Recent Federal Marketplace Proposal Imposes New Requirements for States and Consumers

Sabrina Corlette, Georgetown Center on Health Insurance Reforms, and Jason Levitis, Urban Institute

On March 10, 2025, the Centers for Medicare & Medicaid Services (CMS) released a proposed regulation that makes several policy and operational changes to the Affordable Care Act (ACA) Marketplaces and insurance rules. A central tenet of the proposed rule is that Biden-era policies to improve Marketplace premium affordability and ease administrative hurdles to enrollment have contributed to widespread fraudulent or otherwise improper enrollments. CMS uses this argument to justify changes that would reduce Marketplace premium tax credits, increase paperwork requirements for applicants and enrollees, and roll back eligibility. The proposed rule does not, however, acknowledge that improper enrollments are concentrated in the Federally Facilitated Marketplace (FFM), even though most State-Based Marketplaces (SBMs) adopted, and in many cases expanded upon, the policies in question. Further, while CMS recognizes that broker-driven fraud is a key cause of improper enrollment, the proposed rule does not include provisions that would impose limits on brokers’ behavior or exert authority over lead generators and other actors driving fraudulent enrollments.

CMS estimates that, if this proposed rule is finalized, it will reduce enrollment and premium tax credits offered through the ACA Marketplaces. Between 750,000 and two million enrollees are projected to lose coverage in 2026 alone, according to CMS’ analysis. This loss of coverage is likely to be concentrated among the lowest-income Marketplace enrollees. The proposed changes would also impose considerable operational costs on SBMs, and establish effective dates that would be challenging for SBMs to meet.

This expert perspective reviews provisions of the proposed rule to assess their impact on SBMs and state insurance regulators. Additional summaries of the proposal can be found on Health Affairs Forefront, here and here. CMS also released a fact sheet to accompany the proposed rule.

Reduced Affordability and Benefits

The proposed rule includes policy changes that would increase net premiums, particularly for low- and moderate-income consumers, and increase out-of-pocket costs. It also prohibits insurers from covering gender affirming care as part of essential health benefits.

Increasing Consumers’ Premium Contributions and Out-of-Pocket Costs

CMS is proposing a change to a measure of premium growth, referred to as the “premium adjustment percentage,” that is used the set several ACA coverage parameters. The change could result in higher out-of-pocket costs for all individuals with private health insurance (including those with employer-based insurance), and lower premium tax credits for Marketplace enrollees.

Under the ACA, the premium adjustment percentage is used to set the maximum annual limit on out-of-pocket cost-sharing (or “MOOP”) under commercial market health plans. The Internal Revenue Service (IRS) uses the premium adjustment percentage to determine individual contributions for Marketplace enrollees receiving the premium tax credit. It is also used for other updating other ACA parameters, like the employer shared responsibility payment.

Under the proposed new methodology, the premium adjustment percentage for 2026 would be about 4.5% higher than under the current methodology. This would mean a similar increase in the MOOP for 2026, resulting in an overall increase of about 15% over 2025’s MOOP. In addition, if the IRS adopts CMS’ premium adjustment percentage, consumers receiving Marketplace subsidies could expect to pay 4.5% higher premiums for a benchmark silver plan than under the current methodology.

Reducing Plan Generosity and Premium Tax Credits

The ACA requires insurers in the individual and small-group markets to offer plans with specified levels of generosity (called “actuarial value”), labeled bronze (covering 60% of an average enrollee’s costs), silver (70%), gold (80%), and platinum (90%). However, insurers have some flexibility in meeting these actuarial value levels. Under current rules, insurers can offer bronze plans with a de minimis range of +5/-2 percentage points. Insurers can offer silver, gold, and platinum plans within +2/-2 of the target value, although silver plans offered in the ACA Marketplaces must be within a de minimis range of +2/0 percentage points. This narrower range for Marketplace silver plans, which are tied to advance premium tax credit (APTC) amounts, ensures that consumers receive the full amount of tax credits provided by law. State insurance departments are the primary enforcers of this policy.

