In August 2022, the Biden Administration updated provisions of the American Rescue Plan Act (ARPA) to fully subsidize Affordable Care Act (ACA) exchange plans for people with incomes between 100% and 150% of the Federal Poverty Level (FPL).These subsidies, called Premium Tax Credits (PTCs), are paid directly by the Treasury to insurance companies on behalf of subscribers. This renewal Significant increase The percentage of fully subsidized enrollees on the federal ACA exchanges fell from 40% to 53%, of which an estimated 4-5 million were fraudulent. To better understand what’s going on, let’s take a closer look at the details of ACA subsidies at the state level.
According to a report from Paragon Institute, ACA subsidies created a huge incentive for people to fraudulently over- or under-report their income in order to qualify for larger subsidies and lower copayments. This issue occurs primarily in states that have not expanded Medicaid, which allows individuals with incomes below 138% of the FPL to become eligible for Medicaid and provides an alternative to subsidized federal exchange plans. Fraudulently enrolled ACA beneficiaries are most prevalent in nine states: Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina, Tennessee, Texas, and Utah. Seven of these states have yet to expand Medicaid as defined by the ACA.
These states have more people on the federal exchange than are covered by the Census Bureau’s American Community Survey (which is between 100 and 150 percent of the FPL). In Florida alone, four times as many people at this income level are on the federal exchange than are covered. Similarly, Georgia, Mississippi, and South Carolina have more than twice as many people covered than are covered.
How did we get to this situation? The government fully subsidizes health insurance for people who earn between 100 and 150 percent of the FPL. People who earn below the FPL are covered by Medicaid, which offers less comprehensive coverage, and therefore are ineligible for subsidies on the federal health exchanges. This creates an incentive to report income just above FPL in order to qualify for fully subsidized plans. This explanation was provided by the authors of a paper published in the American Journal of Health Economics in August 2023, and a similar claim was made in a Paragon Institute report.
The graph below shows the total number of exchange enrollees side-by-side with the total number of potential enrollees. Additionally, the percentage values show the number of exchange enrollees as a percentage of potential enrollees. Finally, the state’s Medicaid expansion status is shown as either “adopted” or “not adopted.”
source: https://www.healthcare.gov/medicaid-chip/medicaid-expansion-and-you/
https://paragoninstitute.org/wp-content/uploads/2024/06/The-Great-Obamacare-Enrollment-Fraud_FOR_RELEASE_V2.pdf
https://www.journals.uchicago.edu/doi/abs/10.1086/727785?journalCode=ajhe