Obamacare Program Update for Plan Year 2026 – Change is Coming!

 

Background

The Obamacare health care reform law, formally known as the Affordable Care Act (ACA), was created in 2010 by the federal government to extend health insurance coverage and reduce the financial burden of medical expenses for millions of uninsured adults. ACA plans were first issued effective January 1, 2014; and the enrollment process that started the prior October through the Health Insurance Marketplace was chaotic that first year, if it worked at all.

Obamacare expanded Medicaid services, created federal and state Marketplaces (currently about 20 states operate their own state-based enrollment platforms), prevented denial of medical coverage due to pre-existing conditions, and required plans to cover 10 Essential Health Benefits (EHBs) with a cap on maximum out-of-pocket expenses. Two types of federal subsidies were introduced based on projected household income and size: the Advance Premium Tax Credit (APTC), or monthly premium subsidy, and Cost Sharing Reductions (CSRs), which make plans more affordable by lowering the amount eligible enrollees must pay for deductibles and other out-of-pocket costs. CSRs apply only to applicants up to 250% of the Federal Poverty Level (FPL) enrolling into a Silver-level ACA plan.

Initially, the ACA faced legal challenges, and the program’s popularity was divided along political party lines. The ACA prevailed at the U.S. Supreme Court, which struck down the argument that the ACA was unconstitutional. However, Medicaid expansion was left up to the states.

Perhaps the most unpopular aspect of the ACA was a tax ‘penalty’ imposed on anyone without an exemption from the mandate to be covered by a health care plan (an ACA plan, commercial group health, Medicare, or other qualifying coverage). In late 2017, President Trump signed a tax bill zeroing out the tax penalty for coverage issued in 2018 and thereafter.

With the ACA tax penalty gone, Obamacare gained popularity across both political parties, despite some national insurers exiting (but later re-entering) sales of ACA plans. Democrats remained the main proponents, and then on March 11, 2021, Obamacare was given a major overhaul when President Biden signed the sweeping “American Rescue Plan Act” into law.

The American Rescue Plan created temporary enhanced subsidies that later were extended through the end of 2025 by the Inflation Reduction Act (signed by President Biden in 2022). Higher-income people over 400% FPL could receive a subsidy for the first time; plus, the subsidy amount was increased for lower-income people already eligible. Further, maximal subsidies were given to those who received unemployment benefits (for 2021), and the law forgave individuals from having to repay excess ACA premium subsidies at tax time (for 2020). Finally, subsidized COBRA coverage was made available for laid-off workers (from April to September of 2021), and the 14 states that had not yet expanded Medicaid were given new financial incentives to do so.

Higher income individuals and families went from being ineligible for any federal premium subsidy to potentially qualifying for substantially reduced premium (possibly half, or even less, of the total plan premium). The applicable threshold is if benchmark premiums exceed 8.5% of household income.

Under the American Rescue Plan, individuals and families under 400% FPL (already eligible for PTCs) gained access to higher subsidies. Notably, those with incomes between 100%-150% of the Federal Poverty Level could qualify for zero-premium coverage when electing a Silver-level benchmark plan (under prior law, they had to contribute premium up to approximately 2% of income).

ACA Provisions Set to Sunset on 12/31/2025

The enhanced premium subsidies detailed above are set to expire on 12/31/2025; and without an unforeseen extension, subsidized ACA coverage is about to become a lot more expensive. As noted, individuals and families projecting over 400% FPL will lose subsidy eligibility entirely.

A recent report published by the Center on Budget and Policy Priorities estimated that a family of four making $85,000 would pay an additional $313 in monthly premiums for coverage in 2026, as well as face a $900 increase in their cap on total out-of-pocket medical expenses.

For reference, the 2025 Federal Poverty Level guidelines (applicable for 2026 ACA plans) are shown below (figures are for the 48 contiguous states).

2025 FPL:

Family Size of 1: $15,650

Family Size of 2: $21,150

Family Size of 3: $26,650

Family Size of 4: $32,150

For example, a family of four projecting $140,000 total annual household income in 2026 is at the 435% FPL level, rendering them ineligible for any premium subsidy next year. Currently, if this family were enrolled in my home zip code, they would be eligible for a monthly premium subsidy of $554 ($6,648 for the full calendar year). So, absent any change in the current landscape, this family is facing an increase of more than $6,600 in total 2026 premiums – not including premium rate increases due to yearly inflation that are extremely likely to be implemented.

