emerged last, Dorian wasn’t crying at first, and the terrified new parents feared something was wrong. Chris Bennett turned on the SUV’s flashers and flagged down a passing emergency vehicle. The EMS team escorted the family to the hospital.

“He was still connected to me with the umbilical cord when they rolled the two of us together into the hospital,” Bisi said. “They cut the cord, and the last thing I heard was, ‘He has a pulse,’ before they wheeled me away.”

“I just cried tears of relief,” she said.

Dorian stayed in the neonatal intensive care unit until Jan. 7, 2021, for almost two full months. While Dorian was in the hospital, Bisi wasn’t worried about the cost. She works in the insurance industry and had carefully chosen AdventHealth Orlando because the hospital was close to her house and in her insurance network.

Then the bills came.

The Patient: Dorian Bennett, an infant born two months premature. He has health insurance through his mother’s employer, AssuredPartners, where she works as a licensed property insurance agent.

Medical Service: A neonatal intensive care unit stay of 56 days. Dorian needed highly technical, lifesaving respiratory and nutritional care until his organs matured. He also received laboratory, radiology, surgery, cardiology and audiology services and treatments.

Service Provider: AdventHealth Orlando in Orlando, Florida. It is a part of the AdventHealth system, a large nonprofit and faith-based group of health care providers with locations across Florida and several other states.

Total Bill: AdventHealth Orlando billed $660,553 for Dorian’s NICU care. Because of an insurance snafu, the “patient responsibility” portion of the bill sent to the Bennetts was $550,124. They were offered an installment payment plan of $45,843 a month for 12 months.

What Gives: Under the 2010 health law, nonprofit hospitals are required to provide financial assistance to help patients pay their bills, and payment plans can be part of that assistance. But the Bennett family’s experience shows the system is still far from friendly to patients.

The installment amount offered to the Bennetts — $45,843 — resembles an annual salary more than a reasonable monthly payment. The laughably unrealistic plan was apparently automatically generated by the hospital’s billing system. A spokesperson for the hospital, David Breen of AdventHealth, did not answer KHN’s questions about its billing software or why a five-digit monthly payment was not flagged by the hospital as a problem that might need extra attention.

The size of the Bennetts’ bill stems from two overlapping issues: Baby Dorian was born in 2020 and needed hospital care into 2021, and Bisi Bennett’s employer shifted its health plan to a different company in January 2021. She informed AdventHealth about the change.

As someone who works in the insurance industry, Bennett was pretty sure that she understood the mix-up and that the charge of more than half a million dollars was unjustified.

But as Dorian turned a year old last month, the family still had bills pending and a tangle of red tape to fight.

AdventHealth bundled the 2020 and 2021 dates of Dorian’s NICU stay and then billed both insurance plans for the whole stay. Both insurance plans said the bill contained dates of care when Dorian was not covered, so neither paid the hospital. The shift from one year to the next flummoxed three large business entities, which seemed unmotivated to resolve the problem quickly.

“A bill this large is a huge crisis for the family, but it’s not a huge crisis for the insurance company or for the hospital,” said Erin Fuse Brown, an associate professor of law at Georgia State University who studies health care policy.

In 2020, Dorian was covered under a UnitedHealthcare plan, which for in-network providers had a $6,000 deductible and $6,000 out-of-pocket maximum for the family.

In 2021, Bisi Bennett’s employer switched its third-party administrator of its self-funded plan from UnitedHealthcare to UMR. The deductible and out-of-pocket maximum did not change.

Although UMR is owned by UnitedHealthcare, the two companies did not communicate well about the case.

“It’s indicative of all the ways the system fails the patient,” Fuse Brown said. “Even the one who does everything right.”

Through the nearly yearlong fight over the bill, the Bennetts were also caring for Dorian, who left the hospital with lingering gastrointestinal issues, and managing Chris’ treatment for stage 4 neuroendocrine cancer, which was diagnosed in April. At one point, Bisi said, she felt she was going crazy.

“They’re in charge of billing, and I shouldn’t be the one having to tell them, ‘Bill my one insurance for dates in 2020 and bill my other insurance for dates in 2021,’ but I did,” she said. “I kept having the same conversation over and over.”

Resolution: Bisi Bennett immediately noticed and understood the calendar issue when she received the billing statements in spring 2021. She started by calling the hospital and was told the problem would be corrected in March. Yet, in September, she got the same half-a-million-dollar bill.

UnitedHealthcare spokesperson Maria Gordon Shydlo, who also fielded KHN’s questions for UMR, said the insurance company told AdventHealth to revise the bill with correct dates in the spring.

Breen, the spokesperson for AdventHealth Orlando, confirmed to KHN that the billing error stemmed from the change in insurers from 2020 to 2021. In a statement, Breen said medical billing can be a complex process and the hospital “understand[s] this has been a confusing and challenging experience for Ms. Bennett, and we apologize for the frustration this has caused.”

AdventHealth Orlando did not submit a revised bill with corrected dates until KHN contacted the hospital in October 2021.

After UHC and UMR reprocessed the 2020 and 2021 claims, the original bill of more than $550,000 was knocked down to $300.

In his statement, Breen said that the Bennetts’ case sparked AdventHealth to identify and address issues in its system and that the hospital plans to improve the billing and communications process for future patients, particularly when there is a change in insurance.

The Takeaway: Much of our fragmented health care system is on autopilot, with billing software that generates confusing or, in this case, absurd bills and payment plans.

Related Links

• How Billing Turns a Routine Birth Into a High-Cost Emergency
• Baby Blues: First-Time Parents Blindsided by ‘the Birthday Rule’ and a $207,455 NICU Bill

Bisi Bennett did everything right: She chose an in-network hospital and informed it of the changes to her health insurance. She followed up when she saw there was an error. But her case didn’t reach a resolution until a reporter called on her behalf.

If you are fighting a bill that you believe contains an error, call all the entities involved — the hospital, insurers, other providers — and don’t forget about your company’s human resources department. It may be able to pressure insurers to resolve an error faster than you can.

Most states have a department of consumer services that can help you file a complaint with the appropriate oversight entity. Staff members at state agencies can help you figure out what is going on. Tell the medical providers you are reporting them to the state.

Still, it is a frustrating, uphill battle, especially when patients have improper bills hanging over their heads for many months and are at risk of having the bills sent to a collection agency or having their credit score dinged. There should be far more transparency in billing and a set time limit for dispute resolution, experts say.

“This shows how little leverage or power a patient has in this situation,” Fuse Brown said. “You almost have to go outside the system and put external pressure.”

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This article first appeared on KFF Health News and is republished here under a Creative Commons license.