Senate hearing doesn’t resolve 2026 funding for Affordable Care Act marketplace plans

Senate Republicans used a recent hearing to press their case for enacting immediate reforms to part of the Affordable Care Act (ACA), with little sign they will agree to extend the subsidy framework that has been in place for more than four years.

During the Nov. 19 hearing of the Senate Finance Committee, members of the Republican majority said the enhanced ACA subsidies should be allowed to expire as scheduled at year’s end because they are unsustainable.

The higher subsidies have spurred ACA enrollment growth from 12 million going into 2021, when they were introduced in Democratic legislation, to 24.3 million in 2025. More than 22 million receive subsidies to help them afford premiums. But Republicans say the downsides are substantial, including higher federal healthcare spending, little impact on the affordability and accessibility of healthcare as opposed to health insurance, and the increased potential for fraud, waste and abuse.

With 2026 open enrollment ongoing since Nov. 1, ACA marketplace plan customers are increasingly becoming aware of the higher premiums they’ll potentially owe. Nonsubsidized premiums have increased by an average of 26% nationwide, according to an estimate. Actual out-of-pocket spending on premiums is projected to rise by 114% if the enhanced subsidies are unavailable.

Republicans say they see an urgent need to alleviate the looming spike in costs to enrollees, but they sound disinclined to support a continuation of the enhanced subsidies when a vote takes place in the Senate by mid-December. That’s when Sen. John Thune (R-S.D.), the chamber’s majority leader, pledged to hold a vote in return for the Democratic support needed to pass the Nov. 12 continuing resolution that ended the 43-day government shutdown.

“We cannot simply throw good money after bad policy,” Sen. Mike Crapo, (R-Idaho), chair of the Finance Committee, said at the hearing.

The GOP’s alternative to the ACA subsidies

Republicans propose to replace the enhanced subsidies with some type of funding made directly to consumers. Some in the GOP say these changes can take place in time for 2026, although with open enrollment ending Jan. 15 and prospective legislation needing time to be passed into law, a special enrollment period likely would be needed to accommodate the infrastructure changes.

Sen. Bill Cassidy (R-La.) has suggested establishing flexible spending accounts (FSAs) to help consumers pay for healthcare. Others are pushing health spending accounts (HSAs), which differ from FSAs in that they can be rolled over from one year to the next and allow for the funds to be invested similar to a 401(k).

In either scenario, the idea is that the amount of funding sent to consumers would equal what they would have received through the enhanced subsidies covering their health plan premium under current law

“Some will argue that time has run out to consider alternatives to extending the COVID credits,” Crapo said, referring to the enhanced subsidies, which initially were part of COVID-19 relief legislation. “I encourage my colleagues to avoid this conclusion and instead keep an open mind in search of a bipartisan outcome.”

The budget reconciliation bill known as the One Big Beautiful Bill Act already made HSAs available to consumers purchasing Bronze health plans in the ACA marketplaces starting next year, Crapo noted. Thus, the infrastructure needed to implement the new plan exists.

But Douglas Holtz-Eakin, PhD, president of the right-of-center American Action Forum and an advocate for phasing out the enhanced subsidies, said HSA funding “would not help the majority of ACA policyholders,” since the accounts are unlikely to be commonplace among enrollees in 2026.

Democrats not on board

Democrats said such changes to the ACA marketplaces can be considered, but only after extending the enhanced subsidies for at least one more year. Ron Wyden (D-Ore.), ranking member of the Finance Committee, invited testimony from a retired Oregonian who described the significant health ailments facing him and his wife and how the couple is not sure what healthcare options they’ll have with their ACA plan premiums set to increase by 500%, to $2,200 per month.

HSAs “can be useful tools for some consumers, but they are not a replacement for comprehensive health insurance,” Wyden said.

“Sending a few thousand dollars to Americans isn’t going to do them much good when they face a giant medical bill for a serious health diagnosis or even routine but expensive care, like giving birth in a hospital,” Wyden added.

With expanded HSAs, “sicker people would use the funds to buy insurance, while healthy people would use the funds to self-insure, resulting in classic adverse selection and higher premiums,” said Jason Levitis, a senior fellow with the left-leaning Urban Institute. “This would increase costs to the federal government and anyone seeking to purchase on their own.”

A stumbling block for making changes by 2026 is the time crunch, Levitis said. Changes of the sort described by Republicans “would likely take months or years, or longer,” he said, requiring notice-and-comment rulemaking from the Treasury Department and CMS. Those regulations could involve new IT systems, contracts and outreach to consumers.

“Building a whole new benefit — such as funneling federal funds into an HSA or another type of account — could easily take years, likely requiring the involvement of fiscal intermediaries,” Levitis said.

Other ways to help ACA enrollees

The foundation of the ACA would remain under the Republican proposals. That includes the baseline subsidies that were part of the 2010 law, along with the insurance marketplaces and various consumer protections.

A concept gaining traction among Republicans entails moving the focus from helping to pay for premiums to defraying out-of-pocket costs such as deductibles and copays.

That’s part of the thinking behind the idea being championed by Cassidy and Crapo, along with President Donald Trump. Enrollees could select low-premium Bronze plans and use consumer-directed payments to cover a portion of the accompanying high deductibles.

A less sweeping change would be to maintain subsidy funding to insurers but shift it from premiums to out-of-pocket costs, partially covering 2026 out-of-pocket limits that can be set as high as $8,500 for an individual.

Such funding, referred to as cost-sharing reduction (CSR) payments, was part of the ACA before a court ruled the payments illegal in 2016 due to the lack of a valid appropriation measure in the original bill. Insurers remain obligated to provide CSR funding to consumers whose household incomes are between 100% and 250% of federal poverty. That requirement has led to a rise in premiums as insurers seek to cover their costs.

Resuming CSR payments to insurers would lower premiums for benchmark Silver plans by 12%, thus reducing the subsidization of the ACA market by “tens of billions of dollars,” Brian Blase, president of the conservative think tank Paragon Health Institute, testified at the hearing.

The approach also could address Cassidy’s criticism that subsidizing premiums increases the amount of money that health plans can allocate to profit and overhead rather than to healthcare. Under the ACA’s required medical-loss ratio, 80% of outlays by marketplace health plans must go to paying for care.