By Jason Levitis and Christen Linke-Young*
The Ways & Means Committee’s provisions on Marketplace coverage in the reconciliation bill include one especially complex section (sec. 112201) that would have major consequences and important interactions with the rest of the package. The provision’s title (“Requiring Exchange Verification of Eligibility for Health Plan”) undersells its importance, since Exchanges–also called Marketplaces–are already required to verify eligibility for health coverage and financial assistance. In fact, this provision would make profound changes to both Marketplace enrollment processes and eligibility for the ACA’s subsidies that help 22.4 million people afford Marketplace coverage.
Sec. 112201 amends the eligibility rules in section 36B of the Tax Code, which created the premium tax credit–the ACA’s primary subsidy to help people purchase coverage. These changes would also carry over to narrow eligibility for cost-sharing reductions (CSRs), the ACA’s primary subsidy to help Marketplace enrollees with deductibles and other cost-sharing.
Sec. 112201 makes two primary changes to subsidy eligibility rules. First, it eliminates passive reenrollment, which 10.8 million people relied on to enroll in 2025. Second, it eliminates provisional eligibility, which allows applicants to receive financial assistance for a limited time period while the Marketplace works to confirm they are eligible. These provisions on their own would cause a significant number of people to lose health insurance, but, crucially, they will have even larger impacts if enacted at the same time as other changes being contemplated by the House Energy & Commerce Committee.
This piece is a deep dive into this section, how it would be implemented, its implications, and its interaction with the other health care provisions of the reconciliation package.
Passive Reenrollment
The provision includes extremely consequential language that — in the words of the Joint Committee on Taxation — “prohibits passive reenrollment” into health coverage through the Marketplace with financial assistance. Specifically, under this provision, every Marketplace enrollee who receives APTC must take an active step some time between August 1 and December 15 in order to retain financial assistance (and, in all likelihood, health coverage) for the coming year.
- Current Law: Under current law, the Marketplace allows consumers to be automatically reenrolled into health insurance for the coming year, which is similar to how reenrollment works for other types of health insurance. Consumers are encouraged to return to the Marketplace website during the annual Open Enrollment Period (OEP) to update their information and confirm their plan selection. But if they fail to do so, on or around December 15 the Marketplace processes an automatic (or passive) reenrollment effective for January 1, such that their coverage automatically continues for the coming year. APTC for the reenrollment is generally calculated using the same income parameters as the prior year if the consumer has given consent for the Marketplace to access their most recent tax records.** For 2025, 10.8 million people — 54% of returning consumers — were passively reenrolled into their coverage, the vast majority of them receiving APTC.
- The Proposal: The legislation would prohibit passive reenrollment for financial assistance. Specifically, the legislation establishes a new system where the Marketplace must use information it obtains from enrollees after August 1 in order to verify their coverage for the coming year. If the enrollee has not provided information after that date, then there is no qualifying information that the Marketplace can use to determine eligibility; therefore, the Marketplace cannot provide APTC. In practice, this means the Marketplace would process a new enrollment for such an individual with APTC removed, such that the individual would owe the full premium for coverage effective January 1.
- Implications: If this policy were to become law, Marketplaces would generally be expected to conduct outreach to consumers to encourage them to provide updated eligibility information. Many would take action during the OEP (as they do today) and some additional increment of consumers are likely to visit the Marketplace between August 1 and the start of open enrollment to provide the necessary information.
Still, experience to-date suggests millions of consumers could see their APTC stripped for failure to provide information after August 1. As noted, in 2025 more than 10.8 million consumers were passively reenrolled into coverage.*** This figure varies by state and type of Marketplace: on average state-based Marketplaces passively reenrolled 73% of enrollees, and the figure was as high as 90% in some states. The federal Marketplace has historically had lower rates of passive reenrollment (46% in 2025), but it experienced a significant increase in the percentage of consumers who were passively reenrolled during this past open enrollment.****
Certainly, steep new consequences for passive reenrollment would change behavior. However, experimental evidence indicates that there is reason to be cautious about the ability to influence consumers’ propensity towards active reenrollment. Specifically, one state-based Marketplace tested email outreach strategies for a subset of consumers who did not qualify for passive reenrollment without additional action, and found that ongoing email outreach increased active behavior by only two percentage points, with 40 percent of consumers failing to take the needed steps. While there are important differences between this population and the full group targeted by Section 112201, it is nonetheless relevant evidence suggestive of significant coverage losses.
- Interactions with Energy & Commerce Policies: This provision has interactions with a proposal from the Energy & Commerce committee that shortens the annual Open Enrollment Period for the Marketplace. Specifically, under current regulations, the OEP runs through January 15 of the calendar year, so individuals have the first two weeks of January to “fix” any issues that came up in the process of reenrollment and select a new plan for coverage effective February 1.
