Key facts
- The US government has removed 760,000 Obamacare enrollees due to suspected fraud.
- Another 400,000 enrollees are currently under review.
- Hundreds of insurance brokers are being banned, and new brokers are not being accepted.
- The crackdown could lead to a sicker patient mix for remaining enrollees.
- Insurers requested a median premium increase of 15% for 2027.
- The Centers for Medicare and Medicaid Services stated cancellations are based on a verification process for missing identification information.
A crackdown on Obamacare health insurance enrollees, aimed at combating fraud, could lead to increased costs for both consumers and insurers, according to policy experts and investors. Vice President JD Vance announced last week that the government had removed 760,000 individuals believed to be fraudulently enrolled or unaware of their coverage, with an additional 400,000 under review.
The 2010 Affordable Care Act provides income-based government-subsidized health plans, with 19 million people currently enrolled. Millions have dropped out this year as enhanced COVID-19 pandemic subsidies expired.
The government is also banning hundreds of brokers and halting new broker registrations, citing that many new brokers, paid per enrollee, were involved in fraudulent activities. Policy experts suggest that legitimate members who were healthy and not utilizing their plans could be impacted by these changes. As the number of low-medical-use enrollees decreases, insurers like UnitedHealth and Centene may face squeezed profits due to a potentially sicker mix of remaining patients.
Insurers had already requested a median premium increase of 15% for 2027, marking the second consecutive year of double-digit increases, according to a KFF analysis. While insurers can adjust premiums for anticipated healthcare cost increases, significant drops in membership after premium rates are set can create earnings risk. Investors anticipate that insurers will likely set even higher prices for 2028 to account for the enrollment decline.
Brokers are responsible for bringing in 75% of individuals enrolled in the marketplace. The fraud announcement and ban on new brokers may reduce consumer trust and their likelihood of using brokers for plan sign-ups, according to Mike Smith, president emeritus at The Brokerage Inc. However, companies with diverse business lines outside of Obamacare, such as UnitedHealthcare, are expected to navigate these changes more effectively, with UnitedHealthcare reportedly bolstering its employer-backed insurance plan choices as it shifts away from ACA plans.