The Honorable Robert F. Kennedy Jr.
Secretary
Office of the Secretary
U.S. Department of Health and Human Services
200 Independence Avenue, SW
Washington, D.C., 20201
The Honorable Mehmet Oz, M.D.
Administrator
Centers for Medicare & Medicaid Services
U.S. Department of Health and Human Services
Independence Avenue, SW
Washington, DC 20201
Dear Secretary Kennedy and Administrator Oz,
Paragon Health Institute appreciates the opportunity to comment on the Centers for Medicare & Medicaid Services (CMS) proposed rule CMS-9884-P, RIN 0938-AV61, titled “Patient Protection and Affordable Care Act; Marketplace Integrity and Affordability.” We commend CMS for several provisions that advance program integrity and offer suggestions to improve the final rule to further reduce waste, fraud, and abuse and ensure the best use of taxpayer funds.
Paragon is a non-profit health policy research institute committed to reforming government programs and restoring Americans’ control over their health. We believe empowering consumers—rather than increasing government control—is the key to lowering costs and improving health outcomes.
Since our founding in 2021, Paragon has closely examined the structural flaws and spending inefficiencies within the Affordable Care Act (ACA). The expansion of fully subsidized, zero-dollar premium plans under the American Rescue Plan Act in 2021—partnered with the previous administration’s lax policies and enforcement—permitted massive improper enrollment and fraud in the exchanges. We are encouraged that CMS adopted a similar methodology as we did in our research to estimate the scope of the problem. Our work unpacking ACA fraud,1 the increase of fraudulent activity due to policy failures of the Biden administration,2 and decreasing ACA plan quality3 makes a clear case for the strengthened program integrity efforts found within your proposed rule.
We commend CMS for its renewed focus on program integrity in this proposed rule, and we strongly support an overwhelming majority of its provisions. The mid-range of the regulatory impact analysis suggests the proposed rule would reduce federal deficits by $150 billion. On April 9, the Congressional Budget Office produced its own estimate that the rule would reduce federal deficits by $210 billion. Since the rule is largely focused on ensuring proper eligibility in the exchanges, these savings show the large magnitude of current improper enrollment. Since lower government spending and lower deficits have significant benefits in reducing the excess burden of taxation, Americans will be far better off economically because of this rule. CBO’s analysis also suggests that this rule will lead to a three percent reduction in premiums.
We encourage CMS to go even further to reduce improper spending by ending automatic re-enrollment in subsidized plans to stop perpetuating waste, fraud, and abuse, and to ensure consumers are fully engaged with their annual health insurance decisions. Specifically, we encourage you to adopt a policy the Trump administration proposed in the 2021 proposed payment notice that any enrollee who would be automatically reenrolled with an advance premium tax credit (APTC) that would cover the enrollee’s entire premium would instead be automatically re-enrolled without APTC. This would ensure that enrollees need to return to the exchange to update their information and obtain an updated eligibility determination for a subsidy—best protecting the public against excess subsidies paid to insurers that can never be recovered.
THE PROPOSED RULE’S POSITIVE PROVISIONS
Paragon strongly supports many of the key provisions of the proposed rule and their inclusion in the final rule, including the following:
Income Verification4
Reinstating income documentation requirements for ACA exchange applicants without a recent tax return is a common-sense safeguard to ensure subsidies are reserved for eligible individuals and to reduce improper enrollment. Paragon’s research provides clear empirical support for this policy change.
During the 2024 open enrollment period, nearly half of all exchange sign-ups reported income between 100 percent and 150 percent of the federal poverty level (FPL)—the range that qualifies for fully subsidized plans. In The Great Obamacare Enrollment Fraud, we found that in nine states the number of enrollees reporting incomes in this range exceeds the number of people likely eligible. In Florida alone, we found that enrollment in this income band was four times higher than the eligible population. Nationwide, this likely translates to 4–5 million improper enrollees and an estimated $15–$26 billion in improper federal spending in 2024. Notably, the proposed rule assessed Paragon’s methodology and confirmed that our estimates were technically sound and likely conservative. The agency cannot ignore these numbers and the staggering problem of fraud and improper enrollment in the exchanges. Bold and strong change is necessary to ensure program integrity.
