Treasury tightens ACA subsidy rules. Plan for more uninsured patients
- Posted by Greg Wahlstrom, MBA, HCM
- Posted in Blog
Proposed Treasury and IRS rules would narrow who qualifies for Marketplace subsidies and raise the cost of an income misestimate, and hospitals will feel the coverage losses in self-pay volume and bad debt.
What the proposal does
The Treasury Department and the IRS published proposed regulations in the Federal Register on Oct. 15 to carry out the premium tax credit changes in the July 2025 reconciliation law. The rule rewrites who counts as eligible for the credit, how the credit is calculated and how advance payments are settled at tax time. HHS plans a separate rule on the Marketplace operations needed to put several of the changes in place.
- Repayment caps end. Enrollees whose actual income comes in higher than they projected would repay the full excess advance credit. The regulatory analysis expects about 3.7 million tax returns in 2028 to include a repayment.
- Income-based special enrollment no longer qualifies. Coverage chosen through an income-based enrollment window that is not tied to a life event would not carry a credit.
- Verification comes before payment. Beginning with 2028 tax years, a month counts toward the credit only if the exchange has verified eligibility, and advance payments also require verified income, family size and other coverage.
- Immigrant eligibility narrows. Certain lawfully present immigrants with incomes below the poverty line lose eligibility, and starting in 2027 premiums for lawfully present immigrants who do not meet the law’s new definition are excluded from the credit.
The link to Medicaid work requirements
The proposal also closes a fallback many hospitals assumed would exist. A person who would qualify for Medicaid but loses it for failing the new community engagement requirement would be treated as already having coverage, so that person could not turn to a subsidized Marketplace plan instead. States must begin those requirements by Jan. 1, 2027, although good-faith exemptions can push the start to the end of 2028. For a patient who misses a reporting deadline, the likely result is no coverage at all.
Why it matters for hospitals
The analysis counts about 15.6 million people in exchange coverage, 13.5 million of them potentially eligible for the credit. Even modest attrition from stricter verification and full repayment exposure will appear as self-pay visits, charity care applications and bad debt, most visibly in emergency departments and in states with large Marketplace enrollment.
Comments are due Nov. 30, and a telephonic public hearing is set for Dec. 8. Many provisions come straight from the statute, which limits what can change, but the verification mechanics and the waiver for newborns and other family changes are open to input from providers.
Executive takeaway: Build coverage loss into your 2027 budget now, by payer mix and service line, and give financial counselors and patient access teams the staffing and training to help patients verify eligibility and reenroll before gaps become bad debt.