Trump administration starts to tweak the Affordable Care Act as subsidy debate looms

Coming off a period of record enrollment, the Affordable Care Act (ACA) insurance marketplaces face the prospect of constriction in upcoming years.

The Trump administration quickly moved to limit federal funding for a program that helps people select an ACA health plan. On Feb. 14, the administration announced that funding for the ACA Navigator program was dropping from $97.7 million for plan year 2024 to $10 million annually going forward.

Navigators help consumers understand their options and enroll in coverage. The administration shared data showing that for the 2023-24 grant year, 2,400 trained navigators in 56 organizations helped enroll 92,000 consumers in qualified health plans.

Those enrollees represented 0.6% of plan selections through the federally facilitated exchanges during 2024 open enrollment. The administration said the share also was 0.6% in 2019, when navigator funding was set at $10 million during President Donald Trump’s first term (overall enrollment in marketplace plans was 10 million higher in 2024).

Supporters of the Navigator program counter that the services provided are more holistic than the numbers show, helping to educate people about their coverage options across payment programs and assisting with issues (e.g., billing questions) that arise after enrollment.

Referring to the user fees paid by ACA marketplace plans to navigators, the administration said lower fees resulting from a streamlined program will translate to lower premiums for consumers who do not qualify for subsidies, as well as reduced government and taxpayer costs.

CMS also has drafted a proposed rule, which has yet to be published, implementing new program-integrity standards for the marketplaces. Those regulations could affect the Biden administration’s final rule on the marketplaces for 2026.

Pivotal marketplace decisions

A bigger impact on marketplace enrollment would come if the enhanced subsidies for paying healthcare premiums are allowed to expire at the end of 2025. Republicans in Congress say no decision is expected during the ongoing FY25 budget reconciliation process.

The enhanced subsidies have been in place since 2021, averaging more than $530 per person per month in 2024. That amount would have covered more than 88% of the average premium.

Accompanying the subsidies has been a spike in ACA marketplace enrollment, which rose from 11.4 million in 2020 to nearly 21.5 million in 2024, according to KFF data. The Congressional Budget Office has projected that if the subsidies are discontinued, the number of insured will decrease by 2.2 million in 2026, and 3.8 million fewer people will have insurance per year through 2034.

Cynthia Cox, vice president with KFF, noted that a large share of the enrollment increase has come in states with low insurance rates prior to 2021 and in those that have not expanded Medicaid. As those states tend to be Republican leaning, there may be pressure on the congressional majorities to come up with a solution other than eliminating the subsidies in one fell swoop.

“I would also point out that people who are getting coverage through the ACA marketplaces are getting access to healthcare, too,” Cox said during a Feb. 10 webinar hosted by KFF.

That statement is based on an analysis of claims data and insurer filings, she said.

Concerns about subsidy levels

If the enhanced subsidies expire, the initial subsidy package passed as part of the ACA will remain. Those subsidies ensured that someone earning 138% of federal poverty would pay no more than 3.42% of their income for a benchmark silver-tier plan, while an individual or family at 300% of federal poverty would not pay more than 9.86% of their income.

Under the enhanced subsidies, those percentages have been capped at 0 and 8.5%, respectively. Individuals and families with incomes above 400% of federal poverty also were newly eligible for subsidies, which likewise capped their premiums at 8.5% of income.

Brian Blase, PhD, president of the conservative-leaning Paragon Health Institute and a policymaker in Trump’s first administration, said the higher subsidies not only are costly to taxpayers but also create skewed incentives that foster subpar products.

With close to half of all ACA marketplace enrollees reporting income (no more than 150% of federal poverty) that qualifies them for a fully subsidized premium, insurers are discouraged from “actually designing plans that people value,” Blase said during the KFF webinar. “If the government is paying 100% of the expense, people will enroll in the coverage up to the point [where] they don’t have to pay anything.”

He added, “I think the right level of subsidization is to go back to the original, underlying Obamacare subsidy structure, and we’ll have a more valuable market.”

In terms of choice, recent years have seen an improvement in the marketplaces amid higher enrollment, with a record average of 9.6 plans per state for 2025. That’s up from 6.7 in 2020, according to KFF data.

Wary of marketplace scams

Generous subsidies also raise the risk of fraud, Blase said. He cited reports of brokers telling prospective enrollees they can get a gift card if they call a number. Those who call don’t receive a gift card but instead are offered free subsidized health insurance. (Brokers generally are insurance agents and are not part of the official ACA Navigator program).

“Brokers are doing a lot of things to take advantage of these free plans and enrolling people often without their consent, and are really engaged in lots of misleading marketing,” Blase said.

Such reports do not justify terminating the enhanced subsidies, said Sarah Lueck, vice president for health policy with the liberal-leaning Center on Budget and Policy Priorities.

“That doesn’t mean we need a tighter system or less affordable coverage,” Lueck said during the KFF webinar. She also noted the Biden administration did not ignore the need to combat marketplace enrollment fraud.

Considering other approaches

Conservatives such as Blase say the individual-insurance market will be better off if more options are available. In Trump’s previous term, CMS promoted short-term, limited-duration health plans as alternatives to ACA plans.

Those alternatives typically are more affordable than unsubsidized ACA plans, and Blase also noted that the provider networks generally are broader.

The products are not guaranteed issue, however, meaning if an individual becomes seriously ill, they could have a hard time getting their short-term plan extended. The plans also may exclude coverage of items and services such as prescription drugs, mental health and maternity care.

“If I had a really big health problem and had to go to the hospital, I would be able to handle it because I have good coverage,” Lueck said. “And I just think that the vision I would have is that that [level of coverage] is available to everyone.”

There no longer are many arguments being made against the requirements for ACA health plans to be guaranteed-issue, Blase noted. Likewise, premiums cannot vary based on health risk factors.

The viability of those mandates was far more up for debate near the start of Trump’s first term, when Republicans sought to repeal the entire ACA and return to more of a free-market commercial insurance structure. Eight years later, those protections are more entrenched in the U.S. health insurance market, although Vice President J.D. Vance has mentioned the possible return of risk pools.