The Proposed 2026 Payment Notice: Implications for States

Sabrina Corlette, Georgetown University Center on Health Insurance Reforms, Jason Levitis, Urban Institute, and Tara Straw, Manatt Health

On October 4, 2024, the Centers for Medicare & Medicaid Services (CMS) released its proposed Notice of Benefit and Payment Parameters (NBPP) for 2026. This annual rule governs core provisions of the Affordable Care Act (ACA). This expert perspective focuses on provisions of the proposed rule of interest to state officials. A more comprehensive summary of the final rule can be found on Health Affairs Forefront, here and here.

In addition to the proposed NBPP, CMS released a fact sheet and draft 2026 Letter to Issuers in the Federally Facilitated Marketplace (FFM). Also, on October 8, 2024, CMS released its annual ACA indexing guidance, providing numerical parameters for 2026. Comments on the proposed NBPP are due November 12, 2024, and comments on the draft Letter to Issuers were due on November 4, 2024. The final 2026 NBPP and Letter to Issuers are expected to be published before a new administration takes office in January.

Improving Program Integrity

The proposed rule takes several actions to improve program integrity in the enrollment process and Marketplace operations. The FFM has experienced a significant increase in consumers being enrolled in a plan or switched to a new plan without their knowledge or consent. This kind of fraud has significant negative consequences for consumers, leading to disruptions in access to care, unexpected medical bills, and potential tax liability if they receive premium tax credits for which they are not eligible. These outcomes can present a significant financial and psychological burden for consumers, reinforcing feelings of distrust in communities that have been economically and socially marginalized. CMS’ proposed rule focuses on its enforcement authority over brokers, agents, and web-brokers (collectively “brokers”) who are engaged in fraudulent behavior. CMS also proposes to improve the timeliness of State-Based Marketplace (SBM) reporting on enrollment data corrections and the transparency of SBM data on key performance metrics.

Agency-Level Enforcement

CMS proposes to clarify its authority within the FFM and SBMs using the federal platform (SBM-FP) to hold “lead agents”—the directors or officers of a broker agency—accountable for the behavior of the agents or brokers who work at their agency. The Marketplace eligibility determination and enrollment process can be complex and time consuming, and many people need help. Indeed, almost 80% of all FFM enrollments are now facilitated through brokers. Many of these brokers are employed by or contracted with an agency. CMS would use the same tools it currently uses to conduct oversight of and enforcement against individual agents, brokers, and web-brokers to assess compliance among lead agents that direct or oversee the work of employed or contracted brokers.

CMS would pursue actions against lead agents if there has been explicit or implicit endorsement of the broker’s actions. Explicit agency endorsement could include written directives to engage in non-compliant behavior, while implicit endorsement could include continued employment of a broker whom they know has been engaged in non-compliant activities. CMS has found agencies instructing their brokers to fabricate enrollee incomes and advising them not to speak to consumers before enrolling them in a plan.

CMS asks state insurance departments to comment on these provisions, and particularly seeks input on how they define the term “lead agent.” CMS also seeks suggestions on ways to enhance federal-state efforts to conduct oversight of the broker agencies that facilitate enrollments on HealthCare.gov.

System Suspension Authority

The proposed 2026 NBPP would clarify CMS’ authority to suspend a broker’s ability to conduct Marketplace transactions if CMS has found an “unacceptable risk.” Unacceptable risk could be to the accuracy of eligibility determinations, Marketplace operations, applicants, or enrollees, or to Marketplace information technology systems, including risks related to data privacy and security. However, a suspension does not pause or terminate the broker’s agreement with the Marketplace—such brokers could continue to assist with enrollments using the Marketplace call center or by supporting a consumer with their application (referred to as the “Side-by-Side” Marketplace pathway).

If CMS decides to suspend a broker, they would be given an opportunity to submit evidence that the suspension should be lifted. If the agent or broker cannot provide such evidence, then CMS would pursue a suspension or termination of their Marketplace agreement.

