HHS expands access to catastrophic plans ahead of premium pain on ACA exchanges

The Trump administration is expanding consumers’ eligibility for inexpensive catastrophic health plans in an acknowledgment of looming sticker shock for individuals on the Affordable Care Act exchanges next year. On Thursday, the HHS announced that more middle-income Americans could sign-up for catastrophic plans, coverage with low monthly premiums but very high deductibles meant to provide protection for emergencies, come November’s open enrollment. The change could create a new option for consumers who were previously only able to afford ACA coverage under more generous federal subsidies set to expire at the end of this year. But catastrophic coverage essentially provides the same benefits as bronze plans, a tier of ACA plans that saddle consumers with the highest cost-sharing, and are barely cheaper — if cheaper at all, according to Matt Fiedler, a senior fellow at the Brookings Institution's Center on Health Policy. And, given that catastrophic plans have a separate risk pool than traditional ACA coverage, increasing eligibility for the plans could draw healthy consumers out of the exchanges — potentially bumping up premiums for the beneficiaries who remain, Fiedler said. “There’s less here than meets the eye,” given insurers could already offer this benefit design as a bronze plan today, Fiedler said. But “it’s not that it necessarily does nothing.” Another option for healthy enrollees in advance of ACA cost spike Catastrophic plans protects against serious illness or injury and cover some primary care in exchange for low monthly premiums. But the plans have significantly higher deductibles than other ACA coverage, meaning beneficiaries are essentially responsible for the vast majority of their medical costs — except in worst-case medical scenarios. The plans have always been available for individuals under the age of 30. People who qualify for hardship or affordability exemptions — essentially determinations that they’re unable to afford health coverage due to the high cost of plans or other unfortunate situations, like homelessness or death of a family member — can also sign up for catastrophic coverage. As a result of those parameters, enrollment in catastrophic plans has remained relatively low and tends to skew fairly young. In addition, people receiving subsidies can’t sign up, which has tamped down on demand for the coverage — especially after Congress created more generous subsidies for ACA coverage during the coronavirus pandemic, making significantly more more low- and middle-income Americans eligible for financial assistance. But that could all change in a matter of months. The higher subsidies credited for driving record enrollment in ACA plans are set to expire at the end of 2025. Without them, roughly four million people could find themselves priced out of the exchanges, according to the Congressional Budget Office. The impending loss of the subsidies, coupled with other rules overhauling ACA enrollment and eligibility from the Trump administration, is creating significant uncertainty for insurers. Payers offering plans on the exchanges are bracing themselves for turbulence in the ACA’s risk pools next year as healthier individuals exit the exchanges, and are pricing their plans for 2026 quite highly as a result. Insurers are seeking to hike ACA premiums by 18% at the midpoint next year — more than double last year’s premium increase, according to an analysis of rate filings by health policy research group the KFF. Republicans generally want the enhanced subsidies to expire, arguing that the influx of extra dollars into the exchanges has created an explosion of fraud and abuse. But the CMS’ decision to increase eligibility for catastrophic plans is an admission of just how unaffordable the exchanges could become next year. The agency directly attributed the decision to expected increases in premiums for ACA plans — without touching on what’s driving the spike. “Health insurance premiums are projected to rise substantially for the 2026 plan year across the individual market, representing one of the most significant increases in recent years,” the agency wrote in a fact sheet Thursday. “The impact of significant rate increases may result in a hardship in obtaining coverage under a [qualified health plan], especially for consumers whose income disqualifies them” from receiving financial help, the CMS continued. Specifically, CMS is allowing any consumers who are ineligible for a premium tax credit based on their income to qualify for a hardship exemption and enroll in catastrophic converage. Once the enhanced subsidies expire, this will include people with incomes below 100% of the federal poverty line or above 400% of the federal poverty line. The CMS also plans to expand this to include people with incomes between 250% and 400% of the federal poverty line. The change could potentially benefit healthy individuals who trim their premiums by opting into catastrophic coverage, at the expense of people who remain in non-catastrophic plans and are likely to see their premiums increase, Fiedler said. The health policy researcher situated the policy change within the Trump administration’s broader track record of chipping away at key tenets of the Obama-era law. However, it’s unlikely that many consumers will pivot into catastrophic coverage, given it doesn’t really offer them an option that’s notably different than what’s already available, Fiedler added. “Fundamentally, I don’t think this is a particularly consequential change,” Fiedler said. Still, health officials in the Trump administration said that enhanced eligibility for catastrophic coverage would make health insurance more financially viable for consumers. “Expanding access to catastrophic coverage is another step in making health insurance more affordable, building on the progress made since the passage of President Trump’s One Big Beautiful Bill” in July, HHS Secretary Robert F. Kennedy, Jr. said in a statement. Though Democrats, patient advocates and industry groups had urged Republicans to extend enhanced ACA subsidies in the “Big Beautiful Bill,” Republicans did not, electing instead to cut Medicaid and reshape enrollment and eligibility for ACA coverage. There’s still time for Congress to preserve the subsidies. Insurers especially are holding onto hope that an extension could work its way into a government funding package in September, pointing to the potential political ramifications if lawmakers fail to act. Americans will see the impact of subsidies well before the midterms, and could take it out on Republicans in the voting booth. But an extension looks unlikely given the GOP’s antipathy toward the ACA, and sticker shock for the government. Making the subsidies permanent would cost an estimated $335 billion over the next decade. “It’s still possible that the enhanced subsidies will be extended,” Fiedler said. “Does that mean I think it’s likely? Probably not.”