ACA Program “Pause” of Year-Round Enrollment SEP

In 2021, the U.S. Department of Health and Human Services (HHS) finalized a new special enrollment period (SEP) in states that use HealthCare.gov (optional for states that operate a state-based exchange), granting Year-Round enrollment in ACA plans for household income up to 150% FPL. That Year-Round enrollment provision was extended through 2025 under the 2022 Inflation Reduction Act and became permanent under a rule change HHS made in 2024.

Under this SEP, eligible applicants can enroll in an ACA plan through the Marketplace at any time during the year. Coverage takes effect on the first of the following month (this is true even in state-run exchanges as of 2025; prior to 2025, state-run exchanges could set mid-month enrollment deadlines for coverage to take effect the first of the following month).

In states that have expanded Medicaid, due to the very narrow range between 138% of the current year’s FPL (for Medicaid eligibility) and 150% of the prior year’s FPL, a small segment of the population is helped by this year-round enrollment SEP. In states not expanding Medicaid, more people are impacted (those qualifying for a federal subsidy and within 100%-150% FPL).

So, is this special Year-Round enrollment period truly permanent? No, of course not!

The Trump administration’s “Marketplace Integrity and Affordability” rule (effective August 25, 2025, for some provisions, and for other provisions, Plan Year 2026 or Plan Year 2027) has paused the Year-Round SEP for ACA enrollees at or below 150% FPL. HHS clarified the low-income SEP will once again be available, at the option of each exchange, for Plan Year 2027.

The rationale for this HHS rule is that the low-income SEP played a significant role in allowing fraudulent enrollments, and that it is potentially resulting in adverse selection, with people waiting until they need medical services to enroll in coverage.

Other ACA Program Changes

A host of other changes are approaching:

Deferred Action for Childhood Arrivals (DACA) recipients lose eligibility for coverage because of the Marketplace Integrity and Affordability rule. HHS estimates that 10,000 DACA recipients will lose Marketplace coverage, and 1,000 people will lose Basic Health Program (BHP) coverage. While DACA recipients became eligible for Marketplace coverage in November 2024, access to enroll in Marketplace plans was soon revoked in 19 states that sued to prevent DACA recipients from enrolling (DACA recipients in the rest of the country have continued to be eligible, but that will end in August 2025).

While the Marketplace currently requires income verification for some applications with income mismatches or missing IRS data, we should expect all Marketplace applicants to be required to provide proof of household income when attesting to household income that does not match information the exchange gets from its trusted data sources (such as the applicant's most recent year’s tax return).

The final rule also permanently removes the current automatic 60-day extension to the regular 90-day window that applicants are given to provide requested income documentation.

Like the low-income SEP rule change, the income verification change is temporary and applies only through the end of 2026.

Another change is directed towards ACA enrollees who take advantage of grace period provisions and, for example, look for ways to ‘skip’ a premium payment. Under the new rules, ACA plan enrollees who owe past-due premium to an insurer and apply for a new policy with that insurer must pay the past-due premium to effectuate the new policy (unless contrary to state laws and regulations). If the applicant does not remit the past-due premium, the insurer will be allowed to refuse to effectuate the new policy.

A technical change has been made, impacting maximum out-of-pocket limits. Starting in 2026, the new rule finalizes a methodology change for how maximum out-of-pocket limits are calculated, and the result is that the highest allowable out-of-pocket limit for a single individual will be $10,600 in 2026. Under the previous methodology, the Biden administration had finalized a 2026 maximum out-of-pocket limit of $10,150, but that has now been replaced.

The impact on ACA plan enrollees will be higher out-of-pocket costs and less generous premium subsidies. Since the IRS uses the same premium indexing methodology to determine the percentage of income that Marketplace enrollees pay in after-subsidy premiums, the new methodology will also have the effect of reducing premium subsidies (this is because it will increase the percentage of income that people pay in after-subsidy premiums).

