Silver Linings Playbook: Some states are taking action to mitigate the upcoming tax credit tsunami
Mon, 10/13/2025 - 12:34pm
As anyone not under a rock for the past few months knows by now, the improved federal Affordable Care Act tax credits which were put into place by President Biden and Congressional Democrats starting in 2021 are currently scheduled to expire at the end of December, just 2 1/2 months from now.
If this happens, the consequences for ~24 million Americans will be devastating, with average health insurance premiums more than doubling and millions being priced completely out of the insurance market altogether.
On top of this, the Trump Regime has also made administrative regulatory changes to how the ACA is structured resulting in the remaining tax credit formula becoming even less generous yet, while also eliminating eligibility for either financial assistance or even ACA enrollment whatsoever to many other Americans.
Congressional Republicans could still potentially agree to extend the tax credit upgrade, but that's extremely unlikely at this point, and even if they do, some of the other executive actions taken by the Centers for Medicare & Medicaid Services (CMS) under Trump, RFK Jr. and Dr. Oz would still negatively impact a lot of people.
The tax credits being lost in 2026 amount to over $22 billion nationally, or over $1,000 for each enrollee currently receiving federal assistance on average (this drops to around $930 apiece if you include the ~2 million enrollees not currently subsidized, who will also see a 24% average premium hike). Needless to say, the outlook is grim.
HOWEVER, it is important to be aware that some states are taking action to do what they can to help mitigate/minimize the damage. Below is an overview of which states are doing so.
Note: These are the states taking action that I'm aware of; I'll update it if it turns out I missed some or if there's a late-breaking announcement.
California has roughly 2.0 million residents enrolled in ACA exchange policies, plus several hundred thousand enrolled in off-exchange individual market plans. Of these, over 1.7 million are currently receiving federal tax credits. Gross premiums are expected to go up by around 10% on average.
In late August, Covered California, the state-run ACA exchange, announced that they'll be retooling & expanding their existing supplemental financial assistance program to cancel out a portion of the lost federal funding:
In 2025, Gov. Newsom and the California Legislature increased the amount of state funds available for the enhanced cost-sharing reduction program, appropriating $165 million to expand eligibility. As a result, Californians with incomes above 200 percent of the federal poverty level ($31,300 for an individual or $64,300 for a family of four) were eligible to enroll in an Enhanced Silver 73 plan with no deductibles and reduced out-of-pocket costs.
That's right: For the past year and a half, nearly half of California's ACA enrollees have paid no deductibles thanks to the state CSR program. I don't know the exact number, but currently it applies to enrollees who earn up to 250% FPL, which includes over 1.1 million of the ~2.4 million residents enrolled in ACA individual market plans.
This year, California is continuing to take proactive steps to shield its lowest-income enrollees from the steepest rate increases and reduce costs for consumers should the enhanced tax credits expire. For 2026, the state has allocated $190 million to provide state subsidies for individuals earning up to 150 percent of the federal poverty level, ensuring monthly premiums remain comparable to 2025 levels for those with an annual income of $23,475 for an individual or $48,225 for a family of four. It would provide some additional assistance to those earning up to 165 percent of the federal poverty level.
If I'm reading this correctly, and assuming the 2023 table still applies, it means:
- enrollees earning up to 150% FPL will still be eligible for $0-premium plans...but will face a modest $75 deductible
- enrollees earning 150 - 165% FPL will receive at least some extra premium assistance...but will go back to an $800 deductible
- enrollees earning 165% - 200% FPL will go back to an $800 deductible, plus the other premium hikes
- enrollees earning 200 - 250% FPL will go back to a $5,400 deductible, plus the other premium hikes
Around 333,000 enrollees are below 150% FPL this year, so this is great news for around 14% of the CA ACA population (I'm including off-exchange enrollees in the total). The ~650,000 or so who are unsubsidized will "only" face the 10.3% premium increases (not great, but not devastating). The press release doesn't provide detail on what "some" assistance means for the 150 - 165% FPL segment.