The Biden administration’s decision to accept self-attestation when income cannot be verified—and to automatically extend the documentation window by 60 days—undermines critical eligibility guardrails. The proposed rule would restore the original verification step and remove the unproven 60-day extension, which HHS itself found had no measurable impact on resolving data matching issues. These targeted changes would help close a major loophole and better align subsidies with actual eligibility.
Ending the Special Enrollment Period for Individuals Earning Between 100% and 150% of the Poverty Line5
This SEP undermines the ACA’s original structure, which reserves SEPs for individuals experiencing qualifying life events—such as job loss, marriage, or childbirth—that necessitate coverage changes. This SEP offers year-round open enrollment based solely on income—a condition that is not a qualifying life event and was never intended to trigger exchange enrollment. This SEP also encourages people to wait until they are sick to sign up for coverage, worsening the risk pool and driving premiums up. HHS estimates that keeping this SEP in place could raise premiums between 0.5 and 3.6 percent. Furthermore, its implementation has made the exchanges even more vulnerable to abuse, fraud, and adverse selection.
Paragon research, Department of Justice Investigations, state-based civil suits, and testimonial accounts from victims show a major problem with people involuntarily enrolled in ACA.6 These reports detail how this SEP alone created a wild west environment, which subsequently led to billions of dollars in fraudulent subsidy expenditures and interrupted essential medical care.
As documented in Paragon’s Unpacking The Great Obamacare Enrollment Fraud, this SEP has driven a surge in fraudulent enrollments and unauthorized plan switches. Bad actors—including thousands of unscrupulous brokers—have exploited the fully-subsidized plans, loose enforcement of the law, and this open-door SEP to enroll individuals without consent. HHS reported 50,000 complaints of improper enrollment and 40,000 unauthorized plan switches in just the first three months of 2024.7 These abuses have disrupted care and cost taxpayers billions. This SEP results in more waste, fraud, and higher premiums. Given these costs, Paragon commends HHS for immediately addressing the issues with both the SEP and the open enrollment period before the next open enrollment.
Requiring Pre-Enrollment Verification for 75% of New SEP Enrollees8
As Paragon’s Unpacking The Great Obamacare Enrollment Fraud highlights, lax SEP oversight—including in the aforementioned 100 to 150 percent FPL SEP—has driven widespread abuse, including unauthorized enrollments and plan switches. Appropriately building on a final rule from the Obama Administration establishing a pre-enrollment verification pilot program, the proposed rule would require new SEP enrollees to verify that they are eligible for SEPs. Given the increased rates of improper enrollment and clear signs of abuse throughout the country, this provision is imperative. With evidence of rising improper enrollment, this requirement is both timely and essential to ensure that coverage is going to those who truly qualify.
The provision of the proposed rule to verify eligibility for 75 percent of SEP applicants strikes a reasonable balance between preventing abuse and maintaining operational flexibility for exchanges. This safeguard ensures that SEPs are used as intended: to provide timely access to coverage for individuals who have experienced legitimate, qualifying life events. As HHS has noted, the verification process can be completed in approximately one hour, making it a minimal burden compared to the high financial and programmatic costs of allowing continued abuse.
Verifying SEP eligibility is a common-sense safeguard that restores accountability without overburdening consumers. This provision is essential to reduce fraud, protect enrollees, and stabilize premiums. CMS should finalize and rigorously implement this provision as a cornerstone of its broader effort to reestablish program integrity in the ACA exchanges.
Expanded De Minimis Thresholds for Actuarial Value9
This proposal would increase plan design flexibility and allow issuers to offer more affordable options, ultimately lowering premiums. Expanding the permissible actuarial value range was a successful policy during President Trump’s first term, expanding choice and competition in the individual market. Reinstating and broadening this flexibility would continue to encourage innovation and affordability in plan offerings.