A new administrative rule will impact enrollees in $0 (after-subsidy) premium plans who let their plans auto-renew in 2026. Auto-renewal of ACA plans is widely used, as evidenced by the enrollment period for 2025 coverage, in which more than half of the approximately 20 million people who renewed Marketplace coverage utilized auto-renewal. 

Under the new rules, if ACA enrollees with a 2025 $0 premium plan rely on auto-renewal for their 2026 coverage, they cannot be approved for $0 premium coverage until they reconfirm basic eligibility information in their Health Insurance Marketplace account. Until doing so, these enrollees will incur a minimum of $5 premium due each month.

Like some of the rules noted above, the auto-renewal change is temporary and applies only for the 2026 Plan Year (and it does not apply to state-run exchanges).

But wait, that’s not all! The budget bill enacted on July 4, 2025 (known as the One Big Beautiful Bill Act) calls for Marketplace auto-renewal to end altogether, starting with the 2028 Plan Year. Marketplace enrollees will have to verify their ongoing eligibility for coverage to ensure receipt of premium subsidies each year (Marketplaces will have the option to rely on automatic verification protocols for confirming information, when available from trusted data sources).

The final rule permanently removes “Bronze-to-Silver” auto-renewal, a protocol that Healthcare.gov adopted in 2024, allowing the Marketplace to switch a consumer from a Bronze plan to a Silver plan in some circumstances. Under this process, if an applicant is eligible for CSRs, enrolled in a Bronze plan, and a Silver plan is available in the same product category with the same provider network, and with equal or lesser after-subsidy premiums, the exchange can auto-renew the enrollee into the Silver plan (allowing the enrollee to take advantage of CSRs).

The final rule prohibits this protocol, starting with the 2026 Plan Year. Instead, the auto-renewal will keep the enrollee in their existing plan if it continues to be available. State-run exchanges can retain flexibility regarding their re-enrollment protocols, but only at the discretion of HHS.

Pre-enrollment SEP eligibility verification will be stricter for the 2026 Plan Year. In recent years, HealthCare.gov applicants enrolling under a SEP have only been required to provide proof of their SEP eligibility if the qualifying life event was the loss of other qualifying coverage. The final rule removes that limitation, allowing pre-enrollment verification for any qualifying life event.

The exchange will be required to conduct pre-enrollment SEP eligibility verification for at least 75% of new SEP enrollments. Originally, the proposed rule called for this to apply nationwide, but it was only finalized for states that use HealthCare.gov (state-run exchanges will continue to have the option to verify applicants’ SEP eligibility or not).

A shorter open enrollment period is on the way, but not until Plan Year 2027. HHS had initially proposed a shorter open enrollment period starting in the fall of 2025, but the final rule pushes this out until the fall of 2026. So, the open enrollment period for Plan Year 2026 is slated to begin on November 1, 2025, and continue through January 15, 2026, in most states. State-run exchanges will have the option to extend it even later than that, which several have historically done.

But starting in the fall of 2026, and for future years, open enrollment will be shorter:

In states that using healthcare.gov, it will run from November 1 to December 15.

State-run exchanges will have the option to extend open enrollment, but only within certain parameters:

• It must begin no later than November 1
• It can’t continue past December 31
• It can’t last longer than nine weeks.
• All policies selected during open enrollment will take effect January 1

The open enrollment period will continue to apply both “on-exchange” and “off-exchange” (ACA-compliant health insurance, without availability of federal subsidies, sold outside of the Marketplaces). 

Already this year, at least one large national insurer has decided to fold its hand and exit the Health Insurance Marketplaces for Plan Year 2026. CVS Health, owner of Aetna, recently announced that Aetna will withdraw all ACA individual and family plans at the end of 2025 (Aetna has cited persistent underperformance in its ACA exchange business, including substantial financial losses).

This isn’t Aetna’s first time pulling back from sales of ACA plans. After exiting in 2018 and coming back in 2022, the company is shifting gears once again. While it’s not possible to know for sure, it would seem Aetna is keenly interested in its profit margin, more so than serving the American public.

As an editorial comment, people who earn too much to receive federal subsidies have seen individual market health insurance premiums rise steeply, in some cases ten-fold, compared to a dozen years ago. That’s in addition to the continuing trend of higher deductibles, out-of-pocket caps, etc. Proponents of Obamacare tout the value of APTCs, CSRs, coverage of pre-existing conditions, children allowed on their parents’ plan until age 26, and other components of the program, which clearly have helped many people… but at what overall cost?  Administrative and regulatory burdens under Obamacare are enormous, and arguably those expenses would be much better directed toward actual medical care.

