Reshaping the ACA Marketplace: Higher Deductibles, Thinner Coverage, and Shifting Risk

Following the lapse of enhanced premium tax credits, HHS launches a second round of regulatory reforms reshaping the individual market.

The expiration of enhanced premium tax credits marked the first phase of restructuring the ACA marketplace. The proposed 2027 HHS rule changes represents a second phase, advancing significant administrative changes to plan design, eligibility, and subsidy mechanics. While the new rules may lower monthly premiums for some households, it substantially increases potential out-of-pocket exposure and reshapes risk distribution across income groups. This analysis examines how the combined policy shifts -- first phase out the ACA premium tax credit and second expand high-risk health plans -- affect household financial volatility, insurer behavior, and the long-term structure of the individual insurance market.

Overview of the Proposed HHS Rule Changes

The Department of Health and Human Services (HHS) is following up the decision to allow enhanced ACA premium tax credits to lapse with proposed sweeping changes to the structure of ACA marketplace plans beginning in 2027. The proposals combine structural changes to plan design with stricter eligibility enforcement and expanded insurer flexibility, shifting emphasis from comprehensive, subsidy-supported coverage toward lower-premium, higher-deductible coverage models.

While the proposals would create lower-cost premium options, they would also substantially increase household exposure to out-of-pocket medical debt and reshape state exchange marketplaces, with significant implications for coverage quality and the number of uninsured.

These proposals fall into three broad categories: structural changes to plan design that expand high-deductible, high-exposure coverage; administrative changes that restrict and verify access to subsidies; and oversight provisions affecting insurer pricing and state exchange operations.

The key changes considered by HHS include:

· Significantly expand access to catastrophic coverage for individuals above age 30 at income levels below 100 percent and above 250 percent of the federal poverty level (FPL), with coverage structured around very high cost-sharing and generally not eligible for premium tax credit financing.

· Increasing the maximum out-of-pocket limits for catastrophic plans to as much as $15,600 for individuals and $31,200 for families.

· The creation of new “uncapped” bronze plans and related plan design changes that would allow certain bronze plans to exceed current statutory maximum out-of-pocket limits, enabling very low monthly premiums in exchange for substantially higher deductibles and overall financial exposure while still meeting the ACA’s 60 percent actuarial value requirement.

· Authorization of multi-year catastrophic plans, permitting insurers to offer policies lasting up to 10 years without annual eligibility re-verification and granting flexibility to structure maximum out-of-pocket exposure across the life of the contract or vary cost-sharing by specific medical conditions.

· Elimination of standardized plan options, increasing variation in benefit design and shifting more comparison complexity onto consumers shopping in state and federal exchanges. Elimination of certain essential health benefit requirements, including removal of mandatory adult dental coverage.

· Enhanced program integrity and eligibility enforcement measures designed to restrict and more tightly verify access to subsidized exchange coverage, including narrowing Premium Tax Credit eligibility categories, eliminating the monthly low-income Special Enrollment Period, requiring expanded pre-enrollment verification for subsidies and qualifying life events, and moving toward mandatory verification prior to receipt of advance premium tax credits.

· New insurer reporting and oversight requirements related to cost-sharing reductions (CSRs) and CSR “loading” in rate filings, increasing federal scrutiny of how CSR costs are incorporated into premiums and how those premiums affect premium tax credit calculations.

· Changes to rules governing the defrayal of state-mandated benefits, potentially altering how states finance or administer benefits that exceed federal essential health benefit standards.

· Creation or authorization of plans without traditional provider networks, including fixed-payment designs that may expose consumers to balance billing.

This essay focuses on the economic consequences of these proposed HHS rule changes on health insurance markets, household access to health insurance coverage and household financial risk.

Comments:

Comment One: The Combined Shift Toward Thin, High-Exposure Coverage

Expanded catastrophic eligibility, higher catastrophic out-of-pocket limits, and higher-exposure bronze plans should be understood together. Collectively, these changes lower premiums by shifting more financial risk onto households. The details differ across income groups, but the overall direction is the same: less comprehensive coverage, higher potential out-of-pocket costs, and greater separation between healthier and sicker enrollees in the market.