Expanding the permissible AV variation allows issuers to design plans that are more responsive to consumer preferences, particularly those seeking lower premiums or Health Savings Account (HSA)-eligible options. When the Trump administration broadened the AV range, it contributed directly to a drop in average premiums and an increase in insurer participation, helping to stabilize the market.10 Paragon has previously highlighted the role of flexible plan design in driving innovation and enabling individuals to take greater control over their health care spending.11 By increasing plan flexibility and bringing more competition, this proposal could help counteract the declining quality of ACA plans.12
By contrast, the Biden administration’s decision to narrow the AV bands, if allowed to continue, would reduce these consumer benefits, restrict HSA-compatible plan availability, and contribute to rising premiums. Reversing that decision is not only economically sound, but it also aligns with a broader commitment to affordability and market sustainability. This proposed rule would restore a vital tool that promotes lower-cost options without compromising coverage standards. Greater flexibility in plan design is essential to keeping coverage affordable and ensuring that more Americans can find plans that meet their needs.
Open Enrollment Period13
The proposed rule would restore the open enrollment period window to November 1 through December 15, the same period that the Obama administration had envisioned in the March 2016 rule for the 2019 coverage year. A shorter open enrollment period would improve program integrity and reduce consumer burden and confusion that results from having to navigate what is effectively two open enrollment periods with different coverage start dates. A shorter open enrollment period would also help lower premiums.
In 2021, President Biden expanded the ACA open enrollment period by another month. However, this open enrollment period is confusing because, in practice, it created two open enrollment periods. Coverage starts on January 1 for people who enroll for coverage between the preceding November 1 and December 15. People who sign up during the second period, from December 15 to January 15, start their coverage on February 1. Unfortunately, this difference is not always clear to consumers, so some people who enroll after December 15 are surprised when their coverage does not start until February.
The Trump administration’s implementation of this open enrollment period in 2018 reduced “consumer casework volumes related to coverage start dates and inadvertent dual enrollment decreased … suggesting that the [six-week period improved] consumer experience, as well as program integrity.”14 This shortened period would reduce consumer confusion and better align with the open enrollment period dates used in the employer market and Medicare Advantage. HHS also estimates it would also lower premiums due to less decreased adverse selection.
Premium Adjustment Percentage Index15
The proposed rule contains an important methodological update to the premium adjustment percentage index (PAPI), the index to determine inflation updates to certain cost parameters, such as the maximum out-of-pocket limits on cost sharing and the amounts employers must pay for certain plans. The ACA requires the HHS Secretary to determine these amounts based on the “average per capita premium for health insurance in the United States.”16 The Obama administration chose to calculate the PAPI by using only employer-based insurance market premiums, excluding individual insurance market premiums. This method meant that premium tax credits increased more rapidly over time. However, the Obama administration stated that it would consider using both markets in the future. This new rule would better align with the statute’s plain language by including both the individual market and the employer market in that calculation and would appropriately reduce taxpayer costs.
Past-Due Premiums: Guaranteed Availability of Coverage17
The proposed rule’s effort to close the loophole that allows individuals to cycle through coverage without paying past-due premiums is a further step toward improving program integrity. Allowing insurers to require payment of outstanding balances before effectuating new coverage will help curb abuse that result from the ACA’s insurance rules. This provision aligns with prior Obama-era protections and will reduce premium inflation caused by gaming the rules, ultimately easing the burden on taxpayers and ensuring that ACA subsidies are better targeted. Restoring this protection is expected to reduce insurer losses from nonpayment and lower premiums overall.
Failure to File Taxes and Reconcile Subsidy18
This provision furthers program integrity by reinstating the requirement that enrollees reconcile their APTCs to remain eligible for future subsidies. The current policy, which allows individuals to continue receiving subsidies for an extra year even after failing to reconcile creates a perverse incentive and undermines program integrity. By returning to the policy that ensures individuals who fail to reconcile are deemed ineligible the following year, the rule protects both enrollees (from accumulating unanticipated tax liabilities) and taxpayers (from bearing the cost of improperly advanced subsidies). HHS’s estimate that 18.5 percent of non-reconcilers may be ineligible highlights the urgency of this change.19
Premium Payment Thresholds20
The proposed rule prudently eliminates two additional payment options finalized by the Biden administration in a January 2025 rule21—the fixed dollar threshold (e.g., allowing a balance of less than $10) and the 98 percent gross premium threshold. By doing so, this provision will help ensure that premium payments more accurately reflect an enrollee’s commitment to coverage. These prior options created scenarios in which individuals could remain enrolled in plans despite contributing very little, if anything, toward their share of the premium. In many instances, people may not realize they were enrolled. This dynamic has contributed to improper enrollment, as well as wasted taxpayer subsidies for coverage that is never used.
