Trump Administration’s Affordable Care Act Program Integrity and Affordability Rule

Verification Process Related to Income Eligibility¹¹

The Biden administration undermined the ACA’s guardrails by preventing exchanges from properly verifying eligibility. The ACA and previous regulations established under President Obama provided for a multistep process to verify people’s incomes to accurately determine subsidy amounts (see chart).¹²

Problem:
The Biden administration changed Step 1 of this process by requiring exchanges to take applicants at their word (self-attestation) if the exchanges could not verify income through a tax return.¹³ This created a major gap in the process because many people with lower incomes do not file tax returns.

The Biden administration also changed Step 3 of this process by requiring exchanges to automatically add an additional 60 days to the original 90 days for individuals to submit their documents if any data from Steps 1 or 2 contradicts their attested income.¹⁴ The 60-day automatic extension allows people who are ineligible to continue receiving subsidies for a longer period of time. Before this automatic extension, exchanges already had discretion to give more time if the applicant showed a good faith effort to provide the necessary documents but faced extenuating circumstances.

Furthermore, the original ACA rules still leave a major gap in Step 2 that increases fraud: if an individual says they have an income that is higher than available information indicates, the exchange must accept their attestation over the data sources.¹⁵ This has led to a significant amount of income misstatement by brokers and enrollees in order to claim household incomes that generate higher APTCs.

Solution:
The proposed rule would undo the Biden administration’s change to Step 1, which would again require individuals who do not file tax returns to go through Steps 2 and 3. Exchanges would again be required to verify that people seeking subsidies are eligible to receive them and ensure the proper amounts were advanced to insurers.

The proposed rule would also remove the automatic 60-day extension for when people fail to submit their documents. HHS did not find that the 60-day extension was necessary to help people get their documents in order, as the percentage of people with data-matching issues did not improve after it was implemented.¹⁶

Furthermore, the proposed rule would alter Step 2 by requiring exchanges to move to Step 3 in instances when an applicant attests to a higher income, but the sources indicate a lower income.¹⁷ This proposal would address a gap in current regulations that prevents further verification in cases where people have a strong incentive to inflate their incomes.

Some media outlets have portrayed the documentation requirement as overly burdensome. However, HHS estimates that it takes individuals only about an hour to complete the documentation process. And they would have 90 days to complete it.¹⁸ The Biden administration similarly estimated that the process to fill out and submit the documents would take about 45 minutes.¹⁹

Past-Due Premiums: Guaranteed Availability of Coverage²⁰

Problem:
The Biden administration made it difficult for insurers to cancel plans for enrollees who do not pay their premiums. Reversing this policy would help people who have been enrolled without their knowledge and protect them from paying higher taxes as a result.

The ACA generally requires insurance companies to accept every “individual in the State [who] applies for such coverage.”²¹ The ACA also generally requires insurers to “renew or continue in force” a person’s coverage. However, issuers can discontinue plans of enrollees who do not pay premiums on time. The ACA’s requirements thus leave a potential window open for gaming—an individual who fails to pay for a plan could use the guaranteed issue requirement to stop paying premiums at the end of the year and then start again once the new year began. In such cases, the insurer would still have to provide coverage. HHS has found that many people are doing this.²²

Such gaming hurts all enrollees because insurers raise premiums to account for premium nonpayment. To mitigate this problem, the Obama administration allowed insurers to use enrollees’ new payments to pay outstanding balances from previous years. They also allowed insurers to refuse to effectuate coverage until such individuals paid the full outstanding amounts.²³ But the Obama administration applied the policy only when an individual renewed an existing plan, not when an individual selected a different plan with the same insurer or a plan from a different insurer.

The Trump administration expanded that policy during his first term by letting insurance companies apply new payments to past-due payments in cases where individuals moved to new plans with the same insurers.²⁴

The Biden administration undid the Trump administration’s change.²⁵ As the HHS proposed rule notes, this allowed for some people to game the system by hopping from plan to plan without paying premiums for months they were covered.²⁶

Solution:
The proposed rule seeks to close this loophole. It would allow insurers to require new enrollees to pay their past-due premiums before their new coverage begins. If they refuse to pay, the insurers may discontinue coverage. Given that these plans come with very generous federal subsidies, this provision would be a step toward restoring program integrity. However, given insurers have a financial incentive to keep non-paying enrollees to continue receiving subsidy payments, HHS should consider a stronger alternative, such as requiring insurers to return the subsidies for such enrollees.