Consider a situation where the provisions in Section 112201 were to become law with no change to OEP rules: An individual fails to conduct the needed steps prior to December 15, and therefore her coverage for January has no APTC attached. In the second half of December she receives a bill from the insurer for the full premium of, e.g., $620 instead of the $115 she was used to paying after APTC, fails to pay the bill, and loses coverage effective January 1. Fortunately, she has until January 15 to return to the Marketplace, provide the necessary data to prove her eligibility, and start a new enrollment with APTC effective February 1. She has lost one month of coverage but can retain enrollment for the rest of the year.
However, the Energy & Commerce legislation requires that the OEP end on December 15. Therefore, this same hypothetical consumer has no opportunity to trigger a new enrollment for February 1 during the OEP. Further, the loss of coverage she experienced does not trigger a Special Enrollment Period (SEP) under any existing SEP pathways.***** Therefore, in order to have coverage for February and future months (with restarted APTC), she generally must pay the full premium for the month of January. If she cannot make that full January payment — five times larger than her typical monthly payment — she generally will have no coverage at all for the rest of the year.
Thus, the potential coverage loss associated with this legislative change is far greater when it is paired with legislative changes to the OEP. By shortening the OEP and taking away the most meaningful opportunity to remediate the loss of APTC, the combined policy will mean that most people who are snared on December 15 will ultimately end up without coverage.
Eliminating Provisional Eligibility
The bill would for the first time deny APTC when the Marketplace needs more time to make an eligibility determination. Many consumers would be unable to avoid this scenario, resulting in attrition from higher premiums.
- Current Law. Under the ACA, the Marketplace generally makes real-time eligibility determinations using trusted data sources (e.g. tax data), so that individuals can often apply for and enroll in coverage in a single sitting. Individuals who apply by the 15th of the month can generally start coverage on the first day of the following month. Individuals must submit eligibility information both when they apply to enroll and also if they experience a “change in circumstances,” such as a change in income or household size, later in the year.
When an applicant attests to eligibility information that is inconsistent with trusted data sources. (for example, because the individual’s income has changed since their most recent tax return), the Marketplace asks for additional information to resolve the inconsistency. Such inconsistencies can happen for several reasons, including changes in income, changes in family composition, and delays in government agencies’ processing forms. This extended and manual verification process–referred to as a “data matching issue” or DMI–can take months to resolve while the applicant acquires the necessary documentation from an employer or other source,submits it to the Marketplace, and a Marketplace staff person processes and verifies the information provided. More than half of income DMIs take over 60 days to resolve.
While a DMI is being resolved, the ACA provides that applicants are given “provisional eligibility” for enrollment and advance PTC payments (APTC) for a limited time period. Provisional eligibility is generally limited to 90 days.****** In 2022, before the Biden administration implemented operational changes that reduced the total number of DMIs, the federal Marketplace processed 6.3 million DMIs.
- The Proposal. The proposal would make applicants ineligible for APTC until the Marketplace makes a final eligibility determination–effectively eliminating provisional eligibility for APTC. As a result, individuals facing DMIs could not receive APTC while the process plays out. The prohibition on APTC applies to both applications for enrollment and also to individuals reporting changes in circumstances. The provision is written to turn off APTC eligibility at the family level (by providing that the month in question is no longer a “coverage month” for the family), so a DMI about the income or immigration status of one family member would deny APTC to the entire family.
The effects of this change could be mitigated by the new requirement that Marketplaces establish a “pre-enrollment verification process,” which allows applicants to come to the Marketplace as early as August 1 of the prior year to “verify…the applicant’s eligibility.”*******
- Implications. By eliminating provisional eligibility for APTC, the proposal would require many Marketplace enrollees to pay the full unsubsidized premium until their DMI is resolved–a process that could take months. New enrollees would face a much larger “binder payment” to enroll. Current enrollees would lose the protection of the ACA’s “grace period” and so could be dropped from coverage. Either way, individuals who can’t afford (or choose not to pay) the larger premium will lose their enrollment opportunity until the next open enrollment period. Paying the full premiums out of pocket for a few months may not be an option for many consumers, as 59% of Americans do not have savings to cover a $1,000 unexpected expense.
The provision would generally affect only individuals whose application information does not match government data sources. However, this includes many millions of enrollees each year.