To conclude, I shall share a remark posted last month on a popular financial website by a commenter who is unknown to me, but apparently has more common sense than many of our government leaders: 

The Bronze Plan is complete rubbish. 60/40, high deductible, covers nothing really, unless you are hit by a bus. Let's put Congress on the Bronze Plan. They have a Mercedes Benz Plan right now. Time for them to feel the pain of the average citizen. That should cut some 'government waste.' 

Until next time,

 

Andrew Herman, President

AH Insurance Services, Inc.

 

 

 

 

 

 

Medicare Advantage Trial Periods – What Are They and How Do They Help Medicare Beneficiaries?

Over half of current Medicare Beneficiaries receive benefits through Medicare Part C, an alternative to the Original Medicare program.  Under Medicare Part C, Beneficiaries enroll in health and drug plans offered by private insurance companies contracted with the federal government to provide Medicare benefits on a year-to-year basis.  Part C plans (known as Medicare Advantage) are governed by enrollment period rules that dictate when initial sign-up, plan changes, and disenrollments can be made.

Medicare Advantage plans sometimes are confused with Medicare Supplement policies widely available to Medicare Beneficiaries.  Medicare Supplement also is known as Medigap, as it serves to fill in gaps in medical benefits under the Original Medicare program design.  Beneficiaries on Original Medicare (with or without Medigap) optionally can obtain drug coverage via a Standalone Medicare Part D Prescription Drug Plan.  Federal rules govern enrollment timeframes for Medicare Part D, like Medicare Advantage.

A major difference between Medicare Advantage and Medigap is that in most locations, Medicare Advantage plans with rich benefits often come with a $0 plan premium (i.e., no additional premium beyond the Medicare Part B monthly premium), unlike Medicare Supplement policies that always have a monthly premium (and for those choosing to add a Standalone Medicare Part D plan, that premium is in addition).

With Medicare Advantage including Part D benefits and many extras not covered by Medicare such as dental, vision, hearing, fitness benefits, transportation to the doctor, over-the-counter allowances, and sometimes an allowance for food and utilities, it can be surprising to learn that so many plans have a $0 premium.  Some Medicare Advantage plans even refund a portion of the Medicare Part B premium to the Beneficiary.  Finally, there is no medical underwriting and pre-existing medical conditions are covered.  This has led some people to conclude that “Medicare Advantage must be too good to be true.”

For those who are skeptical (often people who already have Medigap or plan to buy it at Age 65), there is some good news, namely, Medicare Beneficiaries are provided special protection to try out Medicare Advantage on a trial basis.  There are two Federal Trial Periods, both of which provide Guaranteed Issue Rights to buy a Medigap policy if dissatisfied with Medicare Advantage during the first year.

These trial rights are meaningful, as Medigap applicants generally face medical underwriting once the open enrollment period (six months following sign-up for Medicare Part B) has ended.  Medigap underwriting assesses medical history and can impose higher premiums or deny coverage completely.

State laws, such as in Maine and Wisconsin, provide additional protection for Medicare Beneficiaries wishing to try Medicare Advantage for the first time.  These rights are described below following the Federal Trial Periods.

Medicare Advantage Trial Periods: Returning to Original Medicare

Medicare Advantage trial periods are types of Special Enrollment Periods (SEPs) that allow Medicare Beneficiaries to disenroll from a Medicare Advantage plan outside of the Annual Election Period (AEP) that runs each year from October 15th to December 7th (disenrollments during AEP normally take effect the first day of the following year).  If disenrolling from a Medicare Advantage plan that includes prescription drug coverage, a SEP is granted to enroll in a Standalone Medicare Part D drug plan.

Along with allowing disenrollment from Medicare Advantage outside of standard election periods, the Federal Trial Periods grant Guaranteed Issue Rights for the Beneficiary to purchase a Medigap policy.  The government currently specifies two distinct SEPs for this purpose.

