How would letting enhanced ACA subsidies expire affect uninsured rates and state Medicaid budgets in 2026?
Executive summary
Letting the enhanced ACA premium tax credits expire at the end of 2025 is projected to raise marketplace premiums sharply in 2026 and drive millions out of subsidized coverage, with major increases in the uninsured population concentrated in states that did not expand Medicaid and among middle‑income households; the Congressional Budget Office, KFF, and independent researchers forecast between roughly 2.2 million and 4.8 million additional uninsured people in 2026 depending on the estimate used [1] [2] [3]. State Medicaid budgets will feel uneven pressure: some states will face higher uncompensated care costs and budget stress as people fall into coverage gaps, while a handful of states are already using their own dollars to blunt the shock [3] [4].
1. Who stands to lose coverage immediately, and how large is the coverage shock?
Analysts agree the expiration will shrink subsidized marketplace enrollment and raise the national uninsured rate in 2026: the CBO projects the number of uninsured will rise by about 2.2 million in 2026 under ACA‑only rules, while other research groups estimate that between ~4 million (CBO alternative estimates) and roughly 4.8–5 million people could become uninsured if enrollees drop coverage when net premiums more than double for many households [1] [2] [5] [3]. KFF and other trackers show that 92% of current marketplace enrollees would see higher premiums and many middle‑income households face particularly large sticker shock because the “subsidy cliff” returns in 2026 for those above 400% of the federal poverty level [6] [7] [8].
2. Where will uninsured rates rise the most — and who will be hit hardest?
Every state is likely to see rising uninsurance, but the burden will concentrate in states that did not expand Medicaid and in rural and communities of color already facing access barriers, according to KFF and policy analysts; non‑expansion states have larger coverage gaps and therefore fewer automatic pathways into Medicaid for people priced out of marketplace plans [2] [7] [9]. Independent briefs and reporting point to steep regional variation: state marketplaces running their own programs may blunt premium increases modestly, while federal marketplace states generally face larger average premium jumps and greater projected losses of enrollees [9] [10].
3. How will state Medicaid budgets be affected in 2026?
State Medicaid budgets face two countervailing pressures in 2026: in expansion states a small share of people who lose marketplace subsidies may shift into Medicaid, increasing enrollment and near‑term costs for state Medicaid programs, while in non‑expansion states many who lose marketplace coverage will simply become uninsured and increase uncompensated care burdens on hospitals and state safety nets [3] [11]. Researchers estimate uncompensated care could rise by billions nationally in 2026 — RWJF projects roughly $7.7 billion more in uncompensated care and tens of billions in lost provider revenue — costs that states and local governments often absorb through higher Medicaid payments, hospital subsidies, or safety‑net funding [3] [5]. A few states (New Mexico, California and others) have already allocated state funds to replace some lost subsidies for limited populations, highlighting that state fiscal responses will determine local Medicaid and safety‑net stress [4].
4. Broader fiscal and market effects that feed back into state budgets
Higher premiums and a sicker risk pool (as healthier enrollees drop coverage) will push insurers to request higher rates, which in turn raises costs for remaining enrollees and widens pressure on state budgets that subsidize public hospitals, reinsurance programs, or state‑level premium assistance; tracker analyses project gross benchmark premiums could be about 7.9% higher on average because of risk‑pool deterioration, while net premium payments for consumers may more than double absent extensions [9] [7]. The loss of federal subsidy dollars also reduces federal outlays but can depress state tax receipts and economic activity—analysts estimate job and GDP effects that indirectly pressure state finances—so the fiscal hit to states is both direct (higher uncompensated care, Medicaid enrollment shifts) and indirect (economic spillovers) [5] [11].
5. Policy responses, political incentives, and limits of the evidence
Some states have already moved to cushion residents by funding replacement subsidies for select income groups (New Mexico, California examples), but most states have not and Congress has stalled on a comprehensive federal extension, leaving outcomes in 2026 contingent on patchwork state action and future federal legislation [4]. Sources differ in magnitude — CBO, KFF, RWJF, and academic trackers use different models and assumptions about behavioral responses — so while unanimity exists on direction (higher premiums, more uninsured, greater uncompensated care), exact 2026 figures vary across credible estimates and depend on insurer rate filings, state mitigation steps, and any last‑minute federal action [1] [7] [3].