The budget reconciliation bill signed into law on July 4 (“H.R. 1”) and a major new regulation finalized by the Centers for Medicare & Medicaid Services (CMS) include numerous changes to Affordable Care Act (ACA) health insurance Marketplace standards and operations. These changes, combined with the December 31, 2025 expiration of enhanced premium tax credits (ePTCs) collectively will make it harder for people to access, maintain, and afford health insurance coverage. Indeed, Marketplace enrollment is projected to shrink by up to 57%, and Marketplace insurers are proposing median increases of 18% for 2026 plan premiums.
H.R. 1 and the Marketplace rule’s required changes are slated to be phased in over time, with the first several changes scheduled to go into effect on August 25—unless two recent legal challenges can successfully block them. This post outlines what these changes are, their projected impact, and how federal court challenges could help derail the Trump Administration’s “death by a thousand cuts” strategy to reverse the coverage gains achieved under the ACA.
Major Marketplace Changes Slated for August 25, 2025
The Marketplace rule includes numerous changes, several of which go into effect on August 25.* Several others go into effect on January 1, 2026. These changes will strip away coverage for thousands of current enrollees, eliminate special enrollment opportunities, increase paperwork burdens, and throw up new barriers for people to get and maintain private health insurance. CMS itself estimates that collectively, the rule’s provisions will result in up to 1.8 million people losing their coverage. Provisions slated to go into effect this month include:
Terminating Coverage for DACA Recipients
Thousands of Deferred Action for Childhood Arrivals (“DACA”) recipients will soon receive notices that their Marketplace coverage is being terminated. In its final rule, CMS re-defined the term “lawfully present” to exclude DACA recipients, meaning that they would no longer be eligible for Marketplace and Basic Health Program (“BHP”) coverage, premium tax credits, and cost-sharing reductions. For DACA recipients, losing coverage mid-year will result in interrupted and canceled health care services, increased exposure to catastrophic medical bills, and greater uncompensated care costs for their providers.
Ending Enrollment Opportunities
The Marketplace final rule reverses a Biden-era policy that allowed low-income people (earning up to $23,475/year for an individual, $39,975/year for a family of 3) to enroll in Marketplace coverage year-round. Between 2022 and 2023, the low-income special enrollment period (SEP) allowed 1.3 million individuals to overcome bureaucratic challenges and enroll in health coverage. These challenges are particularly acute for lower-income individuals who may lack access to necessary documentation, face greater employment and household volatility, or reside in areas without sufficient enrollment assistance.
To justify ending this SEP for low-income people, CMS argued that it will reduce “adverse selection” by discouraging these individuals from waiting until they need medical care to enroll. CMS estimates that this change will result in premiums being 3 to 4 percent lower than if the SEP were allowed to remain in place. However, CMS largely ignored evidence provided by state-based Marketplaces that the risk profile of people enrolling through SEPs has been consistently “equal to or lower” than those who enroll during the annual open enrollment period (OEP). And indeed, in CHIR’s current review of insurers’ 2026 rate filings, the vast majority are proposing significant premium rate increases, with many pointing to the Marketplace Integrity rule as a factor driving rates up, not down. We have yet to find a single insurer suggesting that ending the low-income SEP will reduce adverse selection or have a material impact on premiums.
New Red Tape Requirements
Beginning August 25, the Marketplace rule will require many people applying for Marketplace coverage to manually submit documents to prove their eligibility. Further, CMS will now be giving people less time to provide that documentation, even as the burdens on Marketplace staff to review these documents skyrocket. The new red tape requirements will affect an estimated 3.3 million applicants, requiring these people, many of whom are low income, to track down and submit paperwork in order to purchase health insurance. Although this policy will only be in effect for a little over one year, CMS expects people will spend $80 million in unpaid time responding to paperwork requests, and state and federal Marketplaces will spend $263.7 million updating their IT systems and paying staff to review the documents. An estimated 481,000 people, most of whom are likely eligible, will have their premium tax credits reduced or denied. Those who are young and healthy are more likely to grow frustrated with the process and go uninsured, worsening the risk pool for insurers and raising premiums for those who remain enrolled.
New Flexibility for Insurers to Deny People Coverage
Under the ACA, insurers are required to provide coverage to anyone that lives within their service area and applies during an open or special enrollment period. The Marketplace regulation would give insurers a new tool to deny people coverage by allowing them to condition their enrollment on the repayment of outstanding premium debt for any prior coverage. This policy will have a disproportionate impact on low-income applicants. Further, it is likely to primarily deter young and healthy people from enrolling, resulting in an older, sicker Marketplace risk pool and higher premiums.
At the same time these new rules are going into effect, the Trump Administration has slashed funding for Marketplace Navigators by 90% and fired hundreds of CMS caseworkers who could have helped guide consumers through the new thicket of red tape.
Lawsuits Ask Courts to Halt Marketplace Changes
Led by the City of Columbus and joined by other U.S. cities, provider organizations, and small businesses, a challenge to the final rule was filed in the federal district court of Maryland. Their complaint alleges that the final Marketplace rule will reduce enrollment in health insurance and increase enrollees’ out-of-pocket costs. The city government and provider plaintiffs note that the resulting increase in un- and under-insured residents will increase their uncompensated care costs. The Main Street Alliance, an association of small business owners, joined the challenge because many of its members purchase coverage on the Marketplaces and object to the final rule’s impact on their premiums and cost-sharing.
In a second challenge, 21 states, led by California’s attorney general, have filed suit in the Massachusetts federal district court to block implementation of key provisions in the final Marketplace rule. The plaintiff states argue that the new rules will impose onerous burdens on enrollment, leading millions of people to lose their health insurance. The complaint also flags the significant unfunded costs imposed on states through new requirements on state-run Marketplaces and an increase in uncompensated care for local providers, as more people become uninsured. The plaintiff states have been joined by amici representing individual Marketplace enrollees, affected organizations, and local governments and public hospitals.
The plaintiffs in both cases are asking the judges for a preliminary injunction and stay. With the rule scheduled to go into effect on August 25, a decision from one or both judges could be imminent.
What’s Next
If the pending litigation succeeds, several provisions of the rule that are projected to reduce access to insurance coverage and increase premiums will be blocked, at least temporarily.** But the rule is just one part of a “death by a thousand paper cuts” strategy to repeal the ACA. If ePTCs are not extended, millions of Marketplace enrollees will receive notices in just a few weeks that their 2026 premiums are skyrocketing. Leading up to the open enrollment period, an estimated 300,000 lawfully present immigrants will learn that they’re losing their health insurance lifeline, and 100,000 additional enrollees could be cut off from premium tax credits for failing to meet a new tax filing deadline. Protecting consumers from the looming loss of coverage and higher out-of-pocket costs will require congressional action—and soon.
*For a full summary of the Marketplace Integrity rule, see our article here.
**Neither lawsuit challenges the rule’s changes to the definition of “lawfully present” or the end of the low-income SEP. Regardless of the outcome of these cases, both of those provisions will go into effect as scheduled.