Failure to File Taxes and Reconcile Subsidy²⁷

Problem:
Under both the Obama and Trump administrations, exchanges had to determine tax filers ineligible for the APTC if they received too much subsidy and failed to properly reconcile the discrepancy. That policy remained in place through 2023 and helped protect the program’s integrity.

During the Covid-19 pandemic, the Biden administration essentially stopped enforcing eligibility for ACA coverage.²⁸ The Biden administration finalized a rule that, starting in 2024, prohibited an exchange from denying an APTC until the individual failed to pay back excess subsidies for two consecutive years.²⁹ This policy incentivizes abuse by allowing people who improperly enroll in the exchanges to receive an extra year of subsidized coverage. HHS estimates that “18.5 percent of people [who failed to reconcile their subsidies] may be ineligible” for continued subsidies.³⁰ The Biden administration’s policy also harms consumers who were enrolled without their knowledge, because tax liabilities can continue to accumulate for an extra year. According to the proposed rule, these tax liabilities could be significant, particularly if someone’s income ends up being higher than estimated.³¹

Solution:
The proposed rule would require exchanges to deem individuals as ineligible for APTCs if they do not pay back their excess subsidies for the previous year. For example, if individuals make more than they initially thought in 2026, they must pay back, or reconcile, the excess subsidies when they file their 2026 taxes, which is usually in the spring of 2027. If they fail to reconcile their subsidies for 2026, the exchanges would be required under this proposed rule to deem them ineligible for APTCs for 2028.

Redetermination³²

Problem:
ACA plan enrollees originally had to verify their eligibility each year. However, the Obama and Biden administrations issued various guidance documents that undermined those processes. The Biden administration allowed exchanges to determine applicants’ eligibility by using their most recent applications, regardless of whether the applicants filed tax returns or if their tax returns showed they were not eligible for the APTCs claimed.³³

Removing this verification requirement made it easier for ineligible people to stay on plans. This is particularly harmful when brokers sign up enrollees for fully subsidized health insurance without their knowledge, as it can result in significant tax liabilities. This policy impacted Medicaid beneficiaries’ access to providers. In 2024, HHS received 44,151 complaints (12,954 “medically urgent” ones) that Medicaid beneficiaries were not able to access their benefits because rogue brokers had signed them up for ACA plan without their knowledge.³⁴ Since only a small percent of people switched are likely to file such complaints, this large number is testament to an extraordinary problem.

Solution:
The proposed rule does not adequately address this problem and needs to be strengthened in this area. The rule only requires those consumers who receive fully subsidized plans to confirm or update their eligibility or else have their subsidies reduced so that they would have to pay $5 a month. This additional step seeks to reduce fraud, because exchanges now automatically re-enroll individuals and deem them eligible based on the information in their original applications. However, the proposed rule acknowledges that this $5 amount is probably not enough to incentivize “individuals to re-confirm their income and plan.”³⁵

This provision is woefully inadequate because it does not address automatic re-enrollment, which perpetuates substantial fraud in the exchanges and discourages individuals from regularly evaluating whether their health plans best fit their needs.

Automatic re-enrollment into heavily subsidized coverage is a recipe for wasteful and improper expenditures, particularly because the government cannot typically recover excess advanced subsidies provided to insurers. This often means that taxpayers lose thousands of dollars for enrollees whose subsidies were incorrectly determined. Moreover, automatic re-enrollment bases subsidies on data that are several years old, which is a significant program integrity risk.

Given this, CMS should end automatic re-enrollment starting for the 2026 plan year. CMS should educate policyholders about this change through multiple methods to make sure that enrollees know that they must actively provide information to be eligible to receive an APTC. This policy would not affect enrollees’ eligibility to receive a subsidy, since they would still be eligible to receive PTCs when they file their taxes. But ending automatic re-enrollment would likely save billions of dollars a year in subsidies that go to insurers that do not meet program requirements and that cannot be recaptured.

