Constriction looms for a key segment of healthcare coverage

The reverberations for Medicaid have drawn most of the recent headlines, but federal policy developments also portend a big contraction of the individual-insurance market in 2026 and beyond.

Although group coverage remains the predominant form in the U.S., the market for individual plans has been growing amid recent surges in Affordable Care Act (ACA) enrollment. At the end of 2024, a record 25.4 million people had insurance through ACA marketplace plans and other nongroup plans, driven by more than 22 million subsidized enrollees.

Those numbers are set to drop going into 2026, with the pending termination of enhanced subsidies for buying marketplace insurance. Congress would need to authorize an extension, and to date the Republican majority has not shown an inclination to do so.

The Congressional Budget Office (CBO) previously projected that more than 8 million current marketplace enrollees would be uninsured in 2034, stemming from several policy changes. That number may be moderately lower now because the final reconciliation bill excluded a few provisions that were expected to affect enrollment. Still, more than 2 million have been projected to fall off the insurance rolls in 2026 alone, after the expiration of the subsidies.

“This [impacts] the whole ecosystem,” Michele Eberle, executive director of the Maryland Health Benefit Exchange, said during a webinar hosted by KFF. “It’s all our communities, our farmers, our gig workers — people who are working, but their employers don’t provide health coverage.

“It’s our hospital systems, our providers, the economy. I mean, it’s everything. The ripple effect is just enormous by taking health coverage away from people who want to purchase it.”

Time growing short

It’s not out of the question that the GOP still could prolong the subsidies, at least partially, to avoid an estimated out-of-pocket premium spike of roughly 75%, on average. When the expanded subsidies were extended by a Democratic-controlled Congress in 2022, it happened in August.

“It seems like there is still time,” Ellen Montz, PhD, managing director with Manatt Health and formerly director of CMS’s Center for Consumer Information and Insurance Oversight during the Biden administration, said in an interview in June.

Conceivably, the CBO projections and other feedback could drive home even for ACA skeptics the importance of affordability in promoting coverage, Montz said.

Action would need to happen soon to limit disruption that already is surfacing in the insurance markets. In a report issued in late June, the Center on Health Insurance Reforms at Georgetown University listed spikes in proposed 2026 ACA premiums in a handful of early-filing states: More than 20% in Rhode Island and Washington, 19% in Pennsylvania, more than 17% in Connecticut and Maryland, and more than 13% in Massachusetts. For at least a couple of those states, the increase would be the highest in years.

Factors include not only the projected loss of subsidies, but also the finalized budget reconciliation bill and new CMS regulations to tamp down marketplace enrollment.

“Any of these policies individually could have a notable impact on premiums for 2026 and beyond,” the report states.

Beyond policy uncertainty, insurers are dealing with surging costs. That trend could affect provider relations, which already have been strained of late in the marketplaces: Reporting shows payment denials by ACA plans reached a nine-year peak in 2024.

Legislative and regulatory shifts

CMS’s program integrity rule for the marketplaces takes effect next year, with the agency projecting 2026 disenrollments of 725,000 to 1.8 million as a result. An unknown segment of that decrease already is accounted for in the projected group that would become uninsured after the enhanced subsidies expire.

The rule largely seeks to tighten enrollment via numerous provisions specifically for 2026, anticipating that for subsequent years, the end of the enhanced subsidies will mitigate what the Trump administration sees as a skewed market. However, longer-term provisions are included in the budget reconciliation bill that became law July 4.

In both the bill and the final rule, new restrictions on income-based special enrollment periods are set for implementation next year, and individuals are ineligible for subsidies if they have not fully repaid any excess amount they received the year prior.

Over the ensuing couple of years, various provisions in the bill will require consumers to initiate verification processes for their subsidy eligibility.

The finalized bill implements “a pretty unprecedented end to auto renewal in the insurance market, which is very standard when it comes to private insurance market practice,” Montz said. “All these additional steps are a barrier to eligible folks ultimately enrolling in coverage.”

Relatively healthy people are the most likely to bypass coverage when encountering roadblocks, thereby adversely affecting risk pools, she added.

Another rollback is this year’s nearly 90% decrease in funding for the ACA navigator program, which helps prospective enrollees sign up and guides them on using their coverage.

After the reconciliation bill and the new regulations, “More folks are going to need intensive help to get through the additional hoops that have been put into place,” Montz said.

That help figures to be less available going forward, she noted.

Where to turn

The subsidies originally ratified in the ACA statute will remain available, with enrollees still eligible if their household income is between 100% and 400% of the federal poverty level. Under the enhanced subsidies, anyone can qualify if the benchmark premium exceeds 8.5% of their income. Subsidy amounts would be reduced, with some of the lowest-earning enrollees potentially owing 2% of their income for an ACA plan, compared with cost-free access under the enhanced subsidies.

Roughly 4 million current enrollees would be projected to leave the marketplaces but find new insurance. Some enrollees for whom marketplace health plans have been more affordable than employer-sponsored insurance might find themselves in the opposite situation, for example.

Others could choose alternative individual plans, such as short-term limited duration insurance (STLDI), or association health plan coverage for the small-group market.

An STLDI plan “could be great for someone who’s healthy — but don’t get sick,” Montz said. “It does not have the protections of the Affordable Care Act,” such as a guarantee of coverage for preexisting conditions, a prohibition on differential premiums based on health status, and the ability to obtain and renew coverage regardless of health circumstances.

ACA critics say such policies distort the insurance market unless there are affordable options to keep lower-risk individuals in the pool, which was part of the first Trump administration’s justification for promoting relatively inexpensive STLDI plans outside the marketplaces.

Biden administration rules limited the duration of such plans to four months, but the current administration and members of Congress have been considering a reinstitution of regulations that allowed for a 12-month term, with renewals extending the coverage period to 36 months.