HHS has cited growing numbers of complaints from consumers who were unknowingly enrolled—more than 7,000 in December 2024 alone—highlighting the risks of overly permissive payment policies.22 By encouraging timely and substantive premium contributions, this policy change strengthens program integrity and will reduce improper expenditures. It also better aligns insurer incentives with responsible enrollment practices, since insurers will have less opportunity to continue receiving subsidies on behalf of enrollees who are not actively participating in the system.
Re-Enrollment Hierarchy23
The proposed rule wisely eliminates the policy that automatically reassigns bronze plan enrollees into lower-cost silver plans. This well-intentioned, but flawed policy, infringes on enrollee autonomy and risks enrollees’ generating tax liabilities due to plan switching without informed consent. The proposed rule rightly restores consumer choice and prevents surprise tax liabilities. This change enhances trust in the exchange system and reduces administrative complications stemming from unintended plan changes.
IMPROVING THE RULE
Paragon strongly recommends the following changes to the proposed rule to ensure greater program integrity:
Strengthen the Rule by Enhancing Redeterminations and End Automatic Re-enrollment
In the proposed rule, you wrote that you “are increasingly concerned about the level of improper enrollments in QHPs and believe that automatic re-enrollment of consumers into zero premium plans poses a significant risk to continuing high levels of improper payments of the APTC.” Unfortunately, the rule fails to meaningfully tackle one of the most significant drivers of exchange waste, fraud, and abuse: automatic re-enrollment into heavily subsidized plans. Policies that permit billions in unrecoverable subsidies per year without updated income information are deeply concerning. Fortunately, you sought comment on a variety of approaches to address this concern and thus each of our recommended changes, if finalized, would be a logical outgrowth of your proposed rule.
i. Enhancing the redetermination process24
As proposed, CMS’s updated redetermination process would require consumers who receive fully subsidized plans to provide information to their exchange confirming or updating their eligibility in the marketplace portal, or else they would get their subsidy reduced so that they would have to pay $5 a month. This additional step seeks to reduce fraud, because exchanges now automatically re-enroll individuals and deem them eligible based on the information in their original applications. However, the proposed rule acknowledges that this $5 amount is probably not enough to incentivize “individuals to re-confirm their income and plan.” In the proposed rule, you specifically seek comment “on whether $5 is the appropriate premium amount for affected individuals to pay under the proposed policy.”
We strongly agree that $5 is not enough. The $5 premium provision is woefully inadequate to limit improper and fraudulent enrollment and to stop the perpetuation over time. And this problem isn’t limited to fully subsidized plans—fraud and abuse exist across the exchange system. The rule should address the full scope of the issue.
While in theory, we think a premium could help address some instances in which brokers sign people up for coverage without their knowledge, $5 is such a trivial amount that it is unlikely to protect against waste, fraud, and abuse. Some individuals might prefer to pay a $5 premium rather than submit information that could compromise their enrollment or that they view as an inconvenience with a greater cost than $5 of their time per month. Moreover, even under the proposed rule’s premium payment threshold, which allows issuers to let non-paying enrollees stay on the exchanges for longer,25 those individuals could similarly avoid paying the $5 premiums entirely.
The $5 amount would also not be enough because brokers would also have a strong incentive to simply pay the $5 for the enrollee or offer inducements. Recent reporting shows that some brokers engaged in such tactics by offering gift cards to enrollees.26 Earlier this year, the Department of Justice brought a case against two individuals who allegedly bribed enrollees to get them enrolled in subsidized exchange plans.27 Their scheme may have caused the federal government to pay at least $161.9 million in improper subsidies—a scheme that would have been much more difficult to carry out if the amount of APTC had been reduced by an amount equal to the commission they earned from submitting fraudulent enrollments..
If CMS decides to impose a minimum amount that enrollees must pay if they fail to update their information, we suggest an amount of $25 a month for individual coverage and $20 a month for each additional plan member. These numbers are a superior alternative to $5 because they approximate the average monthly broker commission.282930 A payment of this amount would be much more likely to reduce financial gaming. It is a meaningful sum that would be more likely to motivate individuals to act to ensure the integrity of the ATPC estimate and payment. Furthermore, it would remove the incentive for third parties to pay that premium amount for the enrollee.