Premium Payment Thresholds³⁶

Problem:
Federal regulations established under President Obama³⁷ require an insurer to terminate a non-paying enrollee’s coverage after a three-month grace period. The Obama administration loosened this requirement at the insurance companies’ request by allowing them to count enrollees as having paid their entire premiums if they pay a certain net percentage of their premiums.³⁸ This underscores a perverse dynamic in the ACA: Insurance companies financially benefit from improper enrollment because they still receive subsidies for non-paying enrollees. So even if those enrollees do not pay their portion of the premiums, insurers still benefit through their enrollment with large government payments

In 2025, just before leaving office, the Biden administration finalized a rule that people need to pay 95 percent of their net premium for the insurer to keep their coverage.³⁹ For example, if the monthly premium is $500 and the exchange pays an APTC of $400, the net premium is $100. Under the 95 percent threshold, the enrollee must pay at least $95. The rule also gave insurance companies two additional options to keep individuals enrolled who failed to pay. Under the Biden administration rule, the insurance company can still count an enrollee as having paid their premium if (1) the individual owes less than the fixed dollar premium threshold of $10 or (2) the individual has paid 98 percent of the gross premium after the subsidy. These payment options make it easier for people to stay enrolled in coverage for months before the insurer is required to end their enrollment.⁴⁰

This policy wastes taxpayer funds and hurts some Americans because, as the proposed rule notes, “improper enrollments remain undetected, since the enrollee is less likely to receive invoices, and a delinquency.”⁴¹ HHS notes that consumers are increasingly complaining that they have been signed up without their consent (7,134 consumer complaints of improper enrollments in December 2024 compared to 5,032 in December 2023).⁴²

Solution:
The proposed rule would reverse the Biden administration’s two additional options that allowed issuers to keep non-paying customers on the exchanges for longer periods of time. However, it would maintain the Biden administration’s threshold of 95 percent.⁴³ Overall, the proposal would increase program integrity by reducing the number of enrollees who can simply stay on the exchanges without taking action while helping to protect those who were signed up without their consent from accumulating greater tax liabilities or preventing them from accessing other forms of coverage.

The ACA limits enrollment periods to an annual open enrollment period and special enrollment period for significant life events. These limits are important, because the ACA requires insurers to offer coverage to any applicant without the ability to charge people more if they are sick. If people can sign up for insurance at any time, they may wait until they get sick to buy insurance, which would raise premiums overall.
The Biden administration expanded the open enrollment period and created new special enrollment periods that are prone to abuse. These policies confuse consumers, raise premiums by encouraging individuals to wait until they get sick to enroll, and exacerbate improper enrollment.

Open Enrollment Period⁴⁴

Problem:
In 2021, President Biden expanded the ACA open enrollment period by one month. However, this open enrollment period is confusing because, in practice, it is two open enrollment periods. Coverage starts on January 1st for people who enroll between November 1 and December 15. But coverage does not start until February 1 for those who sign up during the second period, from December 15 to January 15.⁴⁵ This difference is not always clear to consumers, so some people who enroll after December 15 are surprised when their coverage does not start until February.⁴⁶

Solution:
The proposed rule would restore the open enrollment period to November 1 through December 15,⁴⁷ the same period that the Obama administration had envisioned.⁴⁸

In March 2016, the Obama administration issued a rule that scheduled an open enrollment period from November 1 to December 15 starting for the 2019 coverage year. The Obama administration’s rule stated many of the same reasons as the Trump administration’s new rule, including that a month and a half is adequate time for consumers to enroll.⁴⁹ In 2017, the Trump administration sped up the implementation of the Obama administration’s rule, and for the 2018 through 2021 open enrollment periods, the period was from November 1 to December 15. The proposed rule notes that “consumer casework volumes related to coverage start dates and inadvertent dual enrollment decreased … suggesting that the [six-week period improved] consumer experience, as well as program integrity.”⁵⁰

This shortened period would reduce consumer confusion and better align with the open enrollment periods used in the employer market and Medicare Advantage. HHS also estimates it would lower premiums due to less adverse selection.⁵¹

Special Enrollment Periods⁵²

Problem:
The Biden administration created easily gameable special enrollment periods (SEPs) and removed requirements for individuals to verify eligibility for all but one SEP.⁵³ The combination of these two policies exacerbated improper enrollments and fraudulent spending.

