Lawsuit challenges freeze on new health insurance brokers ahead of open enrollment

A few weeks ahead of open enrollment, the Trump administration kicked 760,000 people off of their Affordable Care Act insurance plans. The administration blamed brokers, licensed professionals who help consumers pick health insurance plans, for what it claimed was fraud. In another move to combat supposed fraud, the agency stopped all licenses for new brokers just weeks ahead of open enrollment.

This news hit Johnny Wallin’s insurance agency especially hard. Marketplace Insurance Exchange Group serves mostly first-generation Americans in Texas.

“We work with people that speak Arabic, Vietnamese, Spanish, Urdu, Pashto, Russian, Turkish,” Wallin said. As the chief operating officer, he finds, trains, and recruits people who speak those languages to become brokers.

Wallin hired seven people to be ready for the busy season starting in November. But then in September, the Centers for Medicare and Medicaid Services announced a freeze on all new brokers.

“There will be no new brokers for Obamacare in this country for the next six months,” CMS Administrator Mehmet Oz said during a press conference.

Oz pointed to instances of high-profile instances of fraud where brokers who improperly enrolled people in plans and made millions in commissions have been sent to prison.

While government reports found a jump in consumer complaints over the last few years, it’s not clear how widespread the broker fraud is. CMS started with a targeted approach going after individual brokers. The agency’s latest freeze on all new licenses is sweeping.

“It halted any new development,” Wallin said. “I've had to tell some people that, ‘Sorry, we're not hiring now and shut them out.’”

Wallin had to let the brokers he hired for this season go.

Ronnell Nolan, president of Health Agents for America, is hearing story after story like this from the independent brokers she represents across the country.

“I say it to CMS, ‘I lay the fraud at your feet,’” Nolan said. She said she’s been warning CMS for years about the need for stronger safeguards. “And now you want to blame the agent community. We've been screaming for fraud changes for years.”

Brokers used to only need limited information like names, birthdays, and states to sign someone up or change their plan. CMS added more security measures, and now consumers will need to give the OK before any enrollment or change.

The 21 states that run their own Affordable Care Act marketplaces already do this. And they’ve had much less fraud.

Nolan is also worried about the 760,000 consumers who CMS kicked off their health plans last month. The agency said it’s confident they’re fake enrollees partly because they didn’t file any medical claims. Surveys show that in any given year, a quarter of beneficiaries don’t need to go to the doctor or get medicine. CMS said it’s already reinstated coverage for 51 people who were kicked off so far.

Morningstar analyst Julie Utterback warned that kicking healthy people off coverage could mess up insurers’ calculations.

“The risk pool probably increased after that move,” Utterback said, “And that could create a headwind for insurers from a profit perspective on the individual plans.”

This is the latest move that could make the marketplaces less attractive to insurers. A dozen insurers have exited this year, and 3 million people dropped coverage because the generous tax credits ended in 2025.

Utah insurance broker Rebecca Yates is worried about open enrollment this year. She can no longer rely on the two new hires she made, meaning long hours for her remaining team.

“I overall don't think they should have a pen stroke ability to shut down any industry,” she said.

Two trade associations for brokers have taken the issue to court, claiming the Trump administration incorrectly used emergency power to do the freeze without the standard time for stakeholder weigh-in.

CMS is ramping up its search for fraud and is investigating another 400,000 enrollees. Texas broker Johnny Wallin said some of his clients are at risk of losing their insurance, as the government requests more proof of income and immigration documents.