Congressional Debate on ACA Subsidies Affects 2026 Health Coverage Costs and Enrollment

ACA Marketplace Costs Surge for 2026 as Enhanced Subsidies Expire, Enrollment Declines

Millions of Americans purchasing health insurance through the Affordable Care Act (ACA) marketplaces are bracing for significantly increased costs for 2026 coverage. This follows the expiration of enhanced tax subsidies, leading to a noticeable decrease in sign-ups for the current open enrollment period. Lawmakers in Congress are actively debating potential solutions for healthcare costs and the future of these crucial subsidies. Meanwhile, consumers are exploring alternative health coverage options, including high-deductible plans and emerging state-level public options.

The expiration of enhanced tax subsidies is set to dramatically increase premiums for many ACA enrollees, with some projections showing an average increase of 114%.

ACA Subsidies and Enrollment Overview

The enhanced tax subsidies, initially introduced during the COVID-19 pandemic, were designed to make ACA plans more affordable. Their scheduled expiration at the end of the year means a return to the pre-pandemic subsidy structure. Under this system, individuals in the lowest income brackets will pay at least 2.1% of their household income towards premiums, with the highest earners facing nearly 10%. Crucially, subsidies will no longer be available for individuals earning more than four times the federal poverty level, which translates to approximately $62,600 for an individual or $84,600 for a couple for 2026.

The impact of these changes is already evident in enrollment figures:

• As of January 12, approximately 22.8 million consumers had selected a plan, marking a decrease of about 1.4 million compared to 24.2 million at the same time last year.
• New customer sign-ups totaled 2.8 million, down from 3.9 million in the prior year.
• This represents the first year-over-year decline at this point in the enrollment window in four years.
• Prior to this, ACA enrollment had doubled from about 12 million in 2021 to over 24 million, a surge largely attributed to the enhanced tax credits.
• Experts overwhelmingly attribute the current decline primarily to the expiration of these subsidies.
• Projections suggest that between 2 to 4 million people nationwide may lose health coverage, with some potentially transitioning to employer-sponsored plans or Medicaid, while others could become uninsured.

States are reporting significant shifts in enrollment patterns:

• Pennsylvania: The state's ACA marketplace, Pennie, reported a 16% decrease in first-time sign-ups during the first six weeks. Cancellations by existing customers, particularly those earning between 150% and 200% of the federal poverty level, outnumbered new enrollments.
• California: Covered California observed a 33% drop in new enrollments through December 6. The executive director noted an increase in consumers opting for "bronze"-level plans, which feature lower premiums but higher deductibles (national average $7,476 for bronze vs. $5,304 for silver plans).
• Massachusetts: The Massachusetts Health Connector reported a 7% increase in consumer calls during the first month, reflecting widespread difficulties in maintaining coverage.

Congressional Actions and Proposals

The future of ACA subsidies remains a central point of contention in Congress.

• Legislative Efforts: The House of Representatives passed a package of measures that notably did not include an extension of the enhanced subsidies. However, a bipartisan group of House members has initiated a discharge petition to force a vote on a three-year subsidy extension, potentially in January. Senate and presidential approval would still be required.
• Senate Activity: On December 11, the Senate voted on a proposal to extend the subsidies as part of a broader agreement to end a government shutdown. A separate Republican-backed option, which included funding for Health Savings Accounts (HSAs), was also considered. Neither proposal achieved the 60 votes required for passage.
• House Republican Plan: Speaker Mike Johnson plans to introduce a legislative package focused on "drivers of health care costs." This proposal, similar to the Senate Republican bill, does not include an extension of the enhanced ACA subsidies. It aims to expand access to association health plans, appropriate funds for cost-sharing reduction payments, stabilize the individual market, and increase transparency for pharmacy benefit managers.
• Party Positions: Democrats generally advocate for extending the more generous subsidies. Republicans are divided, with some opposing a direct extension due to cost concerns and the political implications of supporting the ACA, while others support various proposals for extensions due to concerns about potential political repercussions in upcoming midterm elections.
• Financial Projections: The nonpartisan Congressional Budget Office estimated that a three-year extension of the enhanced subsidies would increase the national deficit by approximately $80.6 billion over a decade. Without an extension, the CBO projects gross benchmark premiums could increase by 4.3% in 2026 and 7.7% in 2027 for marketplace plans. A previous KFF analysis suggested that individuals receiving financial assistance could experience an average premium increase of approximately 114%, from $888 in 2025 to $1,904 in 2026.
• White House Stance: The White House has indicated general support for HSAs but has not publicly endorsed a specific plan from Capitol Hill.

