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A sweeping new report released today confirms what critics of the Affordable Care Act have warned for years: millions of ineligible individuals are receiving federally subsidized health coverage, draining tens of billions in public funds through a system riddled with structural loopholes and almost no accountability.

In what is shaping up to be one of the most significant federal health care accountability stories of the year, the Paragon Health Institute released findings today — confirmed by The Washington Post — estimating that roughly 6.2 million people on the ACA’s health insurance exchanges are improperly enrolled in subsidized coverage. That figure represents approximately one in four of all exchange enrollees, according to the think tank’s analysis.

The report lands as Congress continues debating the future of COVID-era enhanced subsidies that have ballooned ACA enrollment numbers — numbers now called into serious question by researchers, federal watchdogs, and the courts alike.

“Roughly a quarter of all ACA exchange enrollees may be receiving coverage they are not entitled to — paid for by American taxpayers.”

— Paragon Health Institute, June 2026

HOW IT HAPPENED

The story of ACA fraud is inseparable from the pandemic. When Congress passed enhanced subsidies in 2021 that effectively made silver and bronze plans free for low-income enrollees, brokers and insurers quickly found ways to exploit the windfall. Income verification requirements were loosened. Enrollment could be triggered through Direct Enrollment pathways with minimal scrutiny. And crucially, the financial penalty for overstating income — and thus receiving excess subsidies — was capped so low it created almost no deterrent.

The result, according to Paragon’s research, was a surge in fraudulent sign-ups driven by three overlapping groups: enrollees who deliberately misstated their income; unscrupulous brokers who falsified applications to earn commissions; and a class of enrollees who were signed up entirely without their knowledge or consent, with insurers and agents pocketing the subsidy payments.

The scale of that last category is particularly alarming. Centers for Medicare and Medicaid Services (CMS) data show that nearly 12 million ACA enrollees — 35% of all exchange participants — filed zero medical claims in 2024, up from just 3.5 million in 2021. Researchers describe many of these as “phantom enrollees”: people who have no idea they are technically covered, or who have other insurance entirely.

GOVERNMENT’S OWN TESTS CONFIRM THE HOLES

The Government Accountability Office (GAO) conducted two rounds of undercover testing — and the results were stunning. In the first round, GAO submitted four fictitious applications for plan year 2024 using invalid Social Security numbers and fabricated identities. All four were approved, costing approximately $2,350 per month in fraudulent subsidies. In the second round, GAO submitted 20 fictitious applications for plan year 2025; 19 of the 20 were approved and, as of September 2025, 18 were still actively receiving subsidized coverage. Combined across both rounds, the exchange approved 23 of 24 fictitious applications — a 96% failure rate for basic fraud detection.

The Congressional Budget Office (CBO) added its own corroboration, estimating 2.3 million improper enrollees just among those who overstated their income in the ten states that did not expand Medicaid — a fraction of the total picture. The CBO figure alone exceeds the total coverage losses Democrats claim will result from ending the enhanced subsidies, a point Republicans have seized upon in the ongoing budget debate.

CRIMINAL PROSECUTIONS MOUNT

The fraud is not only a policy problem — it is increasingly a criminal one. In February 2025, a federal grand jury indicted Cory Lloyd and Steven Strong for a scheme that sought over $233 million in fraudulent ACA subsidies, of which the federal government paid at least $180 million. Both men targeted vulnerable, low-income individuals — including people experiencing homelessness, unemployment, and substance use disorders — and used street marketers who sometimes offered bribes to induce enrollment. Both were convicted by a federal jury in November 2025 and sentenced to 20 years in federal prison each, with $180.6 million in restitution ordered.

In April 2026, the Department of Justice announced a separate but related resolution: AP of South Florida (APSF), the brokerage company where Lloyd had continued the scheme, agreed to plead guilty to one count of major fraud against the United States. The federal government had paid $141.5 million in unwarranted subsidies through APSF. In a parallel civil resolution, APSF’s parent company AssuredPartners agreed to pay $135 million to resolve False Claims Act allegations. The combined settlement exceeds $160 million. Court documents revealed that APSF employees stationed street marketers at homeless shelters, bus stops, and drug treatment clinics — sometimes offering cash or gift cards to obtain personal information. Some victims subsequently lost Medicaid access and faced increased costs for HIV medication, opioid treatment, and mental health drugs.

FLORIDA: GROUND ZERO

Florida has emerged as the leading state for ACA enrollment fraud. A Paragon county-level analysis found that in nearly every Florida county, ACA enrollment exceeds the estimated eligible population — in some counties by more than eleven times. Note: independent health policy researchers, insurers, and hospital groups have disputed Paragon’s methodology, contending the fraud estimates may be overstated. The state’s combination of high poverty rates, large uninsured populations, and a dense network of commission-driven insurance brokers created conditions that, according to federal prosecutors, allowed large-scale fraud to operate for years.

WHAT REFORM COULD LOOK LIKE

Critics of the ACA say the path forward is straightforward but politically difficult: allow the pandemic-era enhanced subsidies to fully expire, raise the subsidy repayment caps that currently let overpaid enrollees keep the excess with little consequence, and restore meaningful income verification requirements at the point of enrollment. CMS under the current administration has signaled support for tighter controls, with Administrator Dr. Mehmet Oz stating in mid-2025 that the agency is “restoring integrity to ACA exchanges by cracking down on fraud.”

Defenders of the program argue the fraud figures are overstated and that any tightening of enrollment rules will disproportionately harm low-income Americans who legitimately need coverage — a tension that is now at the center of one of Washington’s defining health policy battles. What is no longer in dispute, after years of accumulating evidence from GAO, CBO, CMS, and federal prosecutors alike, is that billions of taxpayer dollars have flowed to people who were never supposed to receive them.

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