Auditors Submitted 24 Fake Applications for Subsidized Health Insurance. Only 1 Was Denied.

A new GAO report suggests the Affordable Care Act's health insurance exchanges are rife with fraud.

Government auditors tried to enroll 24 fictional people in health insurance plans offered via the Affordable Care Act exchanges—the marketplaces where taxpayer-subsidized health insurance plans are available for purchase.

Only one of those applications was denied.

A stunning Government Accountability Office (GAO) report published Wednesday warns that there could be massive fraud in the health insurance exchanges due to lax anti-fraud protections—even after a 2018 study called for a more robust program to detect and block fraudulent applications.

Auditors with GAO created four fictional applications during 2024 that used fake Social Security numbers and income claims that lacked any verification. All four were approved for subsidized health insurance. In one case, GAO noted that the federal marketplace said "it confirmed the applicant's estimated income based on documentation we submitted."

"However, we did not submit documentation to confirm the applicant's income," the auditors reported.

For the 2025 application year, GAO created 20 more fictional applications following the same model as the previous year. Nineteen of those applications were initially approved, and 18 remained actively enrolled in subsidized health insurance plans as of September, GAO reports. Those 18 fraudulent enrollees would be eligible to collect over $10,000 in tax credits meant to offset the purchase of health insurance.

One of the major red flags in the report is the fact that auditors found more than 66,000 Social Security numbers attached to records showing more than 366 days of health insurance coverage—an indicator that those Social Security numbers may have been used multiple times in the same year. Additionally, GAO found more than 58,000 Social Security numbers matching death records in the Social Security Administration's database. More than $94 million in tax credits were delivered to those accounts.

In many of those cases, "matches had different names and dates of birth across Marketplace enrollment data and SSA's death data," GAO noted. "These matches could represent synthetic identity fraud."

The lack of a comprehensive plan to prevent such fraud, GAO warns, could allow individuals to qualify for larger health insurance tax credits than their income would allow. After previous GAO reports found similar issues in 2016 and 2017, the Centers for Medicare and Medicaid Services (CMS), which oversees the exchanges, did a "fraud risk assessment" in 2018. However, those recommendations were not implemented, and CMS now tells GAO that it will conduct another risk assessment.

In the meantime, lots of taxpayer-funded subsidies might be getting paid out to ineligible recipients. In the same report, GAO says it could not verify enrollees' tax data for "over $21 billion in [tax credits]" from the 2023 plan year.

"That means nearly one-third of APTC [advanced premium tax credit] paid to individuals with Social Security numbers was not matched with a tax return showing reconciliation in states using the federal exchange," writes Brian Blase, president of the Paragon Health Institute, which has produced studies showing widespread fraud in the health insurance exchanges. "In practical terms, CMS has no confirmation that tens of billions of dollars in payments were correct."

The subsidies delivered via the Affordable Care Act exchanges are a huge and growing expense for the federal government. In 2024, CMS paid nearly $124 billion in APTC for about 19.5 million enrollees. Paragon estimates that as much as $20 billion of that total could be fraudulent. 

Even though the tax credits are delivered to individuals, the entire arrangement is effectively a giant subsidy program for health insurance companies. The insurers have little incentive to block fraudulent applications—more fraud in the exchanges just means more taxpayer-funded subsidies flowing to them—and CMS' inability or unwillingness to take even very basic steps to prevent fraud suggests the government would rather keep the insurance companies happy than protect taxpayers' money.