GAO Finds ACA Exchanges Vulnerable to Fraud and Subsidy Misuse

The Government Accountability Office (GAO) released a report highlighting significant vulnerabilities to fraud within the Affordable Care Act (ACA) exchanges. The report, commissioned by key congressional committee chairmen, revealed that the federal exchange approved subsidized health insurance for 23 out of 24 fictitious applicants, exposing weaknesses in identity verification and documentation processes. The findings suggest that the expanded subsidies and limited federal oversight have resulted in widespread enrollment of ineligible individuals and potential misuse of taxpayer funds. GAO's undercover testing involved submitting fictitious applications for the 2024 and 2025 plan years, with near-universal approval of these applications despite the use of invalid Social Security numbers and unverifiable documents. This pattern mirrors GAO's prior investigations from 2014 to 2016, indicating persistent systemic issues. Tens of billions of dollars in advanced premium tax credits (APTC) have not been properly reconciled with tax return data, further undermining program integrity. This failure in oversight is compounded by the Centers for Medicare & Medicaid Services' (CMS) decision to pause enforcement actions on subsidy reconciliation from 2021 through 2024. GAO found that a substantial portion of subsidy payments lacked corresponding IRS confirmation, and individuals who did not file tax returns still qualified for continued subsidies. This lapse has allowed for prolonged improper payments without repercussions. GAO’s findings raise concerns about ongoing fraudulent enrollments that benefit brokers, agents, and insurers financially. The report underscores the inadequacy of verification and monitoring systems despite over a decade of ACA implementation and significant investment in compliance infrastructure. It signals that these vulnerabilities became more pronounced following COVID-era subsidy expansions and likely would persist if such boosts continue. The implications for the insurance industry include increased risk of financial abuse within health exchanges and pressures on federal oversight mechanisms. The report also highlights the need for strengthened verification procedures and enforcement protocols to safeguard public funds and ensure eligibility compliance. These issues bear directly on policy formulation, regulatory enforcement, and the operational oversight of ACA marketplace programs. Key stakeholders such as insurers, policymakers, and regulators will need to consider these findings in the context of ongoing subsidy structures and the balance between broad coverage goals and program integrity. Enhanced diligence and updated regulatory strategies may be necessary to curb growing improper enrollment and fraud risks within the federal exchange environment.