One SEP was particularly vulnerable to abuse. In 2022, the Biden administration eliminated the pre-enrollment verification requirement for SEPs in both federal and state exchanges ⁵⁴ and gave states that use the federal exchange the option of providing a SEP for individuals whose incomes are between 100 and 150 percent FPL.⁵⁵ State exchanges could also establish this SEP, with some such as Colorado⁵⁶ limiting it to new enrollees while others such as New Jersey expanding it⁵⁷ using state funds.⁵⁸ In 2024, the Biden administration made this SEP permanent in states that use the federal exchange.⁵⁹ SEPs were intended for people who experience substantial life events that require them to change coverage. But having a certain income is not a life-changing event like having a child or losing a job, so creating an SEP for an entire income range was a clear overreach and out of step with the ACA’s structure.⁶⁰

The 100 to 150 percent FPL SEP is particularly vulnerable to improper enrollment and fraud, because the expanded subsidies already encourage more people to claim that their incomes fall into this range. HHS notes that in the first three months of implementing the 150 percent FPL SEP in 2024, the number of consumer complaints about improper enrollment or plan switching skyrocketed from only a “handful” to 50,000 for improper enrollments and 40,000 for unauthorized plan switches.⁶¹ This SEP also encourages those who are eligible to wait until they get sick to sign up for coverage. HHS estimates that this SEP raises premiums by between 0.5 and 3.6 percent.⁶²

Solution:
The proposed rule would eliminate the SEP for individuals who earn between 100 and 150 percent FPL⁶³ and would require exchanges to first verify eligibility for at least 75 percent of new enrollees using most SEPs.⁶⁴ These changes would apply to both state and federal exchanges, as they should. HHS notes that the requirement for eligibility verification would apply to only 75 percent of new enrollees to give exchanges greater flexibility.⁶⁵

This proposal builds on an Obama administration rule that scheduled a pre-enrollment verification pilot program for 50 percent of new SEP enrollees.⁶⁶ In the proposed rule, the administration estimates that the pre-enrollment verification process would take an hour for a consumer to complete.⁶⁷

HHS expects that both SEP policies would reduce premiums by improving the risk pool.⁶⁸ The proposed rule states that eliminating the 100 to 150 FPL SEP will reduce premiums by as much as 3.6 percent⁶⁹ and the pre-enrollment verification would reduce premiums by 0.5 to 1.0 percent for the 2026 plan year and 1.0 to 2.0 percent for the 2027 plan year.⁷⁰

In addition to the provisions specifically aimed at improper enrollment and fraud, the new proposed rule includes several other provisions.

Re-enrollment hierarchy⁷¹

The proposed rule would remove the requirement that automatically terminates an enrollee’s bronze plan if a cheaper silver plan is available, returning to the policy in place under Presidents Obama and Trump.⁷² The Biden administration changed the re-enrollment regulations to automatically move a bronze plan enrollee into a silver plan if the silver plan has a lower premium.⁷³ This violates enrollees’ agency and could lead to some individuals accumulating surprise tax liabilities if they must pay back some of their subsidies.⁷⁴ The proposed rule indicates repealing this provision in regulation would prevent individuals from accumulating surprise tax liabilities.

