Introduction: The High-Stakes Battle Over ACA Subsidies
The Affordable Care Act has once again become the center of intense political debate as Congress faces a critical deadline. Enhanced tax credits that have made health insurance more affordable for millions of Americans are set to expire at the end of 2025, and the question of whether to extend them has become entangled with accusations of widespread fraud. This controversy has emerged as a central issue in the ongoing government funding showdown, with Republicans and Democrats presenting starkly different narratives about the ACA marketplace’s integrity.
The Republican Fraud Claims: A New Front in the Healthcare Debate
Vice President Vance’s Position
Republican lawmakers have made fraud allegations a cornerstone of their argument against extending the enhanced ACA subsidies. Vice President JD Vance articulated this position clearly during a recent CBS News interview, stating: “The tax credits go to some people deservedly. And we think the tax credits actually go to a lot of waste and fraud within the insurance industry. We want to make sure that the tax credits go to the people who need them.”
Speaker Johnson’s Economic Argument
House Speaker Mike Johnson has taken an even stronger stance, characterizing the ACA subsidies as fundamentally problematic. “It’s become a boondoggle. It’s a subsidy for insurance companies,” Johnson declared at a shutdown press conference. “When you subsidize the health care system, and you pay insurance companies more, the prices increase. That’s been the problem.”
Understanding Phantom Enrollees: The Paragon Report
The Foundation of Republican Arguments
The Republican fraud narrative relies heavily on research from the Paragon Health Institute, a Republican-aligned think tank founded in 2021. In August, Paragon published a report that has become widely influential in GOP health policy circles, focusing on what they term “phantom enrollees” in the ACA marketplaces.
Who Are Phantom Enrollees?
According to Paragon president Brian Blase, phantom enrollees are individuals enrolled in ACA plans who don’t use any medical care during a year. Blase argues these zero-claim enrollees exceed percentages “what you would expect in a normal, functioning health insurance market.” The organization’s analysis suggests these phantom enrollees represent evidence of systematic fraud, with rogue insurance brokers allegedly signing up people who don’t exist, don’t qualify, or already have other insurance coverage.
The Mechanics of Alleged Fraud
The fraud allegedly works through a straightforward mechanism: “Basically, what happened is you had insurers benefit, brokers benefit financially, and just massive numbers of people got put on the program,” Blase explained. “They have no idea that they’re enrolled, and, as such, they use no medical care.” News reports have documented how simple it could be for insurance brokers in certain states to enroll consumers in zero-cost ACA plans without their knowledge, prompting the Department of Health and Human Services to crack down on these fraudulent practices.
The Data Behind the Controversy: Numbers That Need Context
The Dramatic Increase
Paragon’s analysis of Centers for Medicare & Medicaid Services data reveals a striking trend. In 2021, the percentage of enrollments without any medical claims stood at 19%. By 2024, that figure had jumped to 35%—nearly doubling in just three years.
The Double-Counting Problem
However, this data comes with a significant caveat that critics say undermines Paragon’s conclusions. The CMS data tracks plan enrollments, not individual enrollees—a distinction with major implications. Cynthia Cox, vice president and director of the Program on the ACA at KFF (a health information nonprofit), points out that the federal data could count enrollees twice if they’ve switched plans during the year.
The Enhanced Subsidies Context
The timing of this increase coincides with major policy changes. In 2021, President Joe Biden signed the American Rescue Plan Act, which included enhanced ACA subsidies that made plans available at low or no cost to certain low-income individuals and expanded eligibility to some middle-income people. These credits were extended through 2025 under the Inflation Reduction Act of 2022. This expansion naturally brought more people into the marketplace, potentially changing the demographic composition of enrollees.
Expert Perspectives Challenge the Narrative
The Over-Interpretation Critique
Health policy experts across the ideological spectrum have expressed skepticism about Paragon’s conclusions. Michael Cannon, director of health policy studies at the libertarian Cato Institute, offered measured criticism: “It’s not that he’s wrong, but I think he’s overinterpreting.”
Plan-Switching and Data Artifacts
Cox and other researchers point to increased plan-switching as a significant factor inflating zero-claim percentages. Extended open enrollment periods have contributed to higher rates of plan-switching, which could make the number of people being double-counted higher in federal data. Additionally, some enrollees may have been on an ACA plan for only part of the year, making them statistically less likely to file a claim.
“We’re not trying to argue there is no fraud. It’s a real thing. But the question is, how big of a scale is this problem?” Cox emphasized. “Just suggesting that anyone who’s not using health care is a fraudulent enrollee—that’s not true. Plenty of people don’t use health care.”
The Insurance Market Reality
Joseph Antos, a health policy expert and senior fellow emeritus at the American Enterprise Institute, challenges the premise that high numbers of zero-claim enrollees indicate fraud. “Somehow, the idea that people not using health insurance is some sort of a problem—it might be. But in principle it isn’t,” Antos said. “The point is that for insurance to work, you need some people who are not making claims on the insurance.”
Comparative Context
Supporting this perspective, recent research found that from 2018 to 2022, an average of 23% of enrollees in employer-sponsored plans didn’t use their health insurance each year—a figure that provides important context for evaluating ACA marketplace data. The enhanced subsidies also made the marketplace population younger, and younger enrollees are generally less likely to use their insurance, a demographic reality rather than evidence of fraud.
The Political Context: A Familiar Republican Playbook
Paragon’s Political Influence
Paragon Health Institute, founded by Blase in 2021, has become widely influential in Republican health policy circles. Alumni of the organization now serve as staffers in the Trump administration and House Speaker Mike Johnson’s office, ensuring that the group’s analysis directly influences Republican policy positions.
The “Waste, Fraud, and Abuse” Tradition
The fraud narrative fits into a long-standing Republican rhetorical tradition. It’s not new for the GOP to claim government programs are riddled with fraud. During negotiations over the “One Big Beautiful Bill,” Republican lawmakers insisted Medicaid wouldn’t be cut to pay for tax cuts, but that “waste, fraud, and abuse” in the health program would be eliminated.
Industry Response: Pushback from Insurers and Hospitals
The main trade associations for insurers and hospitals—AHIP and the American Hospital Association—have disputed Paragon’s characterization of the federal data, even publishing blog posts detailing their counterarguments. AHIP specifically pushed back on the idea that the insurance industry profits from enhanced subsidies, noting that existing law caps health plan profits, making windfall gains from phantom enrollees unlikely.
Conclusion: A Debate with Real Consequences
As the government funding showdown continues and the December 31 deadline approaches, the phantom enrollee controversy represents more than an academic disagreement about data interpretation. Democrats emphasize how the subsidies’ expiration will increase insurance premiums for millions of Americans, while Republicans maintain that fraud must be eliminated before any extension is considered. The resolution of this debate will determine healthcare affordability for countless Americans in 2026 and beyond.
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