For those wondering:
While this funding will provide a meaningful lifeline for the lowest-income Covered California enrollees, it far from fills the $2.1 billion hole the federal government would be leaving. If Congress takes timely action to extend the federal enhanced premium tax credits, Covered California will be able to maintain the current state enhanced benefit program, which provides plans with lower out-of-pocket costs to most Covered California enrollees.
Put another way, California is canceling out around 9% of the lost federal subsidies (but they're mostly doing so by reworking the money which has been going to further reduce deductibles).
Colorado has roughly 225,000 subsidized ACA exchange enrollees, another ~56,000 who are unsubsidized, and perhap ~40,000 unsubsidized off-exchange. Final premium increases haven't been published yet; the preliminary average was expected to be over 28%, but that's supposed to be knocked down significantly when the filings are finalized.
The reason for this is emergency legislation taken last month, which is supposed to generate up to $100 million in funding to replace a portion of the lost federal subsidies:
DENVER - Colorado Insurance Commissioner Michael Conway released the following statement on Governor Polis signing HB 25B-1006 into law, legislation that provides funding to the individual healthcare market to reduce catastrophic premium increases:
“I’m grateful Colorado lawmakers heeded our call about catastrophic price increases for the individual healthcare market and passed a temporary fix this special session. This stopgap measure will provide crucial funding to reduce the rise in premium costs for working families. But without Congress stepping up to extend enhanced premium tax credits, tens of thousands of hardworking Coloradans will lose their healthcare, and those who remain enrolled can expect to see average net rate increases of more than 100%, and for many, almost 200%.”
Total lost federal tax credit funding for Colorado is pegged at around $230 million next year, so this should backfill perhaps 43% of that overall.
Like California, the additional funding in CO will enhance an existing supplemental program which, until now, provided $50/mo for the first household member and $18/mo for additional members, but only for households earning up to 200% FPL.
My colleague Louise Norris found the beefed-up breakout of the state-funded premium assistance for next year:
Subsidy Structure for Households Below 400% FPL:
1. For the first enrollee in a household, the enhanced premium subsidy shall be the lesser of $80 per member per month (PMPM) or the premium balance after federal APTC has been applied.
2. For each additional member in the household who is subject to a premium, the enhanced premium subsidy shall be the lesser of $29 per member per month (PMPM) or the premium balance after federal APTC has been applied.
For households with more than three dependents under age 21, no enhanced premium subsidy will be applied for any subsequent dependents with $0 premium.
Unlike California, Colorado's program goes across-the-board to enrollees regardless of income (up to 400% FPL), but it should still result in the vast majority of enrollees who earn less than 150% FPL continuing to qualify for $0 premiums (150% FPL = $23,475 for a single adult next year; 2.1% of that will be $493/year or $41/month), along with some portion of those who earn up to 200% FPL.
For what it's worth, Colorado has around 26,000 enrollees below 150% FPL and another 50,000 who earn 150 - 200% FPL.
One other bit of negative news: CO's unique "OmniSalud" program for undocumented immigrants appears to be about to take a crippling 80% funding blow. Frankly I'm surprised they're gonna be able to keep it going at all under the circumstances.
Maryland has around 320,000 total ACA enrollees, ~190,000 of whom receive federal tax credits while another ~130,000 or so are paying full price either on- or off-exchange. Full price premiums are expected to increase by over 13% on average starting in January.
Once again, Maryland is retooling an existing program (which is currently designed to provide extra assistance specifically for enrollees aged 18 - 37 only) into a more robust arrangement to backfill lost federal assistance:
However, the state has created a new subsidy program for all ages for those who are under 400% of the federal poverty level to help offset the expiration of the enhanced federal subsidies. The state subsidy program will replace 100% of the enhanced federal subsidies for those under 200% of federal poverty level and will replace 50% of the enhanced federal subsidies for those between 250% and 400% of the federal poverty level. Those over 400% of the poverty level will not receive a state subsidy, and will be most impacted by the loss of federal enhanced APTC, unless Congress takes immediate action.
