How Will the 2025 Budget Reconciliation Affect the ACA, Medicaid, and the Uninsured Rate?

Congressional Republicans are considering a budget reconciliation package that would make significant changes to Medicaid and the Affordable Care Act (ACA). For example, the Energy and Commerce Committee released legislative text that includes work and reporting requirements for certain Medicaid enrollees and codifying changes in a recent Trump Administration proposed rule on the ACA Marketplaces, among other policy changes.

These policy changes also come at a time when large health insurance coverage losses are expected if enhanced premium tax credits for ACA marketplace coverage expire. These enhanced tax credits lower the cost of premiums on the ACA Marketplaces but are set to expire at the end of 2025, which will increase out-of-pocket premiums substantially and likely lead to millions of people dropping their coverage.

The Congressional Budget Office (CBO) estimates that, taken together, these changes will result in at least 13.7 million more uninsured people in the year 2034 than would otherwise be the case, including:

• 1.8 million more uninsured from codifying the recent Trump Administration proposed rule on the ACA Marketplaces
• 7.7 million more uninsured resulting from a combination of Medicaid and other ACA changes (that go beyond the proposed rule)
• 4.2 million more uninsured with expiration of the enhanced premium tax credits, relative to an estimate of a permanent extension of those credits

CBO notes that it is continuing to analyze the effects on the uninsured rate and they expect these estimates will increase beyond 13.7 million. Additionally, the CBO score does not account for policy changes put forward by the Ways and Means Committee. (CBO separately estimates that the Medicaid and ACA provisions of the reconciliation bill would increase the number of people uninsured by 8.6 million. That figure is different from the combined 7.7 million and 1.8 million estimates due to technical considerations in how CBO handles proposed rules not yet finalized in its score.)

If these changes go into effect, it would lead to the uninsured rate increasing by about 30%, and it would come after years of declining uninsured rates following implementation of the ACA.

Medicaid Provisions

The provisions in Subtitle D of the House Energy and Commerce’s Budget Reconciliation proposal beyond the effects of the proposed Trump administration ACA rule would increase the number of people without health insurance by at least 7.7 million in 2023, according to preliminary estimates by the Congressional Budget Office. The increased number of people without health insurance stems from multiple provisions that would reduce Medicaid enrollment. Some of the provisions that would likely cause significant numbers of people to lose health insurance are described below.

Fewer people would be enrolled in Medicaid through the ACA expansion because:

• People eligible through the expansion would have to meet new work and reporting requirements.
• States would be required to renew eligibility for expansion enrollees at least two times per year and impose new cost sharing requirements.
• Fewer states might offer the ACA expansion than might otherwise be the case because the bill would eliminate an added incentive for states to adopt it.
• Expansion states would also receive lower federal matching rates if they cover immigrants with state-only funds, regardless of immigration status.

Other provisions would affect all enrollees (not just expansion enrollees):

• New requirements added under the Biden administration to streamline Medicaid eligibility and enrollment would be delayed until January 1, 2035, which would increase barriers to enroll in and renew Medicaid coverage, especially for older adults and people with disabilities.
• The bill would create new requirements for verifying addresses, cross-checking eligibility and data against other sources, and would reduce retroactive coverage from three months to one month.
• The bill would eliminate the reasonable opportunity period for verification of immigrant status in all states, during which people receive coverage.

Codification of ACA Marketplace Integrity and Affordability Proposed Rule

The Energy & Commerce text also codifies policy changes laid out in a recent Trump Administration proposed rule on program integrity. The CBO expects these policy changes to increase the number of uninsured people by 1.8 million by the year 2034.

Below are some key changes to the Marketplace from the proposed rule and the Energy and Commerce legislation:

• Shortens the Open Enrollment Period: In the past few years, the annual open enrollment period has lasted from November 1 to January 15, with some state-based exchanges having longer enrollment periods; the proposed rule and the legislation would end the open enrollment period a month earlier, on December 15.
• Restricts the types of Special Enrollment Periods (SEPs): The proposed rule eliminates the year-round enrollment opportunity for people with incomes up to 150% of poverty (the low-income SEP). SEPs allow individuals to enroll in Marketplaces outside the annual open enrollment period. The legislation would go further than the proposed rule by limiting the ability of all Marketplaces (including SBMs) to provide specific types of SEPs, such as the low-income SEP, that are based on the relationship of people’s income to the poverty line.
• Creates a new $5 monthly charge for certain auto-enrollees: Under the proposed rule, enrollees with a zero-dollar premium (after tax credits) who are automatically re-enrolled in Marketplace coverage and do not proactively verify their ongoing eligibility for a fully subsidized plan will face a $5 monthly charge until they actively confirm their eligibility. Legislation includes the same requirement, described as a reduction in advance payment of premium tax credits.
• Imposes new documentation requirement for individuals to verify income in specific situations when applying for premium tax credits. The proposed rule and legislation would require individuals to verify their projected income by providing additional documentation where the Internal Revenue Services has no tax return data for the individual for the prior year. Documentation would also be required where IRS data indicates that an applicant’s income for the prior year was below the poverty level.

Expiration of Enhanced Tax Credits

The CBO projects that 4.2 million more people will be uninsured in 2038 if enhanced ACA tax credit expire. The enhanced premium tax credits were originally passed by Congress in the American Rescue Plan Act (ARPA) and extended under the Inflation Reduction Act (IRA), but they are set to expire at the end of 2025. The enhanced tax credits both increased the amount of financial help for those already eligible under the ACA and expanded eligibility to those making more than four times poverty ($124,800 for a family of four in 2025). On average, the enhanced tax credits have reduced premium payments by $705 a year on average for enrollees receiving tax credits.

The enhanced premium tax credits have led to the ACA Marketplace more than doubling in size since 2020. States that President Trump won account for 88% of Marketplace enrollment growth since 2020. In some of these states, such as Florida, Texas, and Georgia, at least 10% of the population in a majority of congressional districts is now enrolled in a Marketplace plan.

The expiration of the enhanced tax credits is expected to cause ACA enrollees’ out-of-pocket premium payments to increase by over 75% on average, with people in some states seeing their payments more than double on average. Lower-income and older enrollees, as well those who live in states that have not expanded Medicaid, are expected to see the most significant premium payment increases.