Fraudsters hit exchanges amid Medicare Advantage crackdown

Unscrupulous insurance marketers vexed by a federal push against Medicare Advantage fraud found a more hospitable environment on the health insurance exchanges, brokers say.

The Centers for Medicare and Medicaid Services implemented regulations earlier this decade to address concerns that beneficiaries shopping for private Medicare plans were being misled and victimized. Meanwhile, health insurers became more bullish about the growing marketplaces, and leading carriers began offering commissions for exchange plan sales, making this market more attractive to brokers and other third-party marketing firms.

Related: Insurers, providers team up to save exchange subsidies

Last year, CMS received at least 200,000 complaints from people alleging marketers nonconsensually signed them up for exchange plans or switched their policies. During the open enrollment period that ended last month, the Federal Trade Commission sent letters to 21 marketers and lead generators cautioning them they were under scrutiny.

The sudden proliferation of these incidents led CMS to impose new rules on brokers and other marketers using the federal exchanges. For example, marketers must contact the exchange by telephone when they want to change customers' plans. Despite dire predictions from insurance marketers, the regulations didn't seem to hamper enrollment as sign-ups surpassed 24 million for 2025, breaking a record set the prior year.

The connection between CMS making fraud more difficult to pull off in Medicare Advantage, insurers reducing or eliminating compensation for Medicare Advantage sales, big carriers expanding their exchange businesses, and a flurry of improper enrollments in exchanges plans is clear, said Tim Murphy, an attorney at the law firm Epstein, Becker & Green.

Insurance companies such as CVS Health subsidiary Aetna, Cigna and UnitedHealth Group subsidiary UnitedHealthcare that had not paid for exchange enrollments in the past started to do so for the 2025 sign-up campaign, which induced marketers to shift their attention from Medicare to individual policies, said Justin Brock, CEO of Bobby Brock Insurance, an insurance agency in Tupelo, Mississippi.

Some of those brokers were crooks, Brock said. "Once those commissions started becoming more readily accessible, and people realized how much easier it was to market to people that were under 65, that’s when these large groups exploited the heck out of it,” Brock said.

Lead generator Digital Thrive was among the companies the FTC cautioned, according to copies of the letters provided to Modern Healthcare. Digital Thrive CEO and co-founder Jennifer Mansfield said that the company complies with all marketing requirements and that she does not know why the FTC singled it out.

Digital Thrive entered the exchange market in 2023 after restrictions on how Medicare Advantage plans could be advertised drove online call centers to cancel its contracts, Mansfield said. The same year, the Austin, Texas-based company launched an exchange brokerage called Insure Choice.

“There are a lot of marketers that are opportunistic, and they just chase the fast penny. The [Affordable Care Act plans] became that. From a marketing standpoint, people started doing very well. Marketers got out of Medicare, they saw ACA as an opportunity and they just switched over,” said Mansfield, who helped found the Insurance Marketing Coalition, a professional association that opposes marketing regulations.

Mirroring previous trends in the Medicare Advantage market, the increased prevalence of zero-premium exchange plans for low-income people also created an opening for fraudsters, said Sam Melamed, CEO of the dental and vision insurance agency NCD and founder of a social media platform for insurance marketers called Insurance Forums. These bad actors lured customers with misleading promises of cash cards, rent assistance and mobile phones, he said.

Despite intensified scrutiny from CMS and the FTC, the authorities aren't equipped to root out rulebreakers, Melamed said. “You don't have to be a licensed agency to actually participate in the lead gen world. There's not really much enforcement action that CMS or state departments of insurance could have on it,” he said.

At the same time, private equity investors seeking rapid returns on investment gravitated toward health insurance marketers, as they have toward virtually every corner of the healthcare sector.

Bain Capital, for instance, is one of eight defendants in a wide-ranging lawsuit over what the plaintiffs characterize as misleading tactics to collect sales leads and then change enrollees' plans without permission. The case, Turner v. Enhance Health, is before the U.S. District Court for the Southern District of Florida.

“Upholding the highest standards of compliance and controls is a core focus in all aspects of our operation and we will vigorously defend ourselves against these baseless claims,” an Enhance Health spokesperson said. Bain Capital, an Enhance Health investor, did not respond to an interview request.

Exchange fraud also attracted attention from Republicans opposed to the Affordable Care Act of 2010 at a time when the GOP faces a decision about whether to extend the enhanced exchange subsidies that are due to expire at the end of the year.

Some Republican lawmakers have demanded investigations and suggested exchanges fraud extends beyond dishonest marketers and that a large number of enrollees are improperly receiving subsidies.

“It's important to make sure that policy responses to that bad behavior are focused on the problem, and you don’t trot this out as a reason to fulfill all other policy preferences this administration might have,” said Justin Giovanelli, project director at the Georgetown University Center on Health Insurance Reforms.