The bill amends the Public Health Service Act to raise the medical loss ratio (MLR) threshold for plans sold in the individual and small-group markets from 80% to 85%, effective for plan years beginning January 1, 2026. It separately amends the Affordable Care Act’s Exchange enrollment provisions to impose new civil and criminal penalties on agents and brokers who provide incorrect, false, or fraudulent information on applications for qualified health plans (QHPs), with different sanction tiers for negligence and knowing, willful conduct.
Those enforcement changes create a per-enrollee penalty scheme: negligent or negligent-disregard conduct exposes agents/brokers to civil fines of $10,000–$50,000 per affected individual; knowing and willful misrepresentations carry civil fines up to $200,000 per individual (with procedures modeled on Social Security Act §1128A); and the bill adds a criminal penalty of fines and up to 10 years’ imprisonment. The penalty rules apply to Exchange applications for plan years beginning January 1, 2027.Together, the two reforms shift more premium dollars toward care and tighten accountability for Enrollment intermediaries—changes that will force insurers, brokers, and Exchanges to adjust pricing, compliance, and oversight practices quickly if the bill becomes law.
At a Glance
What It Does
Raises the MLR floor in the individual and small-group markets from 80% to 85%, increasing the share of premiums insurers must spend on medical care and quality. It also carves out a new enforcement regime for agents and brokers who submit incorrect or fraudulent Exchange enrollment applications, including tiered civil penalties and criminal sanctions.
Who It Affects
Insurers selling individual and small-group plans subject to MLR calculations, agents and brokers who assist with Exchange enrollments, federal and state Exchanges that process QHP applications, and consumers whose rebates or premiums may change. It does not alter MLR for large-group markets.
Why It Matters
An 85% MLR forces plans to allocate more premium dollars to care or quality—which can reduce insurer administrative margin or trigger increased consumer rebates—and creates a high-stakes compliance environment for brokers that could change how enrollment assistance is provided on Exchanges.
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What This Bill Actually Does
The Care Over Profits Act makes two discrete but related changes to federal health-law architecture. First, it amends the MLR provision in the Public Health Service Act to replace the numeric 80% requirement in individual and small-group markets with 85%.
Practically, that changes the target insurers use when calculating whether they must issue rebates to policyholders for spending too little on medical care and quality improvement versus administration, marketing, and profits. The change applies to plan years beginning on or after January 1, 2026.
Second, the bill rewrites part of ACA §1411(h)(1) to single out licensed agents and brokers who submit enrollment information to Exchanges. It distinguishes negligent or disregarding conduct from knowing, willful fraud: negligent failures to provide correct information can trigger civil penalties between $10,000 and $50,000 per impacted enrollee; knowing and willful falsification raises civil liability to a maximum of $200,000 per enrollee and ties procedural enforcement to the civil monetary penalty framework already used under Social Security Act §1128A.
The bill also adds an explicit criminal penalty for agents or brokers who knowingly and willfully submit false or fraudulent enrollment information: fines under Title 18 and up to 10 years’ imprisonment. Those enrollment penalties apply to applications for QHPs for plan years beginning on or after January 1, 2027.Operationally, the bill forces several near-term changes.
Insurers in the affected markets will need to recalculate MLRs and decide whether to absorb reduced administrative margins, reduce nonmedical spending, or pass costs to consumers through premiums or narrower networks. Exchanges and the Department of Health and Human Services must clarify what application data agents and brokers must collect and how ‘‘negligence’’ and ‘‘disregard’’ are defined under the Secretary’s rules, while building or scaling investigatory and adjudicative processes to administer per-enrollee penalties.
Brokers will need stronger documentation and verification processes or face outsized per-enrollee exposure. For consumers, the combination could mean higher rebates in some years but also changes in plan offerings or access to enrollment help.
The Five Things You Need to Know
The bill raises the MLR threshold for small-group and individual market plans from 80% to 85% (PHS Act §2718(b)(1)(A)(ii)), effective for plan years beginning on or after January 1, 2026.
For negligent or ‘‘disregard’’-level failures by agents or brokers to provide correct application information to an Exchange, the bill imposes civil penalties of $10,000–$50,000 per individual who is the subject of the application.
For knowing and willful submission of false or fraudulent enrollment information by an agent or broker, the bill imposes civil monetary penalties of up to $200,000 per individual and applies the procedural framework of Social Security Act §1128A (except subsections (a) and (b)).
The bill adds criminal liability: any agent or broker who knowingly and willfully provides false or fraudulent Exchange application information may be fined under Title 18, imprisoned for up to 10 years, or both.
The enrollment-related penalty regime applies to QHP applications for plan years beginning on or after January 1, 2027, creating a one-year delayed start relative to the MLR increase.
