On August 16, the plaintiffs in a putative class action suit alleging large-scale agent fraud in the ACA marketplace filed an amended complaint that considerably elaborates the narrative of how the alleged perpetrators conceived, executed and expanded their scheme of large-scale unauthorized plan-switching, in which agents allegedly assigned themselves as Agent of Record (AOR) on hundreds of thousands of existing accounts and switched enrollees into new plans without the enrollees’ consent, sometimes repeatedly.

Below, I flag some noteworthy new allegations in the amended complaint, as well as questions suggested by those allegations.

Quick catch-up: the suit’s core allegations

According to the original suit, the scheme originated with two agencies working together, TrueCoverage and Enhance Health, both working from “leads” generated by a marketing company, Minerva Marketing, which deployed online ads misrepresenting ACA premium subsidies as cash benefits (usually citing $6,400, apparently an estimate of a year’s subsidy value). The unauthorized plan-switching and enrollment was enabled by commercial Enhanced Direct Enrollment (EDE) platforms authorized by CMS to execute enrollments in plans sold on the federal ACA exchange, HealthCare.gov. Via EDE, an agent armed only with an enrollee’s name, date of birth and state of enrollment could access and act on the account, until CMS shut this access down for existing accounts in which the agent was not already the AOR on July 19, 2024. The systematic fraud alleged in the lawsuit was aided by proprietary EDEs — two of which (BenefitAlign and Inshura) are owned by TrueCoverage’s parent, Speridian, and one of which (Jet Health) was purchased last year by Enhance Health. Ownership of these enrollment platforms would presumably make unauthorized plan-switching less likely to be detected by the dominant EDE, HealthSherpa, or other EDEs. (In early August, CMS suspended BenefitAlign and Inshura; they are not currently on the approved EDE list.) For more information about how market forces enabled the fraud, see the note at bottom.

Now, as to new facts alleged and new questions raised by the amended complaint.

Scale

On July 19, CMS reported that it in the first half of 2024 it had received 74,000 consumer complaints of unauthorized plan switching and 134,000 complaints of enrollment without consent. There is no reason to think that the complaint tally fully reflects the number of people subjected to unauthorized activity. The amended complaint alleges that “Enhance Health, TrueCoverage, Protect Health, NHA and the downlines engaged in hundreds of thousands of AOR Swaps to steal other agents’ commissions” (p. 112). That’s not a very precise claim, and it was in the original complaint as well.

What the amended complaint does add is a claim that TrueCoverage and Enhance Health recruited or created 80 downline agencies between them, 59 of which are named, all but two of them doing business principally in Florida. These agencies allegedly fed on leads generated by fraudulent ads, used the upline agencies’ dishonest phone scripts (e.g., deflecting questions about the alleged cash benefit), enrolled or planned-switched clients via the proprietary EDEs, and switched one another’s AORs multiple times for the same client (allegedly as many as 20 times), suggesting that plan switches may have far outnumbered enrollees affected.

The still-unknown scale of fraud also raises the question of what share of all unauthorized plan-switching and enrollment that occurred throughout the 32 HealthCare.gov states might have been generated by parties alleged in the suit to have colluded with TrueCoverage and Enhance. One possible tea leaf on that front: an executive at a an insurer with significant market share in one of the targeted states (mostly states that have not expanded Medicaid and other poor southern states) tells me that in the roster of customers seeking reinstatement after alleged unauthorized plan-switching, about 15% were enrolled via BenefitAlign. That struck this executive as a high percentage, since almost all EDE enrollments previously had been via HealthSherpa, the dominant EDE. Still, 15% is just…15%.

Because most agent-assisted enrollment (i.e., most enrollment) in HealthCare.gov states is executed via HealthSherpa, most unauthorized agent activity has probably also been executed via HealthSherpa. As I previously reported, HealthSherpa claims a complaint rate of about 0.5%. While HealthSherpa alerts agents when their clients have switched agents, and agents are highly motivated to report when a client has apparently been poached, the movement is invisible to HealthSherpa when the change is executed on another platform.

Do some or even most of the downlines cited in the amended complaint use HealthSherpa as opposed to BenefitAlign, Inshura, or Jet Health? One indirect hint in the amended complaint: Enhance Health allegedly bought its own EDE, Jet, so it could stop paying TrueCoverage for use of BenefitAlign. HealthSherpa, on the other hand, is free to agents.

In any case, to whatever extent the lawsuit’s allegations are accurate, the volume of unauthorized plan-switching likely far exceeds the amounts generated by the defendant agencies and their downlines. Minerva Marketing, allegedly a primary stimulant of bad agent practices, presumably sells to other agencies and probably has a lot of copycats. As I noted in a previous post, HealthSherpa officials believe that there is a lot of “gray area” fraud, generated in large part by lead brokers (like Minerva but certainly not limited to Minerva) that sell the same leads to multiple agencies. Sloppy practice, in which an agent obtains ambiguous or poorly understood consent to act as AOR to an existing enrollee, was easy enough to engage in until recently.

Update, 9/11/24: In a suit filed on Sept. 6 seeking to force CMS to end Benefitalign’s suspension, Benefitalign [sic - the suit does not capitalize the “a”]and TrueCoverage aver that in OEP 2024, “Benefitalign’s Enhanced Direct Enrollment platform accounted for at least 1.2 million ACA applications, making it the second largest channel for ACA enrollments” (p. 4). (Note that the count is of “applications,” not “enrollments.”) By comparison, HealthSherpa tells me that its final enrollment count for OEP 2024 is 6.6 million — slightly more than half of the 12.7 million “active” enrollments registered in HealthCare.gov states. (“Active enrollments” excludes passive auto re-enrollments, which constitute 22% of total enrollment on HealthCare.gov and which are not credited to any EDE.) These numbers give some sense of scale as to EDE activity generally and, I think, reinforce the impression that the alleged TrueCoverage/Enhance Health scheme may account for a significant percentage, though not the majority, of unauthorized plan-switching and enrollment (see also this post on gray-area plan-switching).

