Trump Administration's Proposal Targets Obamacare Exchange Fraud, Saving $150B

The Trump administration recently proposed a rule aimed at enhancing "Marketplace Integrity and Affordability" on Obamacare's health insurance exchanges. This rule is projected to save taxpayers approximately $150 billion over the next decade and could reduce premiums by more than 5%, addressing significant fiscal concerns around the exchanges.

The exchanges have seen increasing issues of fraud, waste, and improper payments, exacerbated by reforms under the Biden administration that expanded premium subsidies and relaxed income verification processes. Under the Inflation Reduction Act of 2022, premium subsidies were greatly increased, allowing many enrollees to access coverage at zero cost, while also capping premiums at 8.5% of income regardless of wealth. However, income verification became lax, with the exchanges often required to accept enrollee-reported income without sufficient validation, fostering opportunities for fraud and misrepresentation.

The Biden administration also introduced more "special enrollment periods," which allowed enrollees to sign up outside normal windows with minimal verification, further increasing the risk of improper enrollments. Estimates suggest that between 4 million and 5 million Americans are improperly enrolled, leading to costs ranging from $15 billion to $26 billion for taxpayers in a single year.

The proposed rule seeks to strengthen income verification and eligibility checks for special enrollment, as well as impose greater accountability on insurance agents and brokers who could potentially benefit from fraudulent practices.

While some elements of the proposal, such as penalties for non-compliance, might be considered insufficiently stringent, the overall approach is designed to curb improper subsidy payments without restricting access for eligible beneficiaries. The proposal's scale of anticipated savings positions it as a significant regulatory effort to improve fiscal responsibility within the health insurance exchange marketplace.