Definition of “lawfully present”⁷⁵

The rule would update the definition of lawfully present to exclude recipients of Deferred Action for Childhood Arrivals (DACA). Currently, the ACA states that individuals who are not “lawfully present” in the United States are ineligible to enroll in ACA plans or receive subsidies.⁷⁶ Since 2012, both the Obama and Trump administrations interpreted the term lawfully present to exclude individuals under the DACA program. President Biden reversed this policy in 2024.⁷⁷ States are currently litigating whether HHS can enforce that rule.⁷⁸

Evidence standard for terminating agents, brokers agreements⁷⁹

Currently, HHS can terminate a broker’s agreement only “for cause.” To address increased complaints of rogue brokers signing people up for coverage, this proposed rule clarifies that HHS will review broker terminations by applying a “preponderance of the evidence” standard.⁸⁰ This standard of evidence would make it easier for HHS to terminate brokers’ agreements.⁸¹ The proposed rule notes that courts generally use a “preponderance of evidence” standard in most civil cases, which is easier to meet than the “beyond a reasonable doubt” standard that courts apply in criminal cases.⁸²

Sex trait modification⁸³

This provision would prohibit plans on the ACA from covering sex-trait modifications as an essential health benefit.⁸⁴ HHS cites concerns “about the scientific integrity of claims made to support their use in health care settings.” This proposal reflects the Trump administration’s efforts to reduce federal funding for sex change procedures and treatments.⁸⁵

Premium Adjustment Percentage Index (PAPI)⁸⁶

This provision would update the method that HHS uses to calculate the PAPI, which determine inflation updates to parameters, such as the maximum out-of-pocket limits on cost sharing and the amounts employers must pay for certain plans.⁸⁷ The ACA requires the HHS secretary to determine these amounts based on the “average per capita premium for health insurance in the United States.”⁸⁸ The Obama administration chose to calculate the PAPI by using only the employer-based insurance market premiums, excluding individual insurance market premiums. This method meant that PTCs increased much more significantly over time. However, the Obama administration stated that it would consider using both markets in the future.⁸⁹ This new rule would better align with the statute’s plain language by including both the individual market and the employer market in that calculation and would appropriately reduce taxpayer costs.

De minimis thresholds for actuarial value⁹⁰

This proposed rule would allow for more flexible thresholds for plans’ actuarial values.⁹¹ A plan’s actuarial value (AV) refers to the expected amount of medical claims covered by the plan. For example, bronze plans—which are required to have an AV of 60 percent—pay 60 percent of the average enrollees’ medical costs. Presidents Obama and Trump expanded the de minimis range. During his first term, President Trump expanded the de minimis range to give insurance companies greater flexibility to design plans benefits. This policy led to a decrease in premiums and permitted more HSA-eligible plans on the exchanges, giving people additional plan options. The Biden administration restricted the de minimis range for all metal tiers, causing higher premiums. The proposed rule would again expand the AV de minimis variation, which will allow greater plan flexibility and lower premiums.⁹²

HHS’s proposed rule would lower premiums, reduce improper enrollments, and correct various Biden-era policies that pursued an enrollment-at-any-cost strategy. The impact analysis in the rule confirmed Paragon’s methodology that estimated between 4 million and 5 million improper exchange enrollees. While allowing the enhanced subsidies to expire would reduce improper enrollment the most, this rule would significantly improve program integrity by reinstating commonsense protections around eligibility.

HHS projects that this proposed rule would reduce exchange enrollment by between 750,000 and 2 million individuals.⁹³ However, many of the individuals who lose coverage because of this rule’s greater guardrails are fraudulently enrolled or have other sources of coverage. As the Congressional Budget Office notes, the number of individuals with multiple sources of coverage skyrocketed after Congress expanded the ACA subsidies—from 18 million in 2021 to 29 million in 2023.⁹⁴ Given what is known about the ACA’s lack of verification, those groups strongly overlap.

The Biden administration pursued a reckless fiscal policy that significantly increased debt, interest rates, and inflation.⁹⁵ This rule reverses many of those policies and thus has significant savings (estimated at $150 billion over a decade), which will lower future interest rates and inflation. Rules that reduce fiscal costs also reduce the deadweight loss of taxation, which harms Americans by reducing economic activity. The Biden administration sought to maximize enrollment by neglecting the rules and turning a blind eye to fraud and improper activity. In contrast, this proposed rule is an example of responsible governing and would help restore the ACA to the law Congress passed in 2010.