Also, CMS’s 9/2 letter extending its suspension of Benefitalign and Inshura that began on August 8 clarifies that Inshura is simply a rebranding of Benefitalign, not a separate EDE platform. It’s worth noting that CMS has not suspended Jet Health, alleged in the putative class action to be owned by Enhance Health and used to further the alleged plan-switching scheme. Jet Health is one of ten web-brokers — i.e., EDE platforms — currently certified by CMS to execute enrollments in HealthCare.gov state.

The Bain of the ACA marketplace?

The original complaint named as a defendant Bain Capital Insurance, a part of private equity behemoth Bain Capital, which invested $150 million in Enhance Health in November 2021, seeking to build an agency focused on Medicare Advantage sales. The amended complained elaborates on the alleged complicitly of Bain Capital Insurance and the centrality of Bain’s capital to propagating the fraudulent methods and practice. According to the amended complaint, Enhance Health was losing money as a Medicare Advantage agency, and its CEO Matt Herman was in danger of losing his job, when a friend heading a different agency alerted him in July 2022 to the potential for high-volume ACA marketplace sales at low incomes (after enhanced ACA marketplace subsidies had rendered benchmark silver coverage free to enrollees with low incomes in March 2021 and CMS had instituted year-round enrollment and allowed monthly plan switches at low incomes in early 2022). This friend re-acquainted Herman with the CEO of Minerva Marketing, Brandon Bowsky who was pioneering ads and leads and deceptive sales scripts aimed at low income targets. The complaint alleges that Bain fully backed Enhance’s pivot to ACA sales, oversaw its operations, was aware of its sales methods, and fueled its propagation of the methods in hopes of effecting a quick, profitable sale of the company. In particular:

To increase Enhance Health’s profitability and its attractiveness for potential buyers, Bain Insurance bankrolled Enhance Health’s purchase of Jet Health, an EDE Platform, in July 2023. When Enhance Health transferred to Jet Health’s platform in November 2023, it instantly became more profitable, no longer having to pay Speridian for the use of Benefitalign. This purchase occurred well after Bain Insurance learned that Enhance Health’s ACA model was built around leads generated from fraudulent ads and AOR-swapping and plan-switching (p. 82).

While TrueCoverage was upline from Enhance Health, and according to the complaint has more downline agencies, the allegations about Enhance Health’s seminal role and Bain’s conscious backing, if true, suggest that ACA marketplace brokerage, and therefore the marketplace itself, may be one more healthcare industry segment disfigured by private equity.

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A note on how unauthorized plan-switching and enrollment works

Julie Appleby of Kaiser Health News broke the news of the unauthorized plan-switching scandal in April, and that story is an excellent introduction; see also this from me on gray-area fraud. In brief:

While agents’ licenses impose professional obligations, and agents must put their name and identifying number on an account to get paid by insurers, unauthorized plan-switching in the 32 states that use the federal exchange, HealthCare.gov, has been mechanically easy for agents via federally approved commercial Enhanced Direct Enrollment (EDE) platforms, which streamline the enrollment process and provide agents with various CRM tools. More than three quarters of enrollments in HealthCare.gov states are agent-assisted, and more than 80% of broker-assisted enrollments are via EDE (none of the 19 state-based marketplaces have as yet enabled EDE enrollment; most have their own agent portals which function similarly). Until last month, agents could locate and act on any existing account armed only with the enrollee’s name, date of birth, and state of enrollment. While agents are legally obligated to obtain and document client consent before acting on an account, that requirement was until recently loosely enforced. Agents engaged in plan-switching obtain their leads through often-unscrupulous ads, which misrepresent premium subsidies as cash that can be used for other expenses. Those ads are often sold to multiple agencies, which then compete for the same respondents to the misleading incentives.

Unauthorized plan-switching and new enrollments received major stimulus from the enhancements to marketplace premium subsidies created by the American Rescue Plan and implemented in March 2021, which rendered benchmark silver plans free to enrollees with incomes up to 150% of the Federal Poverty Level (FPL). Plan-switching received further stimulus from a rule implemented in early 2022 that provided applicants in states using the federal exchange with income below 150% FPL (the threshold for free silver coverage) with access to a Special Enrollment Period (SEP) in any month of the year — that is, they can enroll year-round, and change plans monthly. (16 of the 19 state-based marketplaces (SBMs) have implemented this SEP as well.)

In a very real sense, there is no off-season in HealthCare.gov states, though Open Enrollment Period (OEP) only runs from Nov. 1 to Jan. 15. In HealthCare.gov states, 55% of all enrollees in 2024 (just shy of 9 million) claimed incomes below 150% FPL. The vast majority of them — 87% — were in the 10 states that have refused to enact the ACA Medicaid expansion (they include behemoths Florida and Texas). In those states, eligibility for marketplace premium subsidies begins at 100% FPL, compared to 138% FPL in expansion states, where people with income below that threshold are eligible for Medicaid. Nearly all of these enrollees qualify for free benchmark silver coverage, and millions more with higher incomes qualify for free bronze coverage. The dramatic ACA enrollment growth of the past three years is concentrated in those states — as is the agent fraud.

Photo by Akshay Anand