GAO Report Reveals Extensive Fraud Risks in ACA Health Insurance Exchanges

A recent Government Accountability Office (GAO) report highlights significant vulnerabilities to fraud within the Affordable Care Act (ACA) health insurance exchanges. In 2024, GAO auditors submitted fictitious applications using fabricated Social Security numbers and unverifiable income claims; nearly all were approved for subsidized coverage. This raises concerns about the integrity of the enrollment and subsidy disbursement process in these federally facilitated marketplaces. The GAO findings indicate systemic weaknesses in verifying applicant data, with fraudulent enrollments generating eligibility for over $10,000 in subsidy tax credits per case. Notably, the auditors identified more than 66,000 Social Security numbers linked to over a year's worth of health coverage within a single year and another 58,000 numbers matching death records, suggesting potential synthetic identity fraud and abuse of the subsidy system. Despite previous warnings and a 2018 CMS fraud risk assessment, many recommended anti-fraud protections remain unimplemented. Consequently, tax credits totaling upwards of $21 billion from the 2023 plan year could not be verified against official tax returns, representing nearly one-third of paid advanced premium tax credits (APTC). Experts estimate that fraudulent payouts could amount to $20 billion of the nearly $124 billion disbursed for about 19.5 million enrollees in 2024. The data imply a misalignment of incentives, as insurers benefit from increased enrollee subsidies regardless of application authenticity, potentially reducing their motivation to detect fraud. CMS's limited enforcement actions and delays in updating anti-fraud measures may expose taxpayers to substantial financial risk. This report underscores urgent compliance and regulatory challenges in the ACA's subsidy program. Enhancing identity verification protocols and instituting rigorous subsidy validation mechanisms are critical steps to mitigate ongoing vulnerabilities. Transparency and accountability in CMS management practices remain pivotal to safeguarding federal funds and maintaining market credibility.