Some observers have called for CMS to counter broker fraud by imposing additional steps before a consumer can enroll or change plans, such as two-factor authentication. However, such security measures can reinforce racialized administrative burdens inhibiting consumers who want coverage from enrolling, particularly in communities that have been marginalized and who may lack consistent access to smartphones, broadband, or other necessary technologies. Here, CMS is focusing its proposals directly on the actual source of the fraudulent behavior—the brokers who profit from it.

Clarifying Timelines for Resolving Enrollment Data Corrections

CMS proposes to codify recent guidance clarifying the timeline for SBMs to adjudicate and report enrollment corrections to CMS. Under this guidance, which was released in August 2024, SBMs have 60 days from when they receive a complete report of the inaccuracy from an insurer to assess and resolve the case and report any correction to CMS. Such corrections may arise due to a range of situations where the Marketplace may not have been initially aware of an individual’s enrollment status, or this status changed retroactively. Enrollment reporting by Marketplaces to CMS is the basis for payment of advance premium tax credits (APTCs) to insurers, so accurate and up-to-date data is crucial for program integrity and effective operations.

Publishing State Marketplace Operational Reporting

CMS proposes to release information collected from SBMs about their operations and performance. Long-standing regulations require SBMs to annually provide CMS with detailed information about their functioning and compliance using the State Marketplace Annual Reporting Tool (SMART). They must also provide annual financial and programmatic audits. In addition, SBMs regularly report to CMS on key performance metrics like website and call center traffic. CMS uses this information to identify risks, provide technical assistance and corrective actions, and inform policy development. But this information has not generally been released publicly. CMS now proposes to release this information, as well as documentation of corrective actions or open findings. CMS would begin releasing information in the spring of 2025 with the SMART reports for plan year 2023.

Supporting Improved Plan Choices

CMS proposes changes to standardized plans and limits on the number of non-standardized plans. The agency also seeks comment on ways to mitigate the risk of insurer insolvencies, and proposes to conduct federal oversight of essential community provider standards.

Standardized Benefit Designs

In 2023, CMS introduced standardized plan options for the FFM and SBMs on the federal platform (SBM-FP). In the 2026 draft NBPP, CMS proposes only modest changes to the standardized plans, but would require insurers to ensure that their standardized plans are “meaningfully different” from one another. The meaningful difference standard was introduced in 2015 to prevent a proliferation of duplicative plan offerings but was discontinued by the Trump administration in 2019.

CMS has since found that several insurers are offering “indistinguishable” standardized plan options. This can lead to significant consumer confusion, particularly for those with limited health insurance literacy. Under the proposed rule, beginning in 2026 insurers would need to ensure that their standardized plans in the same service area and metal level have at least one of the following characteristics:

• A different provider network.
• A different formulary.
• A different maximum out-of-pocket cap (specifically, an integrated medical and drug maximum out-of-pocket cap versus a separate medical and drug maximum out-of-pocket cap).
• A different deductible type (specifically, an integrated medical and drug deductible versus a separate medical and drug deductible).
• A difference in the number of in-network tiers.
• A $500 or more difference in the maximum out-of-pocket cap.
• A $250 or more difference in deductible.
• A difference in benefit coverage.

Partnering With States to Reduce Risks of Insurer Insolvency

State insurance departments hold the primary responsibility for protecting consumers and providers from insurance company insolvency. In their draft 2026 NBPP, CMS seeks comment on how the FFM can better partner with state regulators to mitigate the risk of an insurer’s financial instability.

CMS asks states for input on how to increase their coordination with state insurance departments and the National Association of Insurance Commissioners. For example, CMS suggests that it could review insurers’ Marketplace applications in FFM states to identify those at risk of solvency-related difficulties. For insurers that may be insufficiently capitalized, CMS would partner with relevant state regulators to mitigate potential risk, such as by suppressing the insurer’s plans on HealthCare.gov, capping enrollment, denying certification, or decertifying existing Marketplace plans.