Alternative Health Coverage Options

As consumers confront rising costs, various alternative health coverage options are under consideration, each with its own benefits and drawbacks.

HDHPs require patients to cover significant out-of-pocket costs before insurance coverage begins. These plans have become widespread, with the average deductible for a single worker with job-based coverage increasing to approximately $1,700 from around $300 in 2006. Plans with deductibles exceeding $1,650 are eligible to be paired with tax-free HSAs.

While proponents argue HDHPs encourage cost-effective care, observations suggest this outcome "largely has not been the case," and medical prices continue to rise.

• Republican legislators, including former President Donald Trump, have expressed support for expanding HDHPs often paired with HSAs, proposing direct cash to individuals for special healthcare accounts.
• Research indicates that only about 7% of total healthcare spending for individuals with job-based coverage is for services that can realistically be price-shopped.
• Studies have also shown that cancer patients with HDHPs exhibited a higher mortality rate compared to similar patients without such coverage. HSAs are also more commonly utilized by higher-income households.

These plans are available outside official ACA marketplaces and were designed for temporary coverage. They are often less expensive than ACA plans but are not ACA-compliant and do not offer essential benefits such as preventive care, maternity care, or comprehensive prescription drug coverage.

• They may impose annual and lifetime caps on benefits, and applicants typically complete a medical questionnaire, allowing insurers to exclude coverage or cancel policies retroactively for individuals with preexisting medical conditions.
• While supported by the Trump administration, critics have referred to these plans as "junk insurance" due to their non-comprehensive nature. They are available in 36 states, with some states prohibiting or restricting them.

• Indemnity Plans: Designed to supplement traditional insurance by paying fixed dollar amounts towards deductibles or copayments. They do not adhere to ACA coverage rules and may require disclosure of preexisting conditions.
• Faith-Based Sharing Plans: Pool funds from members to cover medical bills. These are not considered insurance, are not required to maintain specific financial reserves, and do not guarantee payment of health expenses.

Launched last fall, Nevada's public option enrolled over 10,000 people, which is less than a third of the initial projection of 35,000. Nevada is the third state, after Washington and Colorado, to introduce such plans, aiming to offer lower-cost insurance and expand healthcare access.

• These plans are private-public partnerships that compete with private carriers, with Nevada's law mandating a 15% reduction in premium costs over four years compared to benchmark silver plans.
• Researchers suggest that state-level public options may struggle to fully offset increased premium payments resulting from the loss of federal ACA subsidies.
• Challenges in other states have included limited participation from healthcare providers and difficulties for insurers in meeting rate reduction targets. Enrollment is anticipated to grow as awareness increases.

Consumer Experiences and Concerns

Consumers across the country are expressing profound concerns about the rising costs. A December KFF poll indicated that approximately half of current ACA enrollees who are registered to vote stated that a $1,000 increase in annual healthcare expenses (including copays, deductibles, and premiums) would significantly influence their voting decisions.

• Daniela Perez, an education consultant in Chicago, anticipates her monthly premium could rise from $180 to $1,200 without the extension of tax credits, leading her to postpone enrollment decisions.
• Debra Nweke, 64, from Southern California, stated that her coverage could increase from $1,000 to $2,400 monthly without subsidies.
• Andrew Schwarz, 38, a preacher in Bowie, Texas, noted his ACA coverage for himself and his wife would increase from $40 to $150 per month, partly due to choosing a lower-deductible plan.
• Felicia Persaud, 52, considered forgoing coverage due to estimated increased monthly costs of around $200, hoping to avoid significant medical events.

State-run ACA marketplaces have developed contingency plans to adjust operations and inform consumers if Congress implements changes to the subsidies. The director of the Massachusetts Health Connector reported concerns from individuals with complex medical conditions regarding access to medical care.