Comment Two: Below 100 Percent FPL — Limited Enrollment Gains, Structural Barriers, and Elevated Household Risk

The rule allows access to catastrophic health insurance to people with income less than 100 percent FPL.

Medicaid is the primary source of coverage for people with income below 100 percent FPL. In Medicaid expansion states, most nonelderly adults in this income band qualify for comprehensive Medicaid with minimal cost-sharing, making expanded catastrophic eligibility largely irrelevant. In non-expansion states, however, many adults fall into the coverage gap: they earn too little to qualify for Premium Tax Credits, which generally begin at 100 percent FPL, and they are not eligible for Medicaid under their state’s rules.

Expanded catastrophic eligibility creates a technical pathway into marketplace coverage for this group, but catastrophic plans are not premium tax credit–eligible and carry very high maximum out-of-pocket limits. As a result, households below poverty who enroll would pay full premiums for coverage that provides little financial protection until expenses exceed very high thresholds. The most likely outcome is limited take-up combined with elevated exposure to medical debt among those who enroll.

At 100 percent of the federal poverty level, annual income is roughly $15,000 for an individual and about $31,000 for a family of four, meaning a maximum out-of-pocket limit of $15,600 for an individual or $31,200 for a family effectively equals an entire year’s income. That level of exposure represents an extraordinary degree of financial risk for households at or below poverty.

Comment Three: Impacts of rule change on the 100–250 Percent FPL group

The proposal does not increase access to catastrophic health plans in this income group, ostensibly because excessive migration from silver plans would erode the core silver plan product in this income group.

However, the proposal allows increased access to high-MOOP bronze coverage in the 100-250 percent FPL group and the combined impact of that change with increased access to catastrophic health plans in other groups may lead to erosion of the market for silver plans throughout state exchange marketplaces.

Migration of healthier enrollees in other income bands into thinner catastrophic or high-MOOP bronze plans, in all income groups will alter the risk composition of the insurance pool and increase price of silver plans.

Some people may choose to accept additional risk by selecting a bronze plan over a silver plan. This is currently the case: the new rule makes bronze plans even riskier and less expensive.

At 250 percent of the federal poverty level, annual income is roughly $37,500 for an individual and about $75,000 for a family of four. Under current law, a silver plan at this income level qualifies for cost-sharing reductions that raise actuarial value to approximately 73 percent and typically reduce the individual maximum out-of-pocket limit to roughly $5,000–$6,000. While still substantial, that level of exposure represents closer to 15 percent of annual income for an individual at 250 percent FPL and preserves the core structure of insurance as partial risk transfer.

By contrast, a high-MOOP bronze or catastrophic plan with a maximum out-of-pocket limit of $15,600 for an individual or $31,200 for a family exposes households to potential liabilities equal to roughly 40 percent of annual income at 250 percent FPL. That magnitude of exposure transforms insurance from partial financial protection into contingent large-scale household liability. The shift from CSR-enhanced silver coverage toward thinner bronze or catastrophic designs therefore materially increases the share of income placed at risk in the event of serious illness

Comment Four: Structural Inefficiency of Covering 100–250 Percent FPL Through the Exchange Rather Than Public Programs

Insuring the 100–250 percent FPL population through private exchanges rather than public health insurance programs like Medicaid is an expensive outcome for taxpayers.

· Premium tax credits in this range cover a large share of total premium costs, and cost-sharing reductions substantially increase actuarial value.

· Provider payment rates are substantially higher for state exchange health plans than for Medicaid.

· SHIP coverage is a less expensive option for households with children.

Routing coverage through a public program could reduce per-enrollee spending while maintaining or improving financial protection. (There may have to be some increase in provider payments to guarantee adequate provider access, although, many low-cost state-exchange health insurance plans also have low provider rates and relatively small provider networks.)