Additionally, CMS suggests it could partner with states to identify insurers that are experiencing levels of enrollment growth that risk exceeding their capitalization rates. The agency notes that in past insurer insolvencies, the affected carriers had offered low-premium plans that attracted comparatively low-risk enrollees. These insurers then owed higher-than-expected risk adjustment charges that they could not afford to pay. Going forward, CMS could work with state regulators to discuss whether or not such insurers should have plans certified for the FFM, and whether the financial capacity exception to the ACA’s guaranteed issue requirement should be invoked.

CMS would engage in the above-described activities only for insurers operating in the FFM. CMS notes that SBMs and SBM-FPs are best positioned to understand their respective markets and may have policies that differ from the FFM.

Review of Essential Community Provider Standards

Essential community providers (ECP) are providers whose patients are predominantly low-income and medically underserved. Under federal rules, Marketplace insurers must contract with at least 35% of available ECPs within health professional shortage areas or low-income ZIP codes in which 30% or more of the population falls below 200% of the federal poverty level.

Due to systems limitations, CMS has to date relied on states that perform Marketplace plan management functions to assess whether insurers are complying with requirements to contract with ECPs. CMS now has the capability to collect ECP data, such as network and service area identifiers, from insurers. This will allow CMS to conduct its own evaluations of plan networks for the FFM, including in FFM states that perform plan management functions. CMS’ goal with this proposal is to provide more consistent oversight of insurers’ contracting with ECPs across all FFM states, and to better ensure that communities that are low-income and medically underserved have equitable access to services.

Proposals to Improve Consumers’ Marketplace Experience

The proposed 2026 Payment Notice includes several proposals designed to ease administrative burdens, improve communications with consumers, and help ensure coverage affordability.

More Flexibility on Premium Payment Thresholds

CMS proposes to give insurers across all Marketplaces additional options—where allowed by state regulators—to avoid terminating coverage when enrollees under-pay premiums by a de minimis amount, while also clarifying what thresholds are permissible under the existing option. This provision has potential implications for health equity in the Marketplaces. The Department of Health and Human Services Assistant Secretary for Planning and Evaluation has observed that, because of enhanced premium tax credit subsidies, more people of color are taking advantage of the opportunity to enroll in low-premium plans after subsidies. aintaining enrollment in those plans can help ensure continuity of care and improved health outcomes, without small premiums blocking access to needed healthcare.

Under existing regulations, states can permit insurers to set a minimum percentage of the consumer’s premium share that they will accept for these purposes. For example, if the net premium threshold is 95% and the full premium is $400, of which APTC covers $300, then the consumer satisfies the threshold so long as they pay at least $95 (95% of the $100 net premium). CMS has not previously indicated that 95% is allowable but has not clarified how much lower issuers may go. The threshold may be applied for purposes of a binder payment, for triggering a grace period, and for triggering coverage loss.

CMS now proposes to clarify that a threshold for the existing option must be at least 95%. CMS also proposes to permit states to use two additional options for thresholds. First, CMS would allow thresholds based on the percentage of the total premium paid by APTC and the consumer. These thresholds would need to be at least 99%. For example, with a 99% gross premium threshold, if the total premium was $400 and APTC was $300, the consumer would need to pay at least $96, since $396 is 99% of $400. CMS also proposes to allow insurers to set a dollar value of permissible non-payment threshold, which must be no more than $5. The two new options would apply for purposes of triggering grace periods and coverage loss, but not for binder payments. CMS proposes to allow insurers to choose any of the three threshold options, but not to use more than one.

All of these options would be based on the accumulated non-payment. For example, if the insurer has a dollar-value threshold of $5 and a consumer under-pays by $3 for two consecutive months, the consumer would fall outside the threshold in the second month, since the total shortfall of $6 exceeds the $5 threshold.

CMS explains that it proposes adding the new options to address situations where the consumer owes only a minimal amount even though they have not met the 95% net premium threshold. For example, if the premium was $400, APTC was $398, and the consumer paid none (or even $1.50) of their $2 share, a net premium threshold of 95% would not protect the consumer, since they would not have paid 95% of their $2 net premium. The new options could cover this situation.