Section-by-Section Breakdown
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Increase MLR floor from 80% to 85% for individual and small-group plans
This provision replaces the numeric ‘‘80’’ with ‘‘85’’ in the statutory MLR floor that applies to plans in the individual and small-group markets. Practically, plan MLR calculations use premiums as the denominator and allowed medical claims plus quality improvement expenses as the numerator; raising the floor increases the likelihood that insurers will owe rebates or must reduce nonmedical spending. The statute as amended applies to plan years starting on or after January 1, 2026, giving issuers one plan-year cycle to adjust pricing, administrative budgets, and quality expenditures.
Civil penalties for negligent or reckless agent/broker conduct
The bill inserts a new clause that subjects agents and brokers to civil penalties of $10,000–$50,000 per individual whenever they fail to provide correct application information to an Exchange and the failure is ‘‘attributable to negligence or disregard’’ of Secretary rules. That creates per-enrollee exposure rather than a single aggregate fine and explicitly distinguishes covered intermediaries from other persons in enforcement language, increasing enforcement focus on licensed enrollment intermediaries.
Enhanced civil monetary penalties and procedural tie-in to SSA §1128A
For knowing and willful false or fraudulent submissions, the bill establishes civil monetary penalties up to $200,000 per individual and directs that procedures in Social Security Act §1128A (other than subsections (a) and (b)) apply to these penalties. That imports SSA administrative processes for notice, hearing, and appeals into the Exchange-enforcement context and may change how quickly and through what forum penalties are adjudicated.
Criminal sanction for knowing and willful enrollment fraud by agents/brokers
The bill adds a new subparagraph (C) establishing criminal liability for agents or brokers who knowingly and willfully provide false or fraudulent information on QHP applications: fines under Title 18 and imprisonment for up to 10 years. This elevates certain Exchange enrollment misconduct into federal criminal law, requiring coordination with federal prosecutors and potentially changing the incentives for both aggressive enforcement and careful compliance by intermediaries.
Enrollment penalty regime effective for plan years beginning Jan 1, 2027
The enacted penalties for agents and brokers apply to applications for enrollment in QHPs offered through Exchanges for plan years beginning on or after January 1, 2027. That one-year lag gives Exchanges, HHS, and market participants time to develop rules, update enrollment systems, and communicate requirements to agents and brokers—but it also requires near-term rulemaking to define negligence, required application elements, and enforcement procedures.
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Who Benefits
- Individual and small-group enrollees — An 85% MLR increases the statutory minimum share of premium dollars that must be spent on medical care and quality, raising the probability of rebates or more spending on clinical services or quality programs.
- Patients who need care-intensive services — Plans will have less room for administrative profit and nonmedical expenditures, making it likelier that dollars flow to claims rather than overhead.
- State and federal consumer advocates/regulators — The statutory change gives regulators a clearer basis to demand rebates or scrutinize nonmedical spending, improving leverage in market oversight.
Who Bears the Cost
- Insurers in the individual and small-group markets — They face reduced administrative margin or must reallocate spending; insurers may raise premiums, narrow networks, or cut nonclinical programs to meet the higher MLR.
- Licensed agents and brokers — New per-enrollee civil penalties and potential criminal exposure raise compliance costs, liability insurance costs, and the need for stricter recordkeeping and verification practices.
- Exchanges and HHS — The federal and state Exchanges must define required application elements, enforce new penalties, and potentially scale investigatory and adjudicative operations to handle per-enrollee cases.
- Small employers (in the small-group market) — If insurers pass through higher administrative costs or shift risk, employers could face higher premiums or fewer plan options.
Key Issues
The Core Tension
The core dilemma is trade-off between channeling more premium dollars to medical care and quality (protecting consumers’ value for premiums) versus preserving insurer flexibility and market stability—and between deterring fraud through severe, per-enrollee penalties and maintaining accessible, low-friction enrollment assistance for consumers who rely on agents and brokers. Each objective is defensible, but the mechanisms chosen—an 85% MLR floor and steep, per-enrollee sanctions with criminal exposure—solve one problem by increasing risks and costs in other parts of the system.
The bill tightly couples two policy goals—shifting premiums toward medical spending and deterring Exchange-enrollment fraud—but it leaves several implementation questions unresolved. First, the statutory change to 85% does not alter how quality improvement spending is defined or audited; without accompanying regulatory clarity, insurers may reclassify administrative costs as quality improvement to avoid rebates, undermining the stated intent.
Second, the per-enrollee penalty model is blunt: a single application error could expose an agent to very large aggregate fines if multiple individuals are affected, creating compliance and insurance-market consequences that may be disproportionate to the underlying misconduct.
Delegation of key definitions to the Secretary (for ‘‘negligence’’ and required application elements) creates regulatory discretion that will shape enforcement intensity, but also generates short-term uncertainty for brokers and Exchanges. Importantly, importing SSA §1128A procedures standardizes adjudication but may require substantive procedural adaptation because 1128A was designed for different program contexts.
Finally, the criminalization of certain enrollment misstatements raises due-process and prosecutorial-priority questions: federal criminal enforcement is resource-intensive and typically reserved for large-scale fraud—how prosecutors will triage cases under this new statute is unclear and could either result in aggressive prosecutions or leave enforcement primarily civil.
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