The premium tax credit structure also creates higher implicit marginal tax rates and marriage penalties due to the phase out of subsidies with the increase in AGI. See my work on this topic in the essay Not Your Father’s Marriage Penalty.

Comment Five: Above 250 Percent FPL — Premium Compression and Escalating Household Risk

The cost-sharing reductions disappear and premium tax credits phase down with income above 250 percent FPL. At 400 percent FPL the PTC fully disappears under the new law. In this environment, lower-premium bronze and catastrophic plans will become more attractive to some households who are liquidity constrained, especially if they are healthy.

People near 400 percent FPL are not rich. Annual income is around $60,000 for a single individual and $120,000 for a family of four.

The primary difference between standard silver and bronze coverage above 250 percent FPL is that bronze plans typically carry higher deductibles and more front-loaded cost sharing, and under the proposed rule certain bronze plans would be permitted to exceed the statutory maximum out-of-pocket limit, further widening risk exposure relative to silver.

At roughly 400 percent of the federal poverty level, annual income is approximately $60,000 for a single individual. A standard silver plan may carry a maximum out-of-pocket limit near the general statutory cap (approximately $12,000 in projected 2027 parameters), implying potential exposure of roughly 20 percent of annual income, whereas a catastrophic plan with a $15,600 maximum out-of-pocket limit would place more than one quarter of annual income at risk in the event of serious illness.

For a family of four at approximately $120,000 in annual income at 400 percent FPL, a silver plan with a statutory family out-of-pocket cap around $24,000 exposes about one fifth of household income, while a catastrophic plan with a $31,200 family maximum out-of-pocket limit exposes roughly one quarter of annual income.

Comment Six: Concentrated Impact on Immigrant Households

The combined rule changes disproportionately affect immigrant households, particularly lawfully present individuals who historically relied on exchange subsidies when barred from Medicaid. The ACA created a limited but important exception for certain lawfully present immigrants who are ineligible for Medicaid due to federal immigration restrictions. Under prior rules, these individuals could qualify for Premium Tax Credits even if their incomes fell below 100 percent of the federal poverty level, recognizing that Medicaid was legally unavailable to them. That exception provided a pathway to subsidized comprehensive coverage for some of the lowest-income legally present residents.

Proposed statutory and regulatory changes narrow the definition of “eligible noncitizen,” restricting Premium Tax Credit eligibility to a smaller set of immigration categories and imposing stricter verification requirements. As a result, many lawfully present immigrants who previously qualified for subsidized exchange coverage would lose access to financial assistance. For those below 100 percent FPL, marketplace coverage would remain structurally constrained by both Medicaid exclusions and the statutory premium tax credit threshold.

The broader shift toward high-deductible catastrophic and bronze plans compounds this effect. Immigrant households losing subsidy eligibility would face a choice between full-premium, high-exposure coverage and uninsurance. Even for those retaining eligibility, increased verification requirements and enrollment barriers may reduce take-up. The economic consequence is not broad coverage expansion but reduced subsidized enrollment and greater financial vulnerability among a population that already faces eligibility restrictions and labor-market volatility.

Comment Seven: Program Integrity and Administrative Tradeoffs

The proposed program integrity and eligibility verification measures reflect a consistent policy objective: reducing improper enrollment and limiting federal subsidy outlays. Safeguards are a legitimate function of program administration.

However, verification systems inherently involve tradeoffs. Tighter documentation requirements, pre-enrollment screening, and narrower eligibility definitions reduce some improper payments but also increase administrative costs, create enrollment friction, and can lead to coverage loss among legally eligible households who fail procedural requirements. Evidence from Medicaid and other income-based programs shows that more stringent verification regimes tend to reduce enrollment overall, not solely among ineligible individuals.

In addition, the expansion of reporting requirements related to cost-sharing reductions increases compliance costs for insurers and state exchanges. Those costs are ultimately borne either by taxpayers or by enrollees through premiums.