While these new options may be helpful, making them not apply to binder payments is an important limitation. Under the requirement to use only one of the three threshold options, using either of the new options would mean that a consumer that very slightly underpays a binder payment could not have coverage effectuated. Research has shown that even very small premiums can present a significant barrier to coverage access, resulting in many people who are eligible for generous financial assistance failing to enroll. CMS specifically requests comments on these issues, raising the prospect that the final regulations may be less limiting in this respect.

On a related note, the Treasury Department and the Internal Revenue Service recently proposed regulations under the premium tax credit (PTC), clarifying that a consumer who pays less than the full premium may still be eligible for PTC so long as they maintain coverage, including pursuant to a permissible premium payment threshold. This addresses potential situations where a consumer who is unable to pay a small share of the premium may be deemed ineligible for PTC and therefore owe back substantial APTC at reconciliation, a dynamic that may scare off potential enrollees or lead to them incurring debts greatly in excess of the premium originally due.

Silver Loading Codification

CMS requests comments on whether and how to clarify in regulations that insurers may increase silver premiums to account for their costs for cost-sharing reductions (CSRs), so long as these adjustments are reasonable and actuarially justified. Since CMS halted reimbursements to insurers for the cost of CSRs in 2017, CMS has permitted insurers to increase premiums to account for the cost of CSRs under rules set by states. Most states require insurers to “load” the cost onto silver plans. While states have adopted silver loading in response to the loss of CSR subsidies, the perhaps unanticipated result has been an increase in coverage affordability for subsidized individuals and an increase in Marketplace enrollment. CMS has repeatedly affirmed that silver loading is permissible but has never codified this rule into regulations. CMS now once again affirms this position, indicates that it is considering codifying the rule, and requests comments on whether and how to do so. This may be an area of particular interest for state comment.

Further Clarity on Failure to Reconcile Notices

CMS proposes to clarify Marketplaces’ options for notifying enrollees about potential eligibility loss due to failure to comply with the requirement that APTC recipients file a tax return and reconcile their APTC, a set of rules referred to as “failure to reconcile,” or FTR. The 2024 Payment Notice modified FTR rules to deny APTC only after two consecutive years of receiving APTC and then failing to reconcile them on the tax return. The 2025 Payment Notice clarified that Marketplaces have two options for notifying consumers who have failed to file and reconcile for one year: a direct notice to the tax filer clearly indicating FTR status (if they can do so in keeping with tax privacy rules), or a more general notice that explains FTR rules and warns of potential APTC loss without specifying the reason—an approach that sidesteps tax privacy rules because such notices do not count as protected tax information.

The proposed rule provides the same clarity with respect to consumers who have failed to file and reconcile for two years. Again, the Marketplace may provide a notice to the taxpayer warning of immediate eligibility loss and explaining the reason, or a more general notice warning of potential eligibility loss for one of several reasons and explaining FTR rules, without specifying the reason.

The proposed rule also notes that Marketplaces on the federal platform will, and SBMs are encouraged to, provide additional communications beyond the ones required by this rule. The federal notices, which SBMs may use as a model, have been posted on the CMS website.

Easing the Appeals Process

A family member or authorized representative may apply for Marketplace coverage on behalf of an individual seeking coverage. For example, a caregiving grandparent or parent who is undocumented may want to apply for coverage on behalf of an eligible child. But if the application filer is not seeking coverage for themselves, current regulations prohibit the application filer from appealing an eligibility determination unless the individual(s) seeking coverage take additional administrative steps.

To reduce the burden on consumers, CMS is proposing to allow application filers to submit appeal requests on behalf of applicants and enrollees. This change would be applied across the FFM and SBMs. CMS does not anticipate that it would increase administrative burdens for the SBMs, but seeks comment on this proposal.

