November 24, 2025

New ACA proposals in the works as ‘subsidy cliff’ looms

As the Affordable Care Act “subsidy cliff” looms, reports say President Donald Trump plans to announce a new proposal for addressing health care costs.

The enhanced ACA tax credits, which have helped lower premiums for around 20 million Americans this year, are set to expire at the end of December. Without these credits, many clients may face higher costs for their health insurance coverage, potentially impacting their ability to find affordable plans.

Senate Republicans agreed to hold a mid-December vote on extending the enhanced subsidies, which are set to lapse at year’s end, in exchange for extending government funding through January.

Reports say the Trump plan under discussion envisions temporarily extending the ACA subsidies in some form, while incorporating a series of guardrails aimed at limiting their scope. Those guardrails would potentially include new income limits and requiring all enrollees to pay some form of premium.

A new focus on HSAs

Sen. Bill Cassidy, R-La., introduced a plan last week that would offer customers who select bronze-level ACA plans a prepaid HSA, partially funded by the money currently allocated to the premium tax credits. Unlike the credits, these HSAs wouldn’t help with monthly premium payments. Instead, they would be designed to offset out-of-pocket expenses such as deductibles, copayments and coinsurance. Trump has publicly endorsed the proposal.

Bronze plans typically cover about 60% of an enrollee’s health care costs, leaving the remaining 40% as out-of-pocket expenses. This often means lower premiums but higher potential costs when care is needed. Cassidy’s argument is that putting more money directly into individuals’ hands for these expenses could be preferable to channeling funds through insurers.

Sen. Rick Scott, R-Fla., introduced an expansive health account proposal that would allow the enhanced premium tax credits to expire but keep the value of the ACA premium tax credits from the original health care law. States could submit a waiver to the federal government to replace the original ACA premium tax credits with contributions by the federal government to accounts similar to HSAs.

The accounts in the Scott proposal could be used for any type of health insurance plan, including short-term plans that can exclude people based on pre-existing conditions. States could also waive certain provisions of the ACA, including the requirement to cover certain benefits.

However, Larry Levitt and Cynthia Cox KFF cautioned that “While ACA plans would still be required to cover people with pre-existing conditions under the Scott proposal, it is likely that the ACA Marketplace would collapse in states that seek a waiver under his approach. Healthy people would be able to buy less expensive coverage that does not cover pre-existing conditions, or forgo insurance altogether and use their health accounts to pay for health care directly (carrying over any unused balance from year to year). People with expensive health conditions would only be able to get coverage in ACA Marketplace plans, leading to a premium ‘death spiral’ for those plans. Insurers would likely leave the ACA Marketplaces.”

Bipartisan ACA interest in the House

Meanwhile, a bipartisan group of House members released text of legislation Friday aimed at extending Affordable Care Act tax credits for two years while installing income caps and anti-fraud measures.

Reps. Tom Suozzi, D-N.Y., Don Bacon, R-Neb., Josh Gottheimer, D-N.J., and Jeff Hurd, R-Colo., said the proposal would provide a subsidy extension alongside protections sought by many Republicans. It would also significantly lengthen the open enrollment window, which would allow more people into plans, thus strengthening risk pools and lowering premiums.

Because the tax credits and premium prices remain unsettled as open enrollment approaches closing for most states on Dec. 15, the bill would extend the plan year 2026 enrollment period until May 15, 2026.

The lawmakers said the legislation would extend enhanced premium tax credits for enrollees earning less than 600% of the federal poverty level, or about $200,000 per year for a family of four. For enrollees earning more than that, the bill would “phase out” the enhanced subsidies, they said.

The legislation would also create guardrails to prevent broker fraud and remove and penalize bad actors, while implementing consumer protections. The bill would require the marketplaces to regularly confirm enrollees’ eligibility with the Social Security Administration’s Death Master File and eliminate so-called ghost beneficiaries.

The marketplaces would be required to annually notify recipients of the value of the tax credits they receive prior to enrollment.

If enhanced premium tax credits under the ACA are allowed to expire at the end of the year, out-pocket premiums for 22 million enrollees that receive premium assistance will increase by an average of 114%, or $1,016 per person, KFF reports.

Do tax credits go to insurance companies?

Trump posted recently on social media:

“THE ONLY HEALTHCARE I WILL SUPPORT OR APPROVE IS SENDING THE MONEY DIRECTLY BACK TO THE PEOPLE, WITH NOTHING GOING TO THE BIG, FAT, RICH INSURANCE COMPANIES, WHO HAVE MADE $TRILLIONS, AND RIPPED OFF AMERICA LONG ENOUGH. THE PEOPLE WILL BE ALLOWED TO NEGOTIATE AND BUY THEIR OWN, MUCH BETTER, INSURANCE.”

However, KFF responded, “The current ACA premium tax credits do not, in fact, go to insurance companies. The tax credits go to people to help them pay their premiums for ACA Marketplace plans. People can either wait until they file their taxes the following year to receive a lump sum or qualify for advance tax credits based on estimated income, so they do not need to wait until they file their taxes. Those advance tax credits are forwarded directly to the insurance company they choose to purchase, directly lowering the enrollee’s monthly premium payments.”