The Spotlight Is on Medicaid Cuts, But the ACA Marketplaces Could See a One-Third Cut in Enrollment
While all eyes are on the big Medicaid cuts being proposed in the House, significant changes are also being proposed that together would dramatically reduce enrollment in the ACA Marketplaces. So far, the Marketplace changes have received comparatively little attention even though they could reduce enrollment by about one third, driving up the number of uninsured in the country. The inside health policy world is aware of these changes, but the news media and the general public are so far unaware of the train heading for the ACA Marketplaces.
Partly that’s because such a big impact on the Marketplaces would result from the combined effect of a number of changes rather than one big policy proposal attracting media and public attention, and many of the changes are technical and wonky, even if they are consequential. It works like this: Start with the expiration of the enhanced ACA tax credits. That’s not in the reconciliation bill, but they will expire automatically if Congress does not act to extend them this year, which will reduce Marketplace enrollment by 4.4 million, according to Trump Administration estimates. Then add provisions from the House reconciliation bill, which will adopt Trump administration regulations, reducing enrollment by another 2.2 million, according to CBO.
Add to that a series of proposals developed in the Ways and Means Committee (several discussed below), which could reduce enrollment by several million more (public estimates are not available yet). Add all that up and it’s easy to see why many Marketplaces believe they are facing a one-third drop in enrollment (about 8 million of the 24 million currently covered, if extrapolated nationally), once all these changes would be in place. Proportionately, that’s a much bigger enrollment and coverage loss than projected for Medicaid. For context, the 24 million people covered by the Marketplaces is slightly more than the number of people covered by the 40 states that have expanded Medicaid.
Some of the legislative language describing these policy changes is murky and the policies themselves are quite technical. It’s not entirely clear what is intended and unintended. But a cut in coverage even close to this magnitude in the Marketplaces would also result in financial hardship for millions of low-income people and destabilize some smaller state Marketplaces or possibly lead to them closing up shop. Marketplaces have to maintain a fixed operational structure to function (supported by plan payments to them, not government), so if enrollment falls too much, smaller Marketplaces in smaller states may no longer be viable.
Already an insurer in one state, Vermont, has filed 2026 rates projecting enrollment declines of 17% just from the loss of the enhanced tax credits alone. Again, the credits will expire this year unless they are extended and premium payments in the Marketplaces will rise, on average, by more than 75%. Some Marketplaces believe that enrollment could eventually fall by significantly more than one third, remembering that enrollment doubled after the enhanced tax credits were instituted.
One change originally proposed in the Ways and Means Committee would require that consumers making as little as about $15,000 a year pay the full premium for their policy while they go through a new, potentially lengthy manual process to determine their eligibility. Today, the process is more automated and there is a grace period while paperwork is cleared.
Another change in the bill would mandate a shorter enrollment period, cutting it in half in some states, while also limiting flexibility for enrollment procedures at the same time.
And a significant change would remove an existing limitation on consumers having to pay back tax credits at the end of the year if their income changes. While most people think of this as impacting people who end up making more money than they thought, in states that didn’t expand their Medicaid programs, consumers who accept Marketplace tax credits but end up making too little to qualify could end up owing back all the tax credits they received. In the largest non-expansion state, Texas, a consumer who thought they would make $15,500 a year but ended up making $14,500 could be required to pay back nearly $6,000 in tax credits.
This is a good example of the challenges assessing many of the proposed changes can pose. Few would be against accuracy in determining income and appropriate levels of government support. The policy can certainly be framed to sound entirely responsible. But then there is also reality. As a new KFF analysis shows, income for low-income people can be volatile, and many Marketplace consumers are in hourly wage jobs, run their own businesses, or stitch together multiple jobs, which makes it challenging, if not impossible, for them to perfectly predict their income for the coming year, which is why these repayments were capped in the ACA to begin with. That’s why at one and the same time, a responsible-sounding policy with reasonable goals can be unrealistic and even cruel in practice.
Finally, in one last example, the bill would also revoke eligibility for Marketplace tax credits from many categories of legal immigrants like refugees and asylees, who have been enrolled in Marketplaces since the ACA passed. This includes Afghan immigrants who were our allies. In addition to effectively eliminating coverage for more than a million legal immigrants, immigrant populations tend to be younger and use less health care than others. This might drive up premiums and increase rates in state individual markets that have been stable for years.
Taken together, these policy changes—many of which are obscure and in the weeds, but enormously important for people and the Marketplaces in every state—warrant much more sunlight with arguments for and against being carefully scrutinized. Of course, that can’t easily happen in a reconciliation process—big policy changes get swept up in a larger, fast moving legislative package with little public awareness of their consequences or as in this case, even that they are happening at all.
The CBO should also tread carefully, scoring the impact on coverage of new administrative policies that will work in combination and be hard for consumers to understand but significantly impact coverage and Marketplace operations. CBO does not usually provide ranges for their estimates but, if we were “scoring” this at KFF, I would insist on producing ranges, feeling a single number would assert certainty beyond what can reasonably be predicted.