Health Insurers Ask Gop To Fix Their Fraud Problem — And Extend Obamacare Subsidies

Health insurers are admitting they have a fraud problem. It’s part of a last-ditch attempt to convince Republicans to extend expiring Obamacare subsidies that have juiced profits the last four years.

For an industry that has long said fraud claims were overblown, it’s a big turnabout. Republicans don’t seem interested in keeping the subsidies at the levels Democrats increased them to in a 2021 Covid relief law, despite a year-long insurer-led lobbying campaign stressing how the subsidies made insurance affordable for millions.

Republicans have responded by stressing that fraud concerns are a principal reason they cannot extend the subsidies without a major overhaul. Health insurers now say they think lawmakers should go even harder on fraud than they’ve proposed — but that Congress also needs to extend the subsidies to help 20 million Americans pay for insurance. As many as 4 million could drop coverage if the subsidies expire, according to government estimates.

“We embrace all of those reforms, and we think even more should be done, and that this market, and all markets, should be subject to continuous improvement when it comes to fraud and program integrity,” said Mike Tuffin, the president and CEO of insurer lobby AHIP, at an event hosted Thursday by one of the Republican skeptics, Rep. Aaron Bean of Florida.

Subsidies will return to their original 2010 levels if the enhanced ones go away. Democrats, who set an expiration date to save money, are now united behind a clean extension. Republicans are divided on the best way to stem rising health care costs. Extending the subsidies for another 10 years would cost $350 billion, according to the nonpartisan Congressional Budget Office.

The enhanced subsidies, which made plans free for many low-income people and also offered help for the first time to people earning more than 400 percent of the poverty level, were pricey. But they also helped drive record Obamacare enrollment.

Health insurers say losing the subsidies will force them to hike premiums for Obamacare enrollees, given rising medical costs. Consumers are expected to see premiums rise 26 percent on average during the ongoing Obamacare open enrollment period as a result of the subsidies expiring, according to health policy research group KFF.

Insurers had stressed those risks to nought in a well-funded lobbying campaign this year they called “Keep Americans Covered” — a joint effort with physicians’ groups, advocates of cancer and lung disease research, and civil rights organizations to convince lawmakers that letting the subsidies expire would be a disaster.

Most Republicans were unmoved. And last week, a report from Congress’ watchdog arm, the Government Accountability Office, had them digging in their heels. It found that the advent of free Obamacare plans had made it easy for fraudsters to set up fake accounts and extract government money.

Jason Smith, the Missouri Republican who chairs the Ways and Means Committee, called it a “smoking gun.” Republicans said it reconfirmed for them that it would be irresponsible to extend the subsidies without a broader overhaul.

Insurers have responded with a new tune.

“Plans are communicating an openness and an embrace of reform, of a conversation around reforms that would strengthen the marketplace in the years to come, but really pressing the urgency of providing immediate relief in a marketplace that serves 24 million Americans who are shopping for coverage right now,” a health insurance industry source granted anonymity to discuss insurers’ thinking, told POLITICO.

Insurers have not been bullish on reforms in the past.

While the industry largely supports some federal efforts to crack down on fraudulent enrollments, AHIP has pushed back hard on the narrative — promoted by the influential right-leaning Paragon Health Institute — that fraud runs rampant in the ACA marketplaces. The group has repeatedly disputed Paragon’s findings that millions of “phantom” enrollees are signed up for Obamacare — people who file zero medical claims because they may not know they’re enrolled in plans or have other coverage.

“Instances where consumers have ‘no claims’ are not proof of fraud or waste of taxpayer dollars,” AHIP wrote in an August post. “On the contrary, they provide confirmation that more Americans — including those who are younger, healthier and crucial to a balanced risk pool — are enrolling in health care coverage.”

On Thursday, Tuffin called the GAO report’s new findings of fraud within the ACA “very concerning,” but emphasized that the findings came before major fraud control measures from the federal government were implemented. That includes a finalized Trump administration program integrity rule and provisions in Republicans’ One Big Beautiful Bill Act that will end automatic re-enrollment in Obamacare plans and require stricter eligibility verification from enrollees.

Before those changes were finalized, insurers said they supported crackdowns on fraud within the marketplace, but also urged the federal government to delay implementing the changes to avoid widespread Obamacare coverage disruptions, especially with subsidies set to lapse. Some insurers opposed shortening the ACA open enrollment period, worrying it would lead to confusion among consumers and lower enrollment.

Tuffin said insurers support Republicans going further still by implementing stronger eligibility checks for consumers moving between Medicaid and marketplace coverage and expanding multi-factor authentication.

David Merritt, senior vice president of external Affairs for the Blue Cross Blue Shield Association, said the company has long supported such measures and is happy to see AHIP propose further action on program integrity.

If broadening the debate to new solutions generates more support among policymakers, Merritt told POLITICO: "We're all for it."

But with just a few weeks left before the subsidies lapse, Republicans appear as divided as ever on a health care plan.

As House Budget Chair Jodey Arrington (R-Texas) said during his keynote address at Bean’s health care event: “We cannot extend this Covid-era, fraud-ridden, added layer of subsidy that props up the underlying program that has failed us for 10 years."