CMS Proposes New Regulations for the Affordable Care Act Health Insurance Marketplaces

On Jan. 17, 2025, following the end of the annual open enrollment period for Affordable Care Act (ACA) health insurance coverage, the Centers for Medicare and Medicaid Services (CMS) reported that 24.2 million consumers selected a plan for coverage in 2025 through the marketplaces, including 20.2 million who had active 2024 coverage and selected a plan for 2025 coverage or were automatically re-enrolled, and 3.9 million new consumers. CMS also reported that 200,046 Kansans selected a plan for 2025 through the federally facilitated marketplace, HealthCare.gov, breaking the record for Kansans selecting marketplace coverage for the fourth year in a row.  

On Monday, March 10, 2025, CMS issued the “2025 Marketplace Integrity and Affordability Proposed Rule,” which proposes standards for the health insurance marketplaces and the health insurance issuers, brokers and agents who assist millions of consumers as they select and enroll in ACA coverage. The Proposed Rule would revise standards and requirements in three major areas: 1) the duration and number of enrollment periods, 2) new or enhanced rules for determining eligibility to enroll in marketplace coverage and to qualify for premium tax credits and cost-sharing reductions, and 3) adjustments to plans and premiums by health insurance issuers who offer coverage on the marketplaces. If the Proposed Rule is finalized prior to Nov. 1, 2025, many of the proposed changes would be in effect for the open enrollment period for Plan Year 2026 and could reduce the number of individuals who enroll and receive premium tax credits and cost-sharing reductions.  

 Under the federal Administrative Procedure Act, CMS is soliciting public comments on the Proposed Rule. Comments must be received by April 11, 2025, to be assured consideration.  

Background 

Title I of the federal Patient Protection and Affordable Care Act of 2010 established Health Benefit Exchanges (“Exchanges” or “Marketplaces”) to facilitate the purchase of qualified health plans by eligible U.S. consumers. Many individuals who enroll in qualified health plans through individual market exchanges are eligible to receive advance premium tax credits (APTC) to reduce their costs for health insurance premiums and cost-sharing reductions (CSRs) to reduce their out-of-pocket expenses, such as co-payments and coinsurance for health care services, Most individuals receiving APTCs use it to reduce their monthly health insurance plan premiums during the calendar year before they must file their taxes. Taxpayers must then reconcile the APTC paid to issuers on their behalf when they file taxes. The ACA includes limits on how much excess APTC a taxpayer must repay based on their household income. For Plan Year 2024, 93.5 percent of Kansas marketplace enrollees received APTC or CSR.  

 The ACA’s individual market rules require issuers (insurance companies) to provide coverage to all applicants regardless of pre-existing health conditions and restrict issuers from setting premiums based on health status. These requirements can lead to adverse selection — a situation where individuals with higher health risk are more likely to select coverage than healthy individuals — by allowing people to wait to enroll in coverage until they need health services. In such situations, health insurance issuers offering coverage to a larger proportion of higher-risk enrollees raise premiums, which causes healthier people to drop coverage. Continuing cycles of rising premiums and healthier people dropping coverage can create a “death spiral” and undermine the viability of the individual market for everyone. To discourage people from waiting until they need health care services to sign up for coverage, the ACA permits issuers to limit enrollment periods to certain times.  

 CMS states that after reviewing individual health insurance market data and consumer complaints, it believes several rules implemented in the past have removed necessary protections for the operation of the Exchanges and have resulted in a substantial increase in improper enrollments on the Exchanges. Some of these rules have removed or reduced requirements for verifying whether individual consumers are eligible to enroll in plans offered on the Exchanges, whether they qualify for APTC and CSR subsidies, and when and under what conditions consumers can enroll. CMS believes that the data show that these previous rules have led to higher premiums and costs for consumers and federal taxpayers.  

 On Jan 20, 2025, President Trump issued a memorandum entitled “Delivering Emergency Price Relief for American Families and Defeating the Cost-of-Living Crisis.” This memorandum instructed all executive departments and agencies to deliver emergency price relief for the American people and to increase the prosperity of the American worker. CMS states that it expects the actions in the proposed rule, which modify or replace existing rules, will “provide relief to families who do not qualify for federal premium subsidies and reduce the burden of the ACA premium subsidy expenditures to the federal taxpayer.” 

