What state or federal options exist to mitigate premium increases if enhanced subsidies lapse in 2026?
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Executive summary
If enhanced ACA premium tax credits are not extended, the federal marketplace will revert to pre‑ARP subsidy rules in 2026, which CBO and other analysts project would raise average gross benchmark premiums by about 4.3% in 2026 and could push millions off exchange coverage (CBO estimates and projections summarized by Congress and CRFB) [1] [2]. States have a limited toolbox — reinsurance, state‑funded subsidies, Medicaid action and plan design changes like HSA‑compatible plans or hardship Catastrophic options — and many industry guides urge consumers to “lock in” current subsidies during open enrollment while states and Congress decide [3] [4] [5].
1. What federal law will do if Congress does nothing: the baseline cliff
If Congress lets the enhanced, pandemic‑era premium tax credits expire after 2025, federal law reverts to the original ACA subsidy formula for 2026. That change narrows subsidy generosity and eligibility (returning to the 100–400% FPL sliding scale) and is projected by CBO to increase average gross benchmark premiums 4.3% in 2026 as healthier enrollees exit exchanges — with larger premium and coverage impacts over time [1] [2].
2. Short‑term federal options — limited unless Congress acts
The principal federal lever is congressional legislation to extend or replace the enhanced credits; absent that, available reporting shows no administrative one‑off that matches the dollar‑for‑dollar relief of ARPA/IRA credits. Industry notices and insurers assume enhanced credits lapse unless Congress extends them and warn consumers that premium tax credit amounts will “likely be lower” in 2026 without action [6] [7].
3. State tools: reinsurance and state‑funded subsidies
States can blunt premium increases through reinsurance programs that lower insurer risk and reduce premiums, or by creating their own state‑funded premium subsidies targeted at residents. Several state‑level writeups and consumer guidance note that “some states may mitigate price hikes with reinsurance programs or state‑funded subsidies,” making these the most direct nonfederal mechanisms to offset a federal lapse [3].
4. Medicaid expansion and targeted eligibility moves
States retaining the option to expand Medicaid can reduce the market of uninsured and shift lower‑income residents off the exchange into Medicaid, which lowers the number needing premium assistance and can indirectly affect marketplace risk pools. The AMA and policy analyses highlight that states’ decisions — including whether to expand Medicaid — will shape how harmful 2026 changes are locally [8] [2].
5. Plan design and consumer‑level tactics insurers and regulators offer
Federal regulators and insurers note 2026 plan changes that consumers can use: broader HSA compatibility for Bronze and Catastrophic plans, expanded hardship exemptions to Catastrophic plans, and employer or small‑group options like HRAs for business owners. Advisers recommend comparing plans during Open Enrollment and, where possible, “locking in” current subsidies by enrolling for 2026 while the policy picture is unsettled [4] [5].
6. How much relief alternative federal ideas could deliver — and their limits
Analysts caution that tax deductions or other tax‑code fixes deliver far less direct relief than premium tax credits because deductions lower taxable income rather than subsidize premiums. Coverage guides and tax commentary note that deductions tend to help higher‑income taxpayers more and generally won’t replace the dollar‑for‑dollar subsidy effect of enhanced PTCs [9].
7. Projected scale and consequences if no action
Policy outlets estimate big effects: enhanced credits reduced average premiums for enrollees by roughly half and helped drive record enrollment — their expiration is associated in analyses with potential double‑digit premium rises for many and millions potentially losing coverage; CBO and KFF‑based projections show enrollment declines and notable premium pressure absent a permanent extension [10] [11] [2].
8. Practical next steps for consumers and the political context
Consumer guidance from insurers and health sites urges early action: verify income documentation, compare Marketplace versus private or employer options, consider HRAs where applicable, and use available subsidy calculators to estimate post‑2025 costs. Politically, extending enhanced credits requires congressional agreement; absent that, the federal baseline plus state actions (reinsurance, subsidies, Medicaid choices) will determine local outcomes [5] [7] [3].
Limitations and open questions: available sources describe federal reversion, state remedies, and consumer tactics but do not provide a comprehensive list of every state program or a guaranteed dollar estimate for every household; specific state responses and enacted budgets will determine how much premium relief is available locally and “locking in” strategies depend on administrative timelines reported by insurers [3] [5].