Moreover, $25 premium amount for single coverage and $20 per additional plan member are logical outgrowths of the proposed rule. By specifically requesting comment on whether $5 was appropriate, the agency clearly signaled its openness to finalizing a different amount. Given the rule’s policy goal of reducing gamesmanship and the history of improper and fraudulent activity involving the APTC, commenters could reasonably have anticipated that higher amounts—designed to curb incentives for fraud and improper enrollment—were under consideration. Because a monthly premium payment roughly equivalent to broker commissions would help deter such behavior, commenters should have foreseen that an amount like $25 for individuals and $20 per month for each additional plan member might ultimately be finalized.
ii. Ending automatic re-enrollment
You also wrote in the proposed rule, “[in] the 2021 Payment Notice proposed rule (85 FR 7088), we sought comment on a proposal to modify the automatic re-enrollment process such that any enrollee who would be automatically reenrolled with APTC that would cover the enrollee’s entire premium would instead be automatically re-enrolled without APTC. This would ensure that any enrollee in this situation would need to return to the Exchange and obtain an updated eligibility determination prior to having any APTC paid on the consumer’s behalf for the upcoming benefit year.”31 There is logical outgrowth for this position because CMS wisely decided to revisit and seek comment on this policy proposal in this year’s proposed rule, in recognition of the “heightened urgency of program integrity concerns with APTC and automatic re-enrollments.”32 We strongly encourage you to finalize this policy alternative in the final rule. This provision would do the most to ensure that the law is followed and would best protect the public from excess subsidies being sent to insurers that can never be recovered.
Automatic re-enrollment with subsidies paid in advance is a recipe for wasteful and improper expenditures. This is particularly true since the government often cannot recoup excess advanced subsidies it provides to insurers. In many cases, this means that taxpayers lose thousands of dollars for enrollees whose subsidies were incorrectly determined. And basing subsidies on data that is several years old is a significant program integrity risk. A recent Wall Street Journal story on duplicative Medicaid managed care enrollment across states provides another reason why there is such a severe problem with CMS adopting policies that perpetuate improper enrollment.33
We also urge CMS to end automatic re-enrollment in APTCs, not only for those with fully subsidized plans, but for all who receive them, Automatic re-enrollment in APTCs discourages consumer involvement in a way that wastes taxpayer dollars for health care and may negatively affect the quality and price of insurance. In most private markets, individuals who are automatically re-enrolled in unused subscriptions have the incentive to cancel services once they realize they are still enrolled and being charged. No such incentive exists for ACA enrollees who have fully subsidized plans, and it is substantially lower for those with mostly subsidized plans, because taxpayers pay most of the cost. Given that the ACA is not a normal private market, but a highly subsidized one, automatic re-enrollment in APTCs discourages consumer involvement, with negative implications for both the consumer and the taxpayer.
Automatic re-enrollment in APTCs is also bad for both the quality and price of insurance because it allows insurers to further enrich themselves without having to convince consumers to sign up for their plans. In normal markets, companies must compete for business by demonstrating value to consumers. They usually do this by trying to improve their service’s quality or lower their price. Otherwise, they lose money. Automatic re-enrollment in APTCs turns this incentive upside down. It allows insurance companies to collect public dollars by relying on enrollees’ lack of attention, not by justifying the value of their services.
This dynamic may affect quality by encouraging consumers to pay less attention to whether their health insurance addresses their health needs. The declining quality of ACA plans has been well-documented, as insurance companies have increasingly diluted their networks.34
This same dynamic may also affect prices. As CMS acknowledged in 2019, a significant number of enrollees received plans where they didn’t have to regularly pay a premium, so they were “less sensitive to premiums and premium changes.”35 Given the fact that ACA plan deductibles are increasing at higher rates than employer-market deductibles,36 undoing automatic re-enrollment in APTCs may help by encouraging consumers to pay attention to issuers’ prices.