Enrollment Periods 

Shortening the Annual Open Enrollment Period

For Plan Years (PYs) starting Jan 1, 2026, and beyond, the annual Open Enrollment Period (OEP) for coverage through all individual market Exchanges would be Nov. 1 through Dec. 15 of the calendar year preceding the plan years of enrollment. Therefore, the OEP for Plan Year 2026 would be Nov. 1 through Dec. 15, 2025. This would be a return to the OEP schedule implemented by the first Trump administration in November 2017. During the Biden administration, the OEP for Plan Years 2022 through 2025 returned to the Nov. 1 through Jan. 15 schedule used during the Obama administration.   

Eliminating the Low-Income Special Enrollment Period (SEP)

The year-round SEP for qualified individuals or enrollees, or their dependents, who are eligible for APTC and whose protected household income is at or below 150 percent of the federal poverty level (FPL) would be repealed. Low-income households would need to apply during the annual open enrollment period. 

Eligibility to Enroll and Qualify for Premium Tax Credits and Cost-Sharing Reductions  

The Definition of “Lawfully Present”

The ACA specifically excludes individuals who are not “lawfully present” from eligibility to enroll in marketplace coverage. They also cannot receive APTCs and CSRs. Since enactment of the ACA, the definition of “lawfully present” was interpreted to mean that noncitizens in the U.S. under the Deferred Action for Childhood Arrivals (DACA) policy were not lawfully present for purposes of determining eligibility for the marketplace and qualifying for marketplace subsidies. In May 2024, the Biden administration published new regulations extending marketplace coverage to DACA recipients and updated the definition of “lawfully present” to include DACA recipients. The Proposed Rule would update the definition again, such that DACA recipients are no longer considered “lawfully present” for purposes of enrollment in a qualified health plan and for eligibility for APTC and CSRs.  

Requiring $5 Premium Responsibility

To prevent fully subsidized enrollees from being automatically re-enrolled without taking an action to confirm their eligibility information, when an enrollee does not contact the Exchange to obtain an updated eligibility determination and select a plan on or before the last day of the annual OEP for January 1 coverage, and whose portion of the premium for the entire policy would be zero dollars after application of APTC through the Exchange’s annual redetermination process, all Exchanges would be required to decrease the amount of the APTC applied to the policy by $5 for the first month and every following month that the enrollee does not confirm their eligibility for APTC. 

Enrollees automatically re-enrolled with a $5 monthly premium after APTC would be able to reinstate the full amount of APTC by updating their exchange application at any point to confirm their eligibility for APTC that cover the entire premium.  

The Federally Facilitated Exchanges and the State-Based Exchanges on the federal platform would be required to implement this change with annual redeterminations for Plan Year 2026, Other State Exchanges would be required to implement the change with annual redeterminations for Plan Year 2027. 

CMS also is seeking comments related to automatic re-enrollment that would provide more incentive for enrollees to confirm their eligibility for APTC and require them to do more than pay the $5 premium to continue to receive the balance of their APTC. CMS seeks comments on 1) whether $5 is the appropriate premium amount for the affected enrollees, 2) whether individuals should be required to re-confirm their plan and re-verify their income before they are eligible to receive APTC, and 3) whether the option for exchanges to automatically re-enroll individuals who qualify for fully or partially subsidized plans should be removed.  

Satisfying Debt for Past Due Premiums

The policy restricting issuers from establishing premium payment policies that require enrollees to pay past-due premiums from prior coverage to effectuate new coverage would be repealed. Issuers also would be allowed, subject to applicable state law, to add past-due premium amounts owed to the issuer to the initial premium the enrollee must pay to effectuate new coverage, and to refuse to effectuate new coverage if the past-due and initial premium amounts are not paid in full. 

Addressing Failure to File and Reconcile

The “failure to file and reconcile process” stated in current law would be revised to reinstate the policy that Exchanges must determine a tax filer ineligible for APTC if: 1) the U.S. Department of Health and Human Services (HHS) notifies the Exchange that the tax filer (or their spouse if the tax filer is a married couple) received APTC for a prior year for which tax data would be used for verification of income and 2) the tax filer or tax filer’s spouse did not comply with the requirement to file a federal income tax return and reconcile their APTC for that tax year. This proposed process would replace the existing requirement that Exchanges may not determine a tax filer eligible for APTC if HHS notifies the Exchanges that the tax filer or tax filer’s spouse: 1) received APTC for two consecutive years and 2) did not comply with the requirement to file a federal income tax return and reconcile APTC for that year and the previous year.  

