How will the end of enhanced ACA subsidies after 2025 affect eligibility and costs for Medicaid expansion enrollees?
Executive summary
The enhanced ACA premium tax credits adopted in 2021 and extended through 2025 are scheduled to revert to pre‑enhancement rules in 2026 if Congress does not act, a change that analysts say would sharply raise out‑of‑pocket premiums and shrink marketplace enrollment — with the biggest coverage losses concentrated in states that did not expand Medicaid (examples: 7.2–7.3 million people losing subsidized coverage; 4.0–4.8 million becoming uninsured; average annual net premium rising from $888 to about $1,904) [1] [2] [3] [4]. Available sources do not mention new administrative rules that would specifically re‑assign large numbers of Medicaid expansion enrollees into marketplaces as a direct result of the subsidy sunset.
1. What’s changing and who it affects: the subsidy sunset explained
Starting in 2026 the temporary increases in premium tax credits enacted by the American Rescue Plan and extended by later legislation end, meaning marketplace subsidy eligibility and the size of subsidies will revert to the ACA’s original formulas — restoring the “subsidy cliff” at 400% of the federal poverty level and eliminating expanded help that lowered premiums for many households from 2021–2025 [5] [6]. Analysts emphasize that those who currently depend on enhanced credits — including people with incomes above 400% FPL who only received help because the enhancement capped contributions — would lose assistance entirely [7] [6].
2. Expected price and enrollment impacts: steep premium shocks and coverage losses
Multiple independent analyses forecast big premium and enrollment changes if the enhancements lapse: the CBO and KFF‑based work project sizable premium increases and enrollment declines; Urban Institute and RWJF estimates predict roughly 7.2–7.3 million people would lose subsidized marketplace coverage and about 4.0–4.8 million would become uninsured in 2026 [1] [2] [8]. The average annual premium payment net of credits — $888 in 2024–25 — is projected by some analysts to more than double to roughly $1,904 in 2026 absent extension [4] [3].
3. What this means for Medicaid expansion enrollees specifically
Available sources make two relevant points but do not describe a direct mass transfer of Medicaid expansion enrollees into marketplaces caused by the subsidy sunset. First, most people with income below 100% FPL remain eligible for Medicaid in expansion states, so the core Medicaid population is not immediately affected by marketplace subsidy changes [9]. Second, the biggest deterioration in coverage from subsidy loss is expected in the 10 non‑expansion states, where marketplace plans absorb more low‑income people; those states are projected to account for a disproportionate share of marketplace enrollment declines and resulting uninsured increases [1] [10]. In short: Medicaid expansion enrollees in expansion states are largely insulated by eligibility rules, while low‑income people in non‑expansion states — who are not in Medicaid to begin with — would be more likely to lose coverage if marketplace subsidies lapse [9] [1].
4. Cost spillovers for Medicaid programs and providers
Sources warn of broader fiscal and system effects: premium increases and higher uninsured rates would raise uncompensated care and financial pressure on hospitals and community clinics, with state‑level impacts varying and non‑expansion states likely hardest hit [11] [2] [10]. CBO and other estimates also show modest upward pressure on pre‑subsidy premiums because risk pools could change if healthier people drop coverage, which may indirectly affect market dynamics that state Medicaid programs and safety‑net providers must manage [9] [12].
5. Disagreement among analysts and limits of the projections
Projections differ in magnitude: CBO focuses on long‑run premium changes and federal spending, Urban Institute and Commonwealth Fund produce larger counts of people losing coverage, and KFF emphasizes the large percentage increases in out‑of‑pocket payments [13] [1] [4] [3]. All models rely on assumptions about how many people will drop marketplace coverage versus seek other options; small changes in behavior or state policy responses would alter outcomes substantially — a limitation explicitly acknowledged across the reporting [13] [1] [4].
6. Policy levers and likely practical responses
Sources underscore that Congress can avert the cliff by extending or making enhancements permanent; absent federal action, some states or stakeholders could pursue mitigations (e.g., state subsidy programs or enrollment outreach), but available reporting does not catalogue specific state policy responses expected in 2026 [10] [5]. Analysts uniformly frame the issue as political: extending subsidies requires congressional action and the timelines for decisions will determine whether large premium shocks and coverage losses occur [3] [14].
Bottom line: If enhanced ACA subsidies expire, marketplace enrollees face sharp premium increases and millions could lose subsidized coverage — with the greatest coverage losses concentrated in non‑expansion states — while Medicaid expansion enrollees in expansion states are largely protected by eligibility rules, though knock‑on pressures on providers and state budgets are expected [1] [2] [9].