The pre-enrollment verification process will provide an opportunity to avoid APTC loss for a specific subset of enrollees: those who know in late summer that they want to enroll during the open enrollment period. It would provide no help for anyone enrolling on a different timeline, anyone experiencing a change in circumstances, and those not focused on health insurance enrollment in late summer. For example, consumers in several common scenarios would be certain or highly likely to be denied APTC:
- Newborns. The proposal would deny APTC to virtually all families enrolling newborns. That’s because it generally takes 1 to 6 weeks after birth before the Social Security Administration gives newborns a social security number (SSN) and an additional 2 weeks for parents to receive their child’s SSN card in the mail, at which point they would need to submit this information to the Marketplace and wait for it to be processed. Consumers who do not provide an SSN on their application automatically generate a DMI. Since sec. 112201 denies APTC at the family level, such a DMI would cut off any APTC the family was previously receiving.
- People getting married or divorced. The proposal would deny APTC to most individuals who get married or divorced during a year and report their change in circumstance to the Marketplace. Marriage and divorce generally lead to income changes requiring the Marketplace to perform a new eligibility verification. And the income of those recently married or divorced can generally not be verified using trusted data sources, since the IRS returns information only when there’s a perfect match of the tax filing unit. As a result, a great many of them will end up in a DMI and thus be denied APTC for some months.
- People losing jobs. Individuals losing jobs generally need coverage immediately, and the Marketplaces generally offer a 60-day limited window for them to enroll. But they are likely to face a DMI, since their expected income is often lower than was reported on their most recent tax return. As a result, such individuals (and their families) will often be denied APTC for at least a while when they try to enroll. If their DMI is not resolved during their 60-day enrollment period, they could lose access to coverage until the next plan year.
- People experiencing income changes. Individuals who experience income changes during the year are required to report it to the Exchange. If their newly attested income doesn’t match their recent tax return, that will trigger a DMI, denying them APTC for some months.
- Interactions with Energy & Commerce Policies. The Energy & Commerce Committee’s bill includes several provisions that would increase the effects of eliminating provisional eligibility. All of these sections codify regulations proposed by CMS in March, so even if the Energy & Commerce provisions are not included in the final legislative package, they are likely to be implemented.
First, the Energy & Commerce bill includes two provisions that would substantially increase the prevalence of DMIs, which in turn would directly increase the number of people denied APTC while the Marketplace verifies their eligibility. CMS estimated that the March proposed rule would result in 2.7 million more DMIs with 2.1 million DMIs being created because no tax data is returned******** and 548,000 because tax data returns less than 100% FPL. Creating millions of additional DMIs will also likely slow the process of resolving DMIs, especially given recent staffing cuts.
Second, the Energy & Commerce bill would scale back special enrollment periods (SEPs) and limit SBMs’ authority to create new ones. As a result, if consumers denied APTC cannot afford their unsubsidized binder payment, they would be less likely to have another opportunity to enroll.
Finally, the Energy & Commerce bill would permit plans to permanently deny coverage to consumers with past-due premiums–a scenario that is far more likely without provisional eligibility for APTC.
Conclusion
The implications of section 112201 would be far-reaching and long-lasting, should it become law. More than 22 million people will face considerable new paperwork burdens in order to maintain their Marketplace coverage at an affordable premium. Combined with recent cuts to Marketplace Navigators and call center caseworkers and shorter enrollment windows, many of these people are likely to lose their coverage; in some cases the coverage loss could be long-term.
* Jason Levitis is a Senior Fellow with the Health Policy Division of the Urban Institute; Christen Linke-Young is a Visiting Fellow at the Brookings’ Center on Health Policy.
**Consumers are required to report changes in income and other eligibility parameters that occur during the year, so the information on file with the Marketplace should generally be current.
***The exact share of this group receiving APTC is not publicly available, but one would expect it to be quite large: 92% of all enrollees receive APTC.
****Such an increase was likely the result of additional requirements put in place during open enrollment that required new process steps for consumers using new agents and brokers to actively reenroll. This change ensures that agents and brokers are not inappropriately targeting consumers they do not have a prior relationship with, but has also resulted in lower numbers of active reenrollments, a trend that may continue in future years.
*****While there is generally an SEP for loss of minimum essential coverage, that SEP is not available when the coverage loss is the result of “failure to pay premiums,” as it would be in this case. Nor can she qualify under the current SEP for individuals who are newly eligible for premium tax credits, because the Marketplace will consider her “eligible” for PTC in January based on her income and other eligibility factors, even though she cannot actually receive PTC for January because she has failed to provide the necessary information.
******Current rules provide an automatic extension to 150 days, but that is on track to be revoked by other provisions of the bill and by proposed CMS regulations.
*******This can be understood as “triggering” the DMI in August for January 1 coverage, which allows some time for the DMI to be resolved, but also eliminates passive reenrollment as described above.
********Massachusetts has reported that the IRS fails to return income information for about 40% of its applicants.