Stopping Extensions of the Period to Resolve Income Inconsistencies

The policies for consumers receiving APTC and CSRs when there is an income inconsistency between their self-reported income and a trusted data source would be strengthened to remove the requirement that applicants receive an automatic 60-day extension to the 90-day period allowed under the ACA to provide documentation to verify their household income. This policy would end APTC payments to individuals who have failed to provide documentation verifying their eligibility for APTC within 90 days.  

 CMS also proposes requiring all Exchanges to generate annual household income inconsistencies when a tax filer’s attested projected annual income is greater than or equal to 100 percent and not more than 400 percent of the federal poverty level (FPL) and trusted data sources indicate that projected household income is under 100 percent of FPL. Under the ACA, consumers do not receive APTC and CSRs if their income is below 100 percent FPL. 

Finally, CMS proposes to remove the exception to the standard household income inconsistency process that requires Exchanges to accept an applicant’s attestation of household income and family size without verification when the Internal Revenue Service does not have tax return data to verify household income and family size.  

Removing Re-Enrollment Hierarchy Standards

Under the ACA, only enrollees in silver qualified health plans are eligible to receive CSR. The proposed rule would remove the federal regulation that currently allows Exchanges to move a CSR-eligible enrollee from a bronze qualified health plan and re-enroll them into a silver qualified health plan for an upcoming plan year, if a silver qualified health plan is available in the same product, with the same provider network, and with a lower or equivalent net premium after the application of APTC as the bronze plan into which the enrollee would otherwise have been re-enrolled.  

Conducting Eligibility Verification for Special Enrollment Periods (SEPs)

The regulation that enables HHS to reinstate pre-enrollment verification of eligibility of applicants for all categories of individual market SEPs would be amended to require all Exchanges to conduct pre-enrollment verification of eligibility for at least 75 percent of new enrollments through SEPs.

Issuer Adjustments to Plans and Premiums 

Eliminating Gross Premium Percentage-Based and Fixed-Dollar Premium Payment Thresholds

Premium payment thresholds are used by issuers to determine when enrollees have paid all premium amounts due when the enrollees pay an amount that is less than the total premium owed and for determining when an issuer may trigger a grace period for non-payment of premium or terminate enrollment for non-payment of premium. Under the Proposed Rule, issuers would be required to implement a threshold that would ensure that enrollees whose premiums are not fully covered by APTC must always pay at least some premium to avoid delinquency or loss of coverage. Under current policy, it is possible for enrollees in certain circumstances to not pay premiums for multiple months before entering delinquency or losing coverage. 

Updating the Premium Adjustment Percentage (PAPI) Methodology

The Proposed Rule would update the Premium Adjustment Percentage (PAPI) Methodology, or premium growth measure, that is used by issuers to calculate the maximum annual limitation on cost sharing, the reduced maximum annual limitation on cost sharing for individuals eligible for CSRs with household income greater than or equal to100 and less than or equal to 150 percent of the FPL, greater than 150 percent and less than or equal to 200 percent of the FPL, and greater than 200 and less than or equal to 250 percent of the FPL, and the required contribution percentage, which is used to determine whether individuals age 30 and above qualify for an affordability exemption that enables them to enroll in catastrophic coverage.   

Based on the proposed Plan Year 2026 premium adjustment percentage, the 2026 maximum annual limitation on cost sharing would be $10,600 for self-only coverage and $21,200 for other than self-only coverage. This represents approximately a 15.2 percent increase from the Plan Year 2025 parameters of $9,200 for self-only coverage and $18,400 for other than self-only coverage. The proposed values of the Plan Year 2026 reduced maximum annual limitation on cost sharing for self-only coverage would be $3,500 for enrollees with household income greater than or equal to 100 percent of the FPL and less than or equal to 150 percent of the FPL, $3,500 for enrollees with household income greater than 150 percent of the FPL and less than or equal to 200 percent of the FPL, and $8,450 for enrollees with household income greater than 200 percent of the FPL, as calculated using the proposed Plan Year 2026 premium adjustment percentage. The values for maximum annual limitation on cost sharing for Plan Year 2025 are $3,050, $3,050 and $7,350, respectively. The proposed required contribution percentage for Plan Year 2026 would be 8.05 percent, an increase of approximately 0.77 percentage points above the 2025 value of 7.28 percent. 