For these reasons, CMS should stop automatic re-enrollment in APTCs starting for the 2026 plan year. CMS should educate policyholders about this change through multiple communication channels to make sure that enrollees know that they must actively provide information to be eligible to receive an APTC. Importantly, ending automatic re-enrollment in premium tax credits would not affect anyone’s eligibility for a subsidy because individuals would still be eligible to receive premium tax credits when they file their taxes. And the monthly premium payment, which would likely be sizeable for many enrollees, would be a strong incentive for them to provide updated information to the exchanges to receive an APTC. And if they are no longer eligible for coverage—because they are in an employer plan or Medicaid or Medicare, for example—then they would have a strong incentive to drop their coverage or just stop paying the premium, which will lead the coverage to lapse.
While CMS has noted several potentially negative effects of this policy change—such as increased consumer debt, reduced coverage, and impacts on the risk pool—we believe the benefits of ending automatic re-enrollment in APTCs significantly outweigh the costs. Moreover, the agency’s concerns can be addressed through reasonable measures, and that on balance, the policy would improve accountability and reduce systemic risks.
Regarding debt to issuers and burden on consumers, the agency expressed concern that individuals who lose APTC eligibility but are automatically re-enrolled in their plans could accrue significant debt. This is an exaggerated risk. The added premium costs are highly foreseeable, and enrollees would have ample opportunities to either prevent or mitigate them. Consumers are generally aware of major changes in their income that affect both their eligibility for PTCs and the amount of the APTC that the insurer should receive in advance. Those who anticipate a loss of subsidy are in the best position to inform the exchanges and avoid the loss of taxpayer funds. Furthermore, consumers who do not actively re-confirm their eligibility and are enrolled without APTC can still choose to cancel their plans, which will occur through nonpremium payment after the grace period ends. This dynamic substantially mitigates the risk of unexpected consumer debt.
Regarding reduced coverage, we believe that this policy’s benefits outweigh such risk because allowing automatic re-enrollment into without a contemporaneous check on eligibility invites improper payment and undermines the credibility of the program.
Moreover, exchanges can mitigate any potential impact on the risk pool through targeted outreach and consumer education during open enrollment. Overall, aligning enrollment with actual eligibility requirements would strengthen, rather than weaken, the foundation of the risk pool. CMS must learn from the failures of the previous administration’s decisions that prioritized enrollment at any cost, often with specious arguments about the health of the risk pool. Having more enrollees with fewer or no medical expenses will lower average premiums. But CMS also has a primary duty to ensure that those enrollees are truly eligible and only receive PTC and APTC amounts that they are legally entitled to.
To meaningfully restore program integrity in the exchanges, CMS must end automatic re-enrollment in APTCs, which perpetuates substantial fraud in the exchanges and discourages individuals from regularly evaluating whether their health plans best fit their needs. Ending this automatic re-enrollment would protect taxpayers, restore market discipline, and ensure subsidies go only to those who remain eligible—without affecting anyone’s right to coverage.
Strengthen Enforcement Against Past-Due Premium Abuse
The proposed rule takes important steps to close the loophole that allows individuals to continuously enroll in subsidized coverage without paying outstanding premiums. By allowing insurers to require repayment of past-due amounts before effectuating new coverage, the rule helps address a known form of gaming that raises premiums for all enrollees and inflates program costs. In the proposed rule, you “seek comment on whether issuers should be required to establish terms of coverage that attribute to past-due premium amounts owed to an issuer the premium the enrollee initially pays for subsequent coverage, and the associated costs for issuers to implement such a requirement.”37
We believe that requiring insurers to adopt this past-due premium policy would better protect program integrity and reduce gaming. This is especially important because the current structure still leaves a critical incentive misaligned. After enrollees stop paying their portion of the premium, insurers continue to receive APTCs through the 3-month grace period. After the 3-month grace period, the insurer is required to remove enrollees. Keeping such enrollees can be profitable, as insurers continue to collect substantial federal subsidies despite the lack of enrollee contribution.
To fully align incentives with program integrity, the agency should require insurers to establish terms of repayment. This requirement is a logical outgrowth of the proposed rule because the agency sought comment on such a proposal, thereby giving commenters notice that it was a possibility.
The agency should likewise require issuers to return excess APTC funds received on behalf of ineligible or non-paying enrollees, including all subsidy payments within the grace period if the person does not pay their share of the premium. Without this requirement, insurers may delay removing such individuals from coverage, prolonging improper payments and undercutting the goals of the rule. This requirement is a logical outgrowth from the proposed rule’s policy because it would serve as an enforcement mechanism for the agency to ensure the insurers uphold the required past-due premium policy.