In the proposed rule, for plan year 2026, CMS would change the de minimis thresholds to +2/-4 percentage points for all individual and small-group market plans, except for expanded bronze plans.^[1] Expanded bronze plans would have a de minimis range of +5/-4 percentage points. The proposed rule would also expand the range for silver plans with income-based cost-sharing reductions to +1/-1 percentage points. CMS notes that insurers have requested greater flexibility to establish cost-sharing for their individual and small-group market plans. While the agency acknowledges that narrowing the threshold range for on-Marketplace silver plans has improved premium affordability for individuals eligible for APTC, it argues that unsubsidized Marketplace enrollees are harmed by limiting insurers’ ability to offer less-generous plans.

CMS estimates that gross premiums will decline by 1% as a result of this proposal, but acknowledges that the policy will decrease the amount of APTCs available, due to the lower generosity of the benchmark silver plan. They estimate that this policy will cause premium tax credits to decline by $1.22 billion in 2026.

Ending the Bronze-to-Silver “Crosswalk Policy” for Consumers Eligible for Cost-Sharing Reductions

Under the ACA, silver plans with cost-sharing reductions (CSR) are available to consumers between 100% to 250% of the federal poverty level (FPL). Beginning in 2024, federal rules allow Marketplaces to shift CSR-eligible enrollees who automatically re-enroll from bronze to silver-level plans, if a silver plan is available with the same provider network and the same or lower net premium for the enrollee. This allows consumers to benefit from the more generous plan coverage for which they are eligible.

In this proposed rule, CMS argues that consumers have increased awareness of their benefits under the ACA, and that the “bronze-to-silver crosswalk policy” could create confusion and undermine consumer choices. The proposal would repeal this option across all Marketplaces. Although CMS estimates “some burden” for SBMs that have implemented the bronze to silver crosswalk, it does not quantify that burden and requests comment.

Prohibiting Coverage of Gender Affirming Care

Several states currently include coverage of gender affirming care (GAC) in their essential health benefits (EHB) benchmark plan.^[2] Others may prohibit insures from excluding such coverage under nondiscrimination standards. In this proposed rule, CMS would prohibit insurers in the individual and small-group market from covering GAC as EHB, beginning in plan year 2026. The agency argues that GAC is not typically covered in employer-sponsored plans, however no evidence is provided to support this claim. Because the ACA requires EHB to be equal in scope to typical employer plans, CMS propose to add GAC to the list of items excluded from EHB.

Insurers could, if they choose, continue to cover GAC in addition to EHB, and states could mandate such coverage. However, CMS notes that states that do so would be required to defray the costs associated with GAC coverage.

New Administrative Requirements and Reduced Opportunities for Enrollment

The proposed rule includes several provisions that reduce the duration and availability of enrollment opportunities and require consumers to submit additional paperwork for Marketplace eligibility and enrollment determinations. Unlike in past years, when changes implemented for the FFM were optional for SBMs, many of the policies proposed in this rule would be required across all Marketplaces.

Shortened Open Enrollment Period

The ACA requires the Marketplaces to offer an annual open enrollment period (OEP). Since the launch of the Marketplaces in 2013, SBMs have generally had flexibility to provide longer OEPs, and OEP lengths have fluctuated in response to consumers’ needs and market conditions. Since the OEP for the 2022 plan year, the FFM’s OEP has run from November 1 to January 15. Current federal rules require SBMs to maintain an OEP for at least 11 weeks, and several SBMs run an OEP until the end of January.

The first Trump administration shortened the annual OEP to November 1 to December 15. In this proposed rule, CMS argues that ending the OEP on December 15 instead of January 15 will reduce “consumer confusion” by aligning more closely with the deadlines of other sources of coverage, such as employer-sponsored insurance. They also note that a shorter OEP will help consumer assisters, such as Navigators, conserve budget resources. (In February, CMS cut funding for the Navigator grant program from $100 million per year to $10 million). While acknowledging that younger individuals are more likely to enroll later in the OEP than older people, CMS asserts that a longer OEP contributes to “adverse selection,” however no evidence of adverse selection is provided. Accordingly, CMS is proposing to require all Marketplaces, including SBMs, to adhere to an OEP from November 1 to December 15, beginning this year (i.e., for enrollment into plans for 2026).

CMS notes that, in the past, they have permitted SBMs to extend their OEP through the use of transitional “special enrollment periods” (SEP). They seek comment on whether they should prohibit SBMs from using such SEPs, and ask for commenters to submit data on the impact of the OEP end date on enrollment and adverse selection.

