How the Federal Budget Bill Impacts the Affordable Care Act

The federal budget bill signed into law on July 4 included targeted attacks on the Affordable Care Act (ACA) that will trigger widespread coverage losses and higher healthcare costs for everyone.

Below are some of the key changes to the ACA included in the new law. These provisions, along with Congress’s failure to, as of yet, extend enhanced premium tax credits, amount to an assault on the ACA and are expected to lead to 270,000 Pennsylvanians losing their ACA Marketplace (Pennie) coverage.

 

Impact on Health Insurance Affordability and Access

The law creates several new barriers that will make it harder for Pennsylvanians to get and keep affordable health coverage through Pennie:

• Higher Repayment Burdens for Premium Tax Credit Recipients -- Starting with premium tax credits received in 2026, anyone who underestimates their income and receives more premium assistance than they're entitled to will have to repay the full excess amount—regardless of their actual income level. Currently, repayment amounts are capped based on income, and only those earning above 400% of the federal poverty level must repay excess credits in full. This change could result in significant tax bills for families who experience income fluctuations during the year.
   
• No Premium Tax Credits for Low-Income Individuals Who Enroll During Special Enrollment Period (SEP) – People with very low incomes (below 150% of the federal poverty level) will lose access to premium tax credits if they enroll during the special enrollment period designed specifically for low-income individuals. While they can still purchase insurance during this period, they'll have to pay full price, making coverage unaffordable for most. Other special enrollment periods—triggered by life events like moving, job loss, or family changes—remain unaffected.
   
• End of "Conditional Eligibility" Grace Period – Currently, when there is a mismatch between information an applicant provides and government data sources, Pennie can still enroll the person in coverage with premium tax credits for 90 days – a grace period called “conditional eligibility”—while the person gathers documentation to resolve the issue. Under the new law, conditional eligibility goes away—people must verify all information before getting any financial assistance. The only exception is for those enrolling due to family size changes, such as the birth of a child.
   
• Elimination of Automatic Renewal of Premium Tax Credits – At the end of 2024, Pennie automatically renewed coverage for 97.5% of enrollees, allowing them to seamlessly continue their Pennie coverage into 2025.  Under the new law, people will need to re-verify their information (e.g., income, immigration status, address) I in order to have their coverage renewed with premium tax credits, even though Pennie uses reliable data sources to verify applicant information.  If someone does not verify their information in time, their health insurance will be renewed but they will be charged the full premium cost.  This will lead to people dropping their coverage because they can’t afford to pay the full cost.
   
• New Barriers for People Who Lose Medicaid – People who lose Medicaid because they are unable to meet the work reporting requirements will not be allowed to get premium tax credits to help afford Marketplace coverage.

 

Impact on Immigrants

As with so many aspects of the new law, immigrants are specifically targeted with respect to cuts to ACA marketplace coverage. 

Currently, lawfully present immigrants in Pennsylvania can purchase health insurance through the ACA Marketplace, known as Pennie in Pennsylvania. These individuals can also get help paying for their coverage through advanced premium tax credits and cost-sharing assistance to help make their coverage more affordable.  This marketplace access is particularly valuable for immigrants who cannot access federally-funded Medicaid – which makes up most of Pennsylvania’s Medicaid programs— due to their immigration status. For example, legal permanent residents (green card holders) must wait five years before they can get federal Medicaid, making Pennie a crucial bridge to coverage during this waiting period.

The new law creates significant barriers to Pennie coverage for immigrants through a two-phase rollout:

• Phase 1 – Starting January 1, 2026, people with income below 100% of the federal poverty level and who are ineligible for federally-funded Medicaid due to their immigration status will lose access to subsidies that help lower the cost of Marketplace insurance.  This change effectively eliminates coverage for the lowest-income immigrants, who will be unable to afford the full cost of health insurance without financial assistance. 
• Phase 2 – On January 1, 2027, Pennie subsidies will be restricted to U.S. citizens, lawful permanent residents (green card holders), certain Haitian and Cuban entrants, and people from the Marshall Islands, Micronesia, and Palau. This means that many vulnerable populations—including refugees, asylees, human trafficking survivors, and survivors of domestic violence—will no longer be able to get tax credits that make ACA Marketplace coverage affordable.
   

Some immigrants who lose coverage may be able to access Pennsylvania’s limited state-funded Medicaid program, but that program has very low income and resource limits. For more information on state-funded Medicaid in Pennsylvania, click here.

 

Failure to Extend Enhanced Premium Tax Credits

The new law fails to extend the enhanced premium tax credits (EPTCs) that have been in effect since 2021, setting the stage for widespread coverage losses when these enhanced subsidies expire at the end of 2025.  This will result in people ending their Pennie coverage and declining to enroll because they will no longer be able to afford the coverage. 

The EPTCs significantly increased the amount of financial assistance available to help people afford their premiums and expanded eligibility to include middle-income individuals who previously earned too much to qualify for help. For many Pennsylvanians, these enhanced subsidies have been the difference between having health insurance and going without coverage. In Pennsylvania, two-thirds of current Pennie enrollees have only ever had Pennie coverage with EPTCs—meaning they've never had to pay the higher premium costs that will return in 2026.  Pennie estimates that customers will face an average monthly premium increase of 81% if these enhanced credits expire. 

This dramatic cost increase will likely trigger many coverage losses. Many people, particularly younger and healthier individuals, will choose to drop their insurance rather than pay significantly higher premiums. Meanwhile, those with greater healthcare needs will be more likely to maintain their coverage despite the cost. This pattern creates a vicious cycle where insurers raise premiums even higher to cover the costs of serving a population with greater health needs, potentially making coverage unaffordable for even more people.