User Fee Uncertainty

CMS proposes to increase the user fees for Marketplaces on the federal platform. The size of the increases would depend on developments related to the PTC enhancements that were enacted in the American Rescue Plan Act of 2021 and extended in the Inflation Reduction Act of 2022. The enhancements are scheduled to expire at end of the 2025, but there are efforts underway to extend them. If the enhancements expire as scheduled, CMS projects that resulting enrollment declines would require the agency to raise the FFM user fee from 1.5% in 2025 to 2.5% in 2026, and the SBM-FP user fee from 1.2% to 2.0%. If Congress acts by March 31, 2025 to extend the enhancements through 2026, CMS expects that it would set the FFM user fee somewhere between 1.8% and 2.2%, and the SBM-FP user fee somewhere between 1.4% and 1.8%. However, CMS emphasizes that there is substantial uncertainty about enrollment and premiums under both scenarios and that the user fee rates could depart from these forecasts.

User fees are paid by Marketplace insurers to support the operations of the FFM and federal technology platform. The fee is calculated as a percentage of Marketplace premiums collected. The fee supports Marketplace eligibility and enrollment activities for FFM and SBM-FP states; for the FFM, it also supports outreach and education; managing Navigators, agents, and brokers; consumer assistance tools; and certification and oversight of Marketplace plans. Robust user fee collections contribute to improving health equity in the Marketplaces. From 2020 through 2023, CMS increased funding for Navigator outreach and educational activities and targeted efforts in the FFM to reach racial and ethnic groups who are more likely to be uninsured. These efforts are credited with encouraging enrollment among people of color and increasing health insurance uptake. For example, the administration partnered with Black organizations to conduct a campaign for outreach and increase media attention and has awarded navigator grants to organizations with targeted plans to reach people of color. In addition, Spanish-language advertisements made possible through user fees are more likely than English-language advertisements to mention telephone and in-person assistance enrollment assistance, likely contributing to more than doubling Latino/a enrollment in the FFM between 2020 and 2023.

CMS notes several reasons for likely user fee rate increases and attendant uncertainty. User fee rates are likely to increase even if the PTC enhancements are quickly extended due to factors like states transitioning from the FFM to SBM-FPs and SBMs, lower premium projections, and increased costs for oversight of agents and brokers. However, the most important factor is the potential expiration of the enhancements. CMS describes the enrollment projections as “uniquely uncertain” due to the potential expiration or belated extension of the PTC enhancements, which could affect everything from insurers’ premium filings and consumer behavior to pass-through funding under section 1332 waivers and program parameters under the Basic Health Program (BHP).

CMS requests comments on the March 31 deadline for extension of the PTC enhancements to move forward with the lower user fee rates.

BHP Payment Methodology Clarifications

CMS proposes to clarify the BHP payment rules for situations where a state partially implements the BHP in the first year. Current BHP payment regulations include an adjustment intended to substitute for the impact of silver loading, since a BHP generally renders state residents ineligible for high-value CSRs. But the current regulations do not provide for a partial adjustment where a phased BHP implementation reduces the impact silver loading only partially in the first year. The proposed regulations permit the silver loading adjustment to be applied in part in such cases. This change appears aimed at Oregon, which is undergoing a phased transition to a BHP.

The proposed regulations also clarify how the BHP methodology addresses cases where there are multiple benchmark silver premiums within a county. Codifying its long-standing practice, CMS proposes to clarify that, in such cases, the payment calculations uses the benchmark premium applicable to the largest fraction of county residents.

Allowable Out-of-Pocket Costs to Jump

Separately, CMS released its final calculations for the annual payment parameters governing out-of-pocket costs. The maximum out-of-pocket (MOOP) limitation will rise by 10.3% in 2026 for most commercial health plans. The federal limit applies to in-network essential health benefit cost sharing in non-grandfathered individual and group health plans, including self-insured employer plans. The 2026 MOOP will be $10,150 for self-only coverage and $20,300 for other coverage.

MOOP spending for CSR variants will also rise. These reduce cost sharing based on income for certain enrollees in qualified health plans on the Marketplaces.

Eligibility for Catastrophic Coverage

Individuals can purchase catastrophic coverage if they are under age 30 or over age 30 and qualify for a hardship or affordability exemption. Section 5000A of the Internal Revenue Code establishes the maximum percentage of income a person must pay for minimum essential coverage for it to be considered affordable. Based on the new parameters for 2026, coverage is considered affordable if the individual’s share of the premium is less than 7.7% of their income.