I.  Medicare Advantage Special Enrollment Period at Age 65 – “SEP 65” (Federal Trial Period)

The “SEP 65” is for Beneficiaries who enrolled in a Medicare Advantage plan for the first time at Age 65 during their Medicare Initial Enrollment Period (IEP).  Those who qualify can disenroll from Medicare Advantage and return to Original Medicare within the first 12 months of coverage.  If the Medicare Advantage plan included Part D coverage, a Part D SEP may be used to enroll in a Standalone Part D plan.  Medicare Advantage disenrollment takes effect on the 1st of the month following receipt of the request by the plan.  Beneficiaries using this SEP 65 have a Guaranteed Issue Right to purchase any Medigap plan available to them, regardless of their current health status or any adverse medical history.  This means insurers cannot deny coverage or increase premiums based upon medical history.  Medigap coverage must be purchased within 63 days after leaving Medicare Advantage (Beneficiaries also can purchase the Medigap plan starting 60 days before Medicare Advantage coverage ends).

II.   Medicare Advantage Special Enrollment Period – “Trial Period SEP” (Federal Trial Period)

The “Trial Period SEP” allows Beneficiaries of any age enrolling in a Medicare Advantage plan for the first time when dropping a Medigap policy, the right to disenroll from Medicare Advantage and return to Original Medicare within the first 12 months of coverage.  If the Medicare Advantage plan included drug coverage, a Part D SEP may be used to enroll in a Standalone Part D plan.  Medicare Advantage disenrollment takes effect on the 1st of the month following receipt of the request by the plan.  Beneficiaries using this Trial Period SEP have a Guaranteed Issue Right to purchase their prior Medigap plan, regardless of current health status or medical history.  If the prior plan is no longer available for sale, any available Medigap Plan A, B, C, D, F, G, K, or L may be selected (except that Plans C and F are available only to Medicare Beneficiaries who turned age 65 or became first eligible for Medicare because of age, disability or end-stage renal sickness prior to January 1, 2020).

III.  Maine “State Trial Period” (specific to Maine, extends period to three years)

Maine mandates that Beneficiaries who enroll in Medicare Advantage starting at the same time as initial enrollment into Medicare Part B and then switch back to Original Medicare within three years, are given a Guaranteed Issue Right to buy any available Medicare Supplement plan during the 90-day period after Medicare Advantage coverage ends.  Without this Guaranteed Issue right, Beneficiaries must health-qualify for Medigap coverage once their Medicare Part B has been effective for more than six months.

While Maine’s Trial Period SEP provides additional rights to buy Medigap without health underwriting, it does not change Federal rules that allow a return to the Original Medicare program only at certain times.

Additionally, Maine mandates that Beneficiaries with an existing Medicare Supplement policy who terminate that plan to enroll in Medicare Advantage for the first time, and then return to the Original Medicare program within three years, use their Guaranteed Issue Right to buy an equivalent or less comprehensive Medicare Supplement policy available to them (Beneficiaries must apply within 90 days).

IV.  Wisconsin “State Trial Period” (Guaranteed Issue Right – Dropping Employer Coverage)

Wisconsin offers yet another protection for Medicare Beneficiaries.  If a Beneficiary drops an employer-sponsored group health plan to enroll in a Medicare Advantage plan for the first time, the Beneficiary is given a Guaranteed Issue Right to purchase a Medicare Supplement policy when the Beneficiary disenrolls from Medicare Advantage during the first 12 months (this is the Wisconsin Trial Period right).  To disenroll from Medicare Advantage, Beneficiaries must follow Federal enrollment period rules to switch back to Original Medicare and optionally enroll in a Standalone Part D plan.

Summary

The Federal government has two Trial Periods for Medicare Beneficiaries wishing to try a Medicare Advantage plan for the first time without losing eligibility for Guaranteed Issue Medigap coverage.  Beneficiaries can use a Trial Period once, for up to one year, to determine if a Medicare Advantage plan is suitable.  Maine has adopted rules extending the one-year trial period to three years, and Wisconsin grants Medicare Beneficiaries an additional Guaranteed Issue Right to buy a Medigap plan when terminating an employer-sponsored group health plan to enroll in Medicare Advantage for the first time.

Until next time,

 

Andrew Herman
President of AH Insurance Services, Inc.