The economic question is not whether integrity safeguards should exist, but whether the marginal gains from additional verification exceed the administrative expense, coverage reductions, and risk pool effects associated with tighter screening.

Comment Eight: Non-Network, Fixed-Payment Plans Shift Pricing Risk to Patients

The proposed rule would permit plans that do not rely on traditional provider networks but instead set fixed payment amounts for covered services. Under this design:

· The insurer sets a maximum payment amount.

· The provider sets the actual charge.

· If the provider’s charge exceeds the insurer’s payment, the patient pays the difference.

Unlike traditional in-network coverage, there is no negotiated rate that caps provider billing. In effect, there is no meaningful distinction between in-network and out-of-network care because the insurer’s payment is fixed but the provider’s price is not. If the difference between the provider’s charge and the insurer’s payment does not count toward the plan’s maximum out-of-pocket (MOOP), the statutory MOOP ceiling becomes less protective in practice.

For example, if a plan pays $8,000 for a procedure but the provider charges $20,000, the patient may be responsible for the $12,000 difference. That amount could exceed the plan’s deductible and effectively bypass traditional network protections. The financial risk shifts from insurer-provider contracting to patient liability.

Lower premiums in such plans would reflect reduced insurer risk rather than improved efficiency. For households, this structure introduces greater pricing uncertainty and potentially very large, unpredictable medical liabilities at the point of care.

Comment Nine: Multi-Year Catastrophic Coverage and Household Uncertainty

Allowing catastrophic plans to run for up to ten years assumes stability in income, employment, and health status that rarely exists in practice. Household income frequently changes, family size shifts, and employer-sponsored insurance may become available in future years.

A multi-year commitment to high-deductible coverage therefore offers limited economic “certainty,” particularly if benefit design concentrates higher cost exposure in early years of the contract. Long-duration catastrophic contracts or incentives aren’t optimal if benefits are initially reduced and changes in circumstances lead to a better health insurance outcome in the future.

Comment Ten: Condition-Sensitive Exposure Through MOOP and Fixed-Payment Interaction

While the ACA continues to prohibit outright exclusion of specific diagnoses, the interaction between flexible cost-sharing design and fixed-payment, non-network coverage may materially alter effective financial protection. If a plan reimburses certain services at insurer-set payment levels rather than negotiated network rates, and providers charge amounts above those payments, the patient may be responsible for the difference.

Although those payments are “out-of-pocket” in a practical sense, amounts billed above the insurer’s allowed payment may not count toward the plan’s statutory maximum out-of-pocket limit, depending on how the coverage is structured and whether federal balance billing protections apply. In that case, the formal MOOP cap may provide less effective protection than its headline number suggests.

This dynamic is particularly significant for high-cost conditions that are often treated at tertiary or specialty centers—such as oncology, organ transplantation, advanced cardiac or neurological disease, and complex neonatal care—where provider charges frequently exceed standard payment benchmarks. The issue is not categorical exclusion of illness, but whether financial exposure becomes concentrated in precisely the types of diagnoses that generate the largest medical expenses.

Considerable uncertainty remains regarding how insurers would interpret and apply the new flexibility permitted under multi-year catastrophic design and fixed-payment reimbursement structures.

Plans could retain traditional provider networks alongside alternative payment arrangements, and regulatory guidance will shape how maximum out-of-pocket limits operate in practice. However, where coverage relies on insurer-set payment levels rather than negotiated network rates, and where amounts above allowed payments do not count toward the statutory MOOP, the effective financial protection afforded by the ACA framework may be materially weaker than the formal MOOP ceiling implies.

Authors note: Paid subscribers can submit paper for publication on the blog. For details see the About Page at www.economicmemos.com

Selected References

Keith, Katie. “HHS Proposes Sweeping Changes for 2027 Marketplace Plans (Part 1).” Health Affairs Forefront, February 11, 2026. DOI: 10.1377/forefront.20260211.352520.

Abelson, Reed. “New A.C.A. Plans Could Increase Family Deductibles to $31,000.” New York Times, February 2026.