CMS estimates that it will take SBMs an average of 4,000 hours to implement the OEP change, with an aggregate cost across all SBMs of $7,786,000. They seek comment from SBMs on the burden of this proposal and suggested “potential less burdensome” alternatives.

Eliminating the Low-Income SEP

In 2022, the FFM and most SBMs adopted a monthly SEP for individuals at or below 150% of the FPL. Initially the SEP was only available so long as these individuals were eligible for the enhanced premium tax credits enacted in the American Rescue Plan Act of 2021 and extended until December 31, 2025 in the Inflation Reduction Act. Last year, CMS revised this SEP so that low-income individuals would continue to have a monthly opportunity to enroll even if the enhanced premium tax credits are not extended.

In this proposed rule, CMS would repeal the low-income SEP. In doing so, the agency argues that it has “substantially contributed” to fraudulent enrollments, becoming “one of the primary mechanisms” that brokers used to conduct unauthorized enrollments. The agency also believes that this SEP has increased the risk of adverse selection. CMS further alleges that adoption of the low-income SEP exceeded the agency’s statutory authority.

CMS would end the low-income SEP as of the effective date of the final rule, which is traditionally 60 days after publication. The proposal would mandate this change across all Marketplaces, including SBMs. CMS estimates that it will cost the FFM approximately $390,000 to remove the SEP functionality from its IT systems; they do not assign any costs to educating consumers or consumer assisters about this abrupt change in policy. CMS estimates similar costs for SBMs, but incorrectly states that none of the SBMs have offered the low-income SEP. In fact, most SBMs currently offer the low-income SEP.

Requiring Additional Documentation of SEP Triggering Events

The ACA requires insures and the Marketplaces to allow individuals to enroll in coverage outside the annual OEP after certain life events that require a change in coverage, such as the loss of employer-sponsored insurance, a move, marriage, or the birth or adoption of a child. In the early years of the ACA Marketplaces, consumers were largely allowed to self-attest that they had experienced one of the allowable “triggering events” to qualify for a SEP. However, in response to concerns from insurers that some people were using SEPs to wait until they were sick to purchase insurance, the first Trump administration required consumers in the FFM to submit documentation proving their eligibility for most SEPs, prior to enrollment. SBMs have long had flexibility to determine the most appropriate way to ensure the proper use of SEPs.

In 2022, citing evidence that the additional documentation requirements were primarily discouraging younger, and often healthier consumers from enrolling, the Biden administration relaxed the Trump-era requirements. Beginning in 2023, only those consumers attesting to a loss of minimum essential coverage were required to provide proof that they qualified for a SEP.

In this proposed rule, CMS would reverse the Biden policy and re-instate pre-enrollment verification for most SEPs. The rule would further require all Marketplaces, including SBMs, to conduct eligibility verification for at least 75% of new enrollments through SEPs. SBMs would have until plan year 2026 to implement this policy change, and could request CMS approval of alternative methods for conducting the required verifications, so long as they maintain accuracy and minimize delay. CMS argues that requiring more people to submit proof of a SEP triggering event prior to enrollment will deter brokers from conducting unauthorized enrollments and plan switching, and reduce adverse selection.

CMS estimates that additional pre-enrollment verifications will result in an annual cost to SBMs of $1,736,615. The agency requests comments on this proposal and their estimate of the burden for SBMs to implement the changes.

Canceling APTCs for Failure to Reconcile

Under the ACA, Marketplace enrollees are eligible for APTCs based on their projected income for the year. If they receive APTCs, they must file a tax return for that year, and if there is a difference between their projected income and their actual income, they must reconcile those amounts and pay back any excess APTCs for which they were not eligible.

Under Biden administration rules, if an enrollee fails to file their tax return and reconcile their APTCs (referred to as “FTR”) for two consecutive years, they would lose eligibility for premium tax credits. The additional year represented an acknowledgment that the reconciliation process is administratively burdensome and confusing for consumers, and can often be impacted by delays or errors by the IRS, and also that resolving FTR issues can be especially challenging, in part because Marketplaces are prohibited from mentioning an enrollee’s FTR status, even when denying APTC on that basis. The Biden administration also required Marketplaces to provide clear notices to enrollees about their FTR status and risk of losing APTCs.

