A recent Wall Street Journal editorial repeats misleading claims by the Paragon Institute about consumers who shop for and enroll in health insurance in the individual market.
In advancing a false narrative of so-called “phantom patients,” Paragon demonstrates a concerning, if not irresponsible, disregard for the fundamentals of insurance.
Here are the facts:
Basic Actuarial Math: Why Some Consumers Could and Should Have No Claims in a Given Year
Health insurance is like any other form of insurance; it pools risk so that when someone needs to use their insurance, there are funds to cover those needs. A high utilizer one year may be a low utilizer the next — and vice versa.
Instances where consumers have “no claims” are not proof of fraud or waste of taxpayer dollars. On the contrary, they provide confirmation that more Americans – including those who are younger, healthier and crucial to a balanced risk pool – are enrolling in health care coverage. And the premium tax credits help to make that insurance more affordable and accessible for younger, healthier enrollees.
In its flawed critique, Paragon also fails to mention a unique aspect of Marketplace coverage: it is commonplace for consumers to enroll in a health plan for only a portion of a year, during which it would be normal to not make any claims. This is often due to a typical life circumstance, such as moving to a different state, getting married or divorced, or transitioning to a new job. Additionally, a short-term special enrollment period for low-income Americans (those earning <150% FPL) meant more people had coverage for only a few months at a time.
A “no-claims” year is evidence that a consumer stayed healthy or only had a few months of coverage — not that taxpayer money was misdirected or that their policy was illegitimate.
The Facts Disprove Allegations of Fraud
While Paragon paints a picture of rampant fraud, data released in August by CMS refutes this erroneous claim – and policymakers have already adopted a series of changes to address any instances of fraud through the One Big Beautiful Bill and Marketplace Integrity and Affordability rule.
Every Exchange enrollee must file taxes to maintain access to the tax credits that help them purchase coverage. In states relying on the federal Exchange, just 1.64% of households lost their tax credits for failing to file and reconcile in 2023–24. If so-called “phantom enrollments” were even a fraction of the issue Paragon claims them to be, that number would be far higher than low single digits. It isn’t.
Who Really Benefits From Health Care Tax Credits?
The editorial asserts that health care tax credits only benefit health plans. This also misses the mark.
Existing law caps health plan profits through medical loss ratio requirements: if companies don’t spend 80% of premiums on care, they pay consumers rebates. Since 2020, consumers have received over $12 billion back from insurers, with more than $1 billion in 2024 alone, according to KFF.
If Congress lets the health care tax credits expire, individuals and families with Exchange coverage will face, on average, a 75% increase in premium payments, according to KFF. Given the steep, sudden increase in costs, many will drop coverage entirely. That will lead to widespread instability in insurance markets, more uninsured families, and higher costs for everyone.
The Bottom Line
Paragon and the Wall Street Journal’s take boils down to this: if you don’t file a claim on your health insurance over a certain period of time, you must not need it, or there must be fraud. That’s like saying consumers should cancel their home insurance if their house doesn’t burn down this year – and just as absurd.
There are no “phantom patients.” There are, however, millions of Americans who have benefited from access to stable, affordable health coverage through the premium tax credits – Americans Congress must protect from higher costs by taking urgent action to extend the health care tax credits before they expire at the end of this year.
Health plans welcome substantive, data-driven conversations about ensuring health care markets deliver clear value to consumers and taxpayers, but that conversation should be rooted in fair, complete and accurate reporting. Paragon’s analysis fails to meet this basic test.