Tax credit turmoil, cost pressures set stage for tumultuous ACA open enrollment

Open enrollment on HealthCare.gov opens Saturday in what is set to be one of the most tumultuous enrollment periods in recent memory.

The Affordable Care Act's (ACA's) marketplaces are no stranger to turmoil, from their disastrous 2014 launch to disruption from the first Trump administration's press to repeal and replace the landmark healthcare law. 

And, now, the sign-up period is set to open amid a government shutdown that has the market at the center.

Lawmakers are still sparring over an extension to enhanced premium tax credits that were rolled out on the exchanges as part of the response to COVID-19. With those subsidies in place, enrollment in the individual market soared to record highs, but they are set to expire at the end of this year.

Insurers in the marketplace are increasing premiums by an average of 26%, according to a new report from KFF, but consumers may feel those increases even more acutely. Twenty-two million of the 24 million people enrolled in ACA plans receive a subsidy of some kind, per the analysis.

Should the enhanced tax credits expire as scheduled, KFF estimates that enrollees who currently receive them will see their monthly premium costs increase by about 114%.

Sabrina Corlette, co-director of the Center on Health Insurance Reforms at Georgetown University's McCourt School of Public Policy, told Fierce Healthcare that younger, healthier enrollees tend to be the first to move on when exposed to higher costs in this way, and this could lead to a significant shift in the risk pools.

She said this is likely to hold true even if Congress does reach a deal to extend the subsidies, which would bring costs back down.

"Even if Congress were to strike a deal next week, and they are able to turn the IT systems around, you've already lost probably your youngest and healthiest enrollees," she said, "and the insurance companies are going to insist on pricing for that in terms of how to set their premiums."

The Congressional Budget Office estimated late last year that the uninsured population would increase by 2.2 million in 2026 without the subsidies, with the number of people losing coverage compounding in both 2027 and 2028.

Kris Haltmeyer, senior vice president of policy analysis at the Blue Cross Blue Shield Association (BCBSA), said during a briefing with reporters this week that if Congress does act to extend the subsidies by the end of the year, insurers and the marketplaces could adapt relatively quickly.

For instance, some states asked insurers to submit rate filings with two estimates that accounted for both a subsidy extension and their expiration. He emphasized, though, that insurers will only be able to act nimbly if Congress elects to extend the subsidies as-is.

Some Republicans have argued for an extension that reforms the subsidies as a solution.

"I do think it's critical that the tax credits are extended in their current form for 2026," Haltmeyer said. "Any change in the tax credit design would take longer for [the Centers for Medicare & Medicaid Services (CMS)] and health plans to operationalize."

Robert Bradner, partner at the law firm Holland & Knight and a former Hill staffer, told Fierce Healthcare that while insurers have expressed confidence in their ability to adapt should a deal be reached, it will remain a challenge to reach certain groups after the fact.

For instance, there will be people who log on this weekend, see an elevated premium and simply move on. If Congress reaches a deal in, say, December, plans face an uphill battle in reaching back out to individuals who have already declined to enroll earlier in the period.

If it's someone who is already in an ACA plan, insurers can reach out again later in the window. Policymakers could also open a special enrollment window after the fact for people who receive updated details on their tax credits. There is also potential to connect during the tax filing process.

But while there are several avenues plans can use for outreach, none of this is easy work, Bradner said.

"It's not that you can't do these things," he said. "It's that it's messy."
 

Uncertainty extends beyond fate of enhanced subsidies
 

In addition to the back-and-forth over the tax credits, insurers are also navigating multiple program integrity changes to the ACA market that were instituted in rulemaking from the CMS. The agency is aiming to cut down the enrollment period and has also cut down on funding for navigators, which assist individuals in signing up for coverage.

The program integrity measures included additional paperwork to verify eligibility for tax credits. The CMS argued that these changes were necessary to combat improper and fraudulent sign-ups for exchange plans.

The Trump administration has also significantly expanded catastrophic coverage on the exchanges, which have lower premiums but far higher deductibles, averaging $10,600 for an individual in 2026 per KFF.

Key program integrity changes have been stayed by the courts, but after many insurers already filed their rates for the year that accounted for these overhauls. Corlette said payers frequently bake in assumptions around policy changes as "uncertainty" that makes its way into premiums.

Other sources of uncertainty could include the president's tariff plans or changes in the One Big Beautiful Bill Act, she said.

"We saw a lot of that in the rate filings, too, just pricing for an uncertain future," Corlette said.

Bradner said it's important to keep these other pressures in mind when digging into premium increases. The broader political conversation has been simplified down to the subsidies when there are significantly more factors at play.

With the end of the tax credits in tandem with these other headwinds impacting rates, they can compound as consumers log in to select their plan. For instance, someone who receives the enhanced subsidies will see a significantly higher premium regardless, and then will go to see what their tax credits look like and find that they've run out.

"You've got the impact on the rate-making side and then you've got the actual reduced premium tax credit when the person goes to shop, and so it's both of those things," Bradner said. "I think, in a lot of the discussion, people aren't really being careful to analyze these two factors."

Larry Bucshon, M.D.,  senior policy advisor at Holland & Knight who spent 14 years as a Republican representative from Indiana, said that extends to the debate on the Hill, which has ultimately boiled down to who supports an extension and who doesn't.

"I think a little bit of a deeper dive probably shows us that even with the COVID-era tax credits expiring, there's upward pressure on premiums this year regardless," he said.

Payers are citing cost pressures in high-demand areas like GLP-1s in their rate filings, according to the KFF analysis. Weight loss drugs and tariff uncertainty are also headwinds that the employer-sponsored coverage market is navigating.

David Merritt, senior vice president of internal affairs at BCBSA, said during the briefing that insurers are feeling that cost pressure from all sides, including hospital care, physician services and pharmaceuticals.