CMS here proposes to end eligibility for APTCs for those who fail to file and reconcile after just one year, not two. The agency estimates that doing so would reduce spending on APTCs by up to $1.86 billion in 2026. If finalized, this would go into effect for the plan year 2026 open enrollment period (i.e., by November 1, 2025, in most states). However, it is not clear that this would allow sufficient time for either SBMs or the IRS to implement the necessary changes.

Requiring Active Re-Enrollment for Some Marketplace Enrollees

CMS is proposing a new policy that would require all Marketplaces, including SBMs, to reduce APTCs for certain Marketplace enrollees who do not return to the Marketplace during open enrollment to submit a new application. Specifically, for consumers who receive APTCs that fully cover their premiums and are automatically re-enrolled into Marketplace coverage, the Marketplace would be required to reduce the APTC amount so that the enrollee must pay $5 towards their monthly premium. The enrollee would need to pay the $5 each month unless and until they return to the Marketplace and update their eligibility application. The agency argues that having enrollees receive a monthly bill is necessary to reduce “improper” or unauthorized enrollments.

The FFM would implement this policy for the 2026 plan year. CMS is proposing to give SBMs an additional year, until 2027, to make the change. The agency seeks comment on whether $5 is an appropriate premium payment, as well as whether it should require those automatically re-enrolled to pay the full, unsubsidized premium, until they return an updated eligibility application.

CMS notes that it lacks data on how many fully subsidized individuals are automatically re-enrolled via SBMs, and requests that comments from SBMs provide this data. The agency estimates that it will take each SBM 10,000 hours to update their IT systems to make this policy change. The agency also acknowledges that SBMs may receive customer service requests after implementing this policy, and incur costs for the training of consumer assisters. However, the agency does not attempt to quantify these likely costs.

More Administrative Barriers for Consumers With Data Matching Inconsistencies

CMS proposes three provisions that tighten paperwork requirements for consumers whose income cannot be verified using federal data sources.

New Documentation When Data Show Income Below the Poverty Line

Under the ACA, individuals above 100% FPL may be eligible for APTCs through the Marketplaces if they are not eligible for other coverage, such as Medicaid. In states that have not expanded Medicaid, the only source of coverage for many individuals between 100% to 138% of FPL is the Marketplace. Many of these individuals may have gig economy or seasonal jobs, making it challenging for them to accurately project their annual income a year in advance.

The Marketplaces determine APTC eligibility by checking an applicant’s best guess as to their income against their most recent tax return data. If the individual’s projected income is lower than the income in their prior tax return, the Marketplace flags a “data matching issue” (DMI), requiring the consumer to provide documentation of their projected income. Historically, a DMI is not generated if the applicant projects higher income than in their tax return, because their APTC would be lower than what federal data sources show they are eligible for.

CMS now proposes to require a DMI when federal tax data show an applicant’s prior-year income to be below 100% FPL. These consumers would need to provide documentation that their income for the coming year will above 100% FPL to qualify for APTCs. CMS explains this change based on the concern that, in states that have not expanded Medicaid, some applicants below the poverty line may be inflating their income projections above 100% FPL to receive APTCs. A similar rule was finalized in 2018 but was successfully challenged in court and never took effect.

CMS proposes that this new verification requirement be implemented upon the effective date of the final rule, so that SBMs would need to make necessary IT and programmatic changes in 2025. The agency estimates that this change will lead to additional 548,000 DMIs per year and that implementing these verifications will create additional annual costs for SBMs amounting to $12,065,664, as well as a one-time cost to update IT systems of $14,793.400.

New Documentation When Tax Data Is Unavailable

In 2023, CMS adopted a policy enabling Marketplaces to rely on an applicant’s self-attestation of projected income, if the IRS was unable to provide information from the individual’s prior tax return. This meant that no DMI would be generated, relieving the applicant and the Marketplace from the submission and review of additional documentation.

In this proposed rule, CMS would require the Marketplaces to create a DMI for applicants who lack tax data to check against their projected income. The agency estimates that this policy would create an additional 2.1 million DMIs each year, costing the SBMs an additional $46,696,440 per year, plus a one-time cost of $16,642,575 in 2025 to update IT systems.

Shortening the Window for Consumers to Submit Documentation

Under the ACA, consumers with a DMI are guaranteed 90 days to provide the necessary documentation to prove their income. While the DMI is being resolved, the consumer can enroll in a plan and receive APTCs, although they may need to pay some or all of those funds back if they are not eligible.