This repayment requirement would accomplish several goals. First, it would incentivize accurate eligibility enforcement: Insurers would be more likely to verify enrollee eligibility and take timely action to remove ineligible individuals. Second, it would protect taxpayer dollars: Federal subsidies would not continue flowing to insurers when no valid coverage relationship exists. Last, it would reduce premium inflation: Removing non-paying and ineligible enrollees would help improve the risk pool and reduce the cost-shifting that drives up premiums for others.
As the rule rightly notes, current conditions have enabled some individuals to game the system by shifting between plans without settling past-due balances. But without correcting the financial incentives for insurers, this behavior is unlikely to stop. Requiring issuers to collect past-due premiums from enrollees would be a responsible way of stewarding taxpayer dollars. Moreover, a repayment requirement would ensure that insurers share accountability for improper enrollment and help restore the ACA’s original guardrails.
HHS Should Designate This Rule as a Deregulation under EO 14192
This proposed rule would significantly reduce the excess burden of taxation. Regulatory actions that result in reductions of federal government spending and that reduce federal deficits have additional benefits that improve society’s overall well-being aside from the direct or “transfer” effect of the provisions. By reducing the fiscal burden on current taxpayers and future taxpayers, this rule will lower the excess burden of taxation. HHS should acknowledge this change in the final rule’s regulatory impact analysis.
The excess burden of taxation—often referred to as the deadweight loss associated with taxation—represents the value of foregone economic transactions that do not occur because of the taxes or debt needed to finance government spending. In other words, the actions taken by consumers and producers to reduce tax exposure is a waste of social resources rather than a transfer. This principle of opportunity cost has long been established in OMB Guidance (A-4 and A-94) as well as HHS guidance for preparing Regulatory Impact Analyses.38
This proposed rule represents one of the most socially beneficial rules in the history of HHS. By reducing projected federal spending by $150 billion over the next decade, U.S. deficits will be at least $150 billion lower by the end of the decade than they would otherwise (a benefit of lowering spending is also lower future interest costs to finance federal debt). Americans will be significantly better off from a lower tax burden, which includes lower inflation, that this rule produces. These reduced costs are beyond other benefits of the rule such as greater options for consumers. CBO estimates even a greater positive effect from the rule, projecting it would reduce U.S. deficits by $210 billion over the 2026-2035 period. CBO also projects the rule will lower benchmark premiums by 2.6 percent.39
Particularly given the large fiscal savings from this rule, the Department should consider this rule as a massive deregulatory effort that meaningfully reduces the federal footprint along with significantly reducing improper spending in exchanges. As a net reducer of regulatory costs, HHS can properly designate this rule as a deregulation under Executive Order (EO) 14192.
The excess burden of taxation can be estimated as the product of the budgetary effect and the marginal excess burden coefficient. OMB Circular A-94 recommends using a coefficient of 0.25, although that estimate was first advanced in an earlier era when marginal tax rates (including implicit marginal tax rates) were lower, industry markup distortions were lower, and government debt had not yet exceeded annual GDP. Considering these factors, the White House Council of Economic Advisors estimated a coefficient of 0.5.40 Thus, we expect this rule will reduce the excess burden of taxation by between $75 billion and $105 billion over the next decade based on CMS’s and CBO’s respective estimates.
Conclusion
Overall, this rule would significantly improve program integrity, reduce improper spending, and reduce premiums. However, we urge CMS to end automatic re-enrollment on the federal exchanges and rescind states’ flexibility to enact their own automatic enrollment policies. We also urge the agency to strengthen enforcement against past-due premium abuse and redesignate this rule as a deregulation under EO 14192. Finally, we strongly urge the agency to make these provisions effective immediately ahead of the upcoming open enrollment for plan year 2026, particularly the provision to end the Special Enrollment Period for individuals earning between 100 percent and 150 percent of the FPL.
Thank you for considering these comments. We welcome any outreach regarding the contents or recommendations within this comment letter.
Sincerely,
Brian Blase
President
Paragon Health Institute
Ryan Long
Director of Congressional Relations & Senior Research Fellow
Paragon Health Institute
Doug Badger
Public Advisor
Paragon Health Institute