Simplifying De Minimis Thresholds for Actuarial Value (AV)

Under the ACA, issuers may offer four levels or types of health insurance plans to consumers on the Exchange or Marketplace, based on the concept of “actuarial value” (AV). AV refers to the share of health care expenses that each plan covers for a typical group of enrollees. The ACA groups health plans into four levels: bronze, with an AV of 60 percent; silver, with an AV of 70 percent; gold, with an AV of 80 percent; and platinum, with an AV of 90 percent. As plans increase in AV, they generally cover a greater share of an enrollee’s medical expenses. The Proposed Rule would widen the de minimis thresholds that issuers may use to determine whether their plans at each level meet the coverage requirements stated in the ACA. 

Other Standards

Evidentiary Standard for Termination of Agent, Broker and Web-Broker Exchange Agreements for Cause

Under the ACA, and subject to state law, agents, brokers and web-brokers can enter into Marketplace agreements with CMS to: 1) assist consumers, applicants, qualified individuals and enrollees in applying for APTC and/or CSRs for qualified health plans; and 2) enroll qualified individuals in a qualified health plan through the individual market federally facilitated Exchanges and State-Based Exchanges using the federal platform in a manner that constitutes enrollment through the Exchange. Agents, brokers and web-brokers are eligible for compensation for these activities. The ACA also provides for termination of these agreements, including termination for cause for: 1) noncompliance or a pattern of noncompliance with applicable law, regulatory requirements, and the terms and conditions of their Exchange agreements; 2) failure to maintain proper licensing; and 3) a State finding of fraud or abusive conduct.   

In July 2024, CMS reported that during the first six months of 2024 it had received more than 200,000 complaints of situations where: 1) a consumer’s marketplace plan was changed without their consent, or 2) a consumer was enrolled in a plan without their consent. At that time CMS initiated a number of steps to make it more difficult for these types of transactions to occur, specifically by making it more difficult for agents and brokers to initiate these types of transactions without the knowledge and consent of consumers. CMS proposes to require HHS to apply a “preponderance of the evidence” standard of proof for terminations for cause by HHS of an agent’s, broker’s or Web-broker’s Exchange agreements. It also proposes to add a definition for “preponderance of the evidence” to mean proof of evidence that compared with evidence opposing it, leads to the conclusion that the fact at issue is more likely true than not. This evidence standard is considered less stringent and would allow CMS to rely on the testimony of consumers, along with other documentation. CMS stated in the Proposed Rule that the “proposed regulatory change would put all agents, brokers, and web-brokers assisting consumers with enrollment . . . on notice of the evidentiary standard [CMS] would use” for its enforcement.  

Prohibiting Coverage of Sex-Trait Modification Services as an Essential Health Benefit

Issuers of coverage subject to essential health benefits requirements would be prohibited from providing sex-trait modification services as an essential health benefit in any State beginning with Plan Year 2026. The Proposed Rule states that “items and services that comprise sex-trait modification services are performed to align or transform an individual’s physical appearance with an identity that differs from his or her sex.” If any State separately mandates coverage for sex-trait modification outside of its essential health benefit benchmark plan, the State would be required to defray the cost of that State mandated benefit. For states that consider mandating coverage of sex-trait modification in the future, defrayal obligations would apply as enforced by CMS. In states in which sex-trait modification is currently an essential health benefit, the state would be prohibited from covering it as an essential health benefit beginning in Plan Year 2026.  

CMS also is soliciting comments on whether it should adopt a formal definition of “sex-trait modification,” whether there are current issuer standards with regards to what is considered sex-trait modification, and whether there should be exceptions to permit the coverage of items and services as essential health benefit for other medical conditions and what those conditions are.

Funding for Hill to the Heartland is provided in part by the Sunflower Foundation: Health Care for Kansans, a Topeka-based philanthropic organization with the mission to serve as a catalyst for improving the health of Kansans. KHI retains editorial independence in the production of its content and its findings. Any views expressed by the authors do not necessarily reflect the views of the Sunflower Foundation.