In 2024, the Biden administration granted consumers with DMIs an additional 60 days to submit the required paperwork, without having to proactively request an extension. In this proposed rule, CMS would remove this automatic 60-day extension. The agency estimates that this change would result in a one-time cost to SBMs of $9,500,000 in 2025 and would reduce federal outlays on APTCs by $266 million per year.

Limiting Eligibility for Coverage

The proposed rule includes provisions that reverse existing Marketplace policy and insurance rules in ways that narrow eligibility. It would reverse the Biden administration’s rule providing coverage to recipients of the Deferred Action for Childhood Arrivals (DACA) policy, and allow or require insurers to deny or cancel policies for individuals with premium debt.

Reversing the DACA Rule

In May 2024, the Biden administration released a rule allowing DACA recipients to enroll in subsidized coverage through the ACA Marketplaces or Basic Health Program (BHP). A lawsuit challenging this rule was filed by 19 states (including three SBM states, Idaho, Kentucky, and Virginia) shortly thereafter. A federal court enjoined the rule in the 19 plaintiff states, but the Marketplaces in the remaining states continue to enroll DACA recipients.

In this proposed rule, CMS argues that the Biden administration’s inclusion of DACA recipients in the definition of “lawfully present” was “improper” and inconsistent with the provisions of the ACA. The agency therefore proposes to revise the definition of lawfully present to exclude DACA recipients. This change would be made upon the effective date of the final rule, requiring mid-year terminations of coverage for DACA recipients.

CMS estimates that it will take the two BHP states, Minnesota and Oregon, approximately 100 hours each to make the necessary coding changes to stop enrolling DACA recipients. For the SBMs, CMS estimates it will take them each 1,000 hours to make the necessary changes. Further, CMS estimates it will take each SBM an additional 1,000 hours to terminate coverage for current enrollees with DACA status. This number does not appear to include time spent on customer outreach or consumer assister training.

CMS also estimates that the SBMs will have a “net burden reduction” of not having to process applications from DACA recipients of 204 hours.

Adjustments to the Premium Payment Threshold

Under the ACA, Marketplace enrollees must generally pay their full first month’s premium in order to effectuate enrollment (often called the “binder payment”). The Biden administration, in its plan year 2026 payment notice, gave health insurers new options to avoid terminating coverage if an enrollee paid less than the full premium by a de minimis amount. Under that rule, insurers could use a fixed-dollar or a gross premium percentage threshold to determine whether a sufficient premium payment was made. This policy was designed to preserve coverage for lower-income Marketplace enrollees whose eligibility for generous APTCs reduced their premium contribution to a minimal amount.

In this proposed rule, CMS would reverse the Biden administration’s policy by eliminating both new threshold options, limiting insurers to offer only net premium percentage thresholds. CMS argues, without evidence, that such a change is necessary to reduce fraudulent Marketplace enrollments. The agency estimates that this policy change would reduce federal spending on APTCs by $820 million in 2026.

Allowing Coverage Denials for Past-Due Premiums

CMS proposes to revert to a policy adopted under the first Trump administration that would allow insurers to deny issuing a policy to individuals with past-due premiums from prior coverage. In addition, CMS proposes to allow insurers to add the past-due premiums to the amount owed for the initial premium payment, and require payment in full before coverage can be effectuated. Insurers could include in the payment owed any premium amounts owed to a different insurer that is part of the same controlled group. This policy would apply starting on the effective date of the final rule.

Although the policy adopted under the first Trump administration established a requirement that insurers notify consumers of their past due premiums, this proposal does not do so. Instead, it suggests such requirements are better left to state insurance regulators. Under this proposal, states could set limits on the amount owed, apply other restrictions on insurers’ payment policies, and establish notice requirements. However, CMS asks for comment on whether states should be granted this flexibility, or whether they should require a more uniform federal approach.

Request for Public Comment

CMS has requested comment on the provisions of this proposed rule, including comments from states about the implementation timeline and costs of the proposed operational changes. The agency also asks that commenters provide evidence (including citations and hyperlinks) and include “data sets and detailed findings” to support their comments. Public comments are due by April 11, 2025.

[1] Expanded bronze plans cover and pay for at least one major service, other than preventive services, before the deductible, or meet the requirements to be a high deductible health plan under the Internal Revenue Code.

[2] In the proposed rule, CMS uses the term “sex trait modification.”