Government cracks down on health insurance fraud

Over 760,000 individuals lost their health insurance marketplace coverage following a government crackdown on fraud, with the initial indication of this issue potentially surfacing at the reception desk for many patients.

On September 22, the Centers for Medicare & Medicaid Services (CMS) reported the cancellation of approximately 315,000 enrollments covering these individuals, confirming that the enrollments were unauthorized after verification by the agency and insurers.

These terminations became effective on August 31 and are projected to recover roughly $2.2 billion in advance premium tax credits.

Administration representatives stated that CMS intends to verify the immigration status and income eligibility of roughly 415,000 additional current enrollees.

Fraud Detection and Eligibility Checks

According to Vice President JD Vance, the administration employs artificial intelligence and machine learning to identify patterns indicative of fraud, noting that eligibility determinations based on fraud are not held to the same standard of proof as a criminal conviction.

Although individuals removed in error have the right to appeal, Vice President Vance observed that very few people take advantage of this option when the government conducts large-scale terminations, a fact he attributed to CMS Administrator Mehmet Oz, MD.

Since January, CMS has sent termination notices to more than 200 noncompliant agents and brokers, and during the summer, it issued 569 notices of intent to terminate to those who submitted 2026 applications without providing identifying information.

A new interim final rule establishes a temporary moratorium on 2027 registration for agents and brokers lacking an active 2026 Exchange Agreement, showing the necessity for stricter eligibility reviews. Furthermore, CMS found that enrollments linked to brokers who registered for 2026 for the first time were 2.7 times more likely to be missing Social Security numbers and 2.8 times more likely to have unresolved income verification problems than those linked to brokers who registered earlier.

Impact on Patients and Providers

The terminated enrollments encompass individuals unaware of their enrollment, those holding dual employer coverage, and those whose incomes exceed subsidy qualification limits.

This diverse group presents various challenges: some patients will present a card for a plan that no longer exists, some will fail to recognize the plan on file, and some will retain coverage but lose the subsidy that rendered it affordable.

Enrollees receiving advance premium tax credits who cease premium payments are granted a three-month grace period, during which insurers are obligated to process claims for services in the first month but may hold (pend) claims from the subsequent two months.

Insurers may deny these pended claims as expenses incurred after coverage ended if premiums remain unpaid, as detailed in the Minnesota Department of Health’s best practice guidelines under _45 CFR 156.270_. Behind the scenes, billing teams can create work queues based on the remittance remark codes insurers use to flag the grace period: N616 for the first month and N617 for the second and third months.

Existing Solutions and Best Practices

The majority of medical practices already possess the infrastructure required for electronic eligibility verification, with 96 percent of such verifications being fully electronic in 2023.

Resolving the issue requires less investment in new software and more focus on executing checks at optimal times, such as a batch verification a few days prior to an appointment and a real-time check upon arrival.

Billing teams can establish work queues around the remittance remark codes used to signal the grace period, allowing them to identify potential issues early and providing staff the opportunity to contact the patient before a pended claim becomes a denial.

When a verification indicates inactivity, directing the patient to a financial counselor rather than resolving the matter at the counter can help them locate legitimate coverage and increase the likelihood that the practice retains them as a patient.

CMS will mandate electronic consumer authorization before an agent or broker can act on an application prior to open enrollment, and consumers will receive guidance on safeguarding against fraud.

Medical practices can also implement verification steps to prevent errors, such as conducting batch eligibility checks and performing real-time checks at the point of arrival.