Of the ~245,000 on-exchange ACA individual market enrollees in Maryland, around ~79,000 earn between 100 - 200% FPL, while another ~79,000 earn 200 - 400% FPL. Around 16,000 earn more than 400% FPL, and over 46,000 have an unknown household income. Finally, there's around ~49,000 off-exchange enrollees who aren't eligible for any tax credits regardless.
Basically, around 79,000 will be held fully harmless by the lost federal subsidies; another 79,000 will be hit for half the lost assistance; and the rest are divided between those currently subsidized who lose all federal assistance and have to pay 13.4% more and those who weren't subsidized in the first place and will "only" have to pay 13.4% on average.
Nevada has roughly 96,000 ACA enrollees currently receiving tax credits out of ~133,000 total. Gross 2026 premiums are going up over 22% on average.
I've already written about most of the new state programs on this list recently, but both of Nevada's kind of slipped under the radar.
First, Nevada is launching their "Battle Born State Plans" which are being billed as a "Public Option" even though it's really only a quasi-PO, similar to the existing programs in both Washington and Colorado.
I last wrote about Nevada's initiative four years ago; at the time it really was supposed to be a true Public Option (that is, a major medical healthcare plan administered by the state itself which anyone could buy into at a more competitive price than private plans).
Unfortunately, since then the program has ended up being watered down quite a bit:
Nevadans looking for health insurance on the state’s Affordable Care Act marketplace this fall have a new, more budget-friendly option to review: Battle Born State Plans.
...Approximately 35,000 people are projected to purchase the Battle Born Plans, a number that could vary given rising health care costs and the expiration of certain federal subsidies.
Basically, like in WA & CO, the state contracted with several private insurance carriers to create a new category of ACA-compliant Qualified Health Plans (QHPs) to sell on the exchange. They have to meet the same requirements as any other exchange plan, except that they're legally required to hit certain premium reduction targets. That's pretty much the only distinction besides the branding.
...Insurance carriers offering the plans are required to align their networks with Medicaid managed care networks to ensure sufficient access to care.
...Under Nevada law, carriers offering the new state plans must satisfy premium reduction targets over the next four years, finishing at 15 percent lower than the average premium on the market.
I don't know what the interim targets are, but it sounds like 2026 premiums are supposed to average perhaps $20/mo less or so (at full price) than they would otherwise...except that's in the context of average unsubsidized premiums going up by $124/mo. Still, every dollar counts I suppose.
Nevada is also launching a new Reinsurance Program as well:
Reinsurance essentially works as insurance for insurance companies, paying a portion of high-cost claims and thus allowing insurers to lower the premiums for individual health insurance plans.
As reinsurance programs help lower insurance premiums, the amount of federal dollars spent on ACA tax credits also goes down. Instead of keeping those dollars, the federal government passes that money through to the state to help fund the reinsurance program and maintain lower premiums and market stability.
State officials said the savings will be felt marketwide as the reinsurance payments will be available to all licensed carriers in the individual market. The reinsurance program also helps the three state plan carriers meet their premium reduction targets.
...By the end of 2029, state officials estimate that the reinsurance program and public option will bring between $290 million and $322 million in new federal savings to Nevada.
Under the agreement approved by the federal government, a large portion of these funds will be used to implement a reinsurance program, with additional funds in future years being spent on a loan retention program for health care providers and a quality incentive program for carriers and provider networks.
I wrote up a more detailed explainer of how state-based reinsurance programs work years ago. The bottom line is that it reduces gross premiums (which helps cut costs for unsubsidized enrollees), but doesn't do anything to reduce the net cost for subsidized enrollees. In fact, it usually has the opposite effect for those who earn 200 - 400% FPL, but that gets kind of wonky.
New Jersey has over 550,000 ACA individual market enrollees, of which around 460,000 currently receive federal tax credits. Gross 2026 premiums are expected to go up an average of 15%.
In late August I reported that the state is, like CA, CO & MD, retooling and enhancing their own supplemental state-based subsidy program to help cancel out as much of the damage from the expiring federal funding as possible:
...The state marketplace launched in 2020 with a state subsidy – called New Jersey Health Plan Savings – to further lower monthly premiums for consumers, beyond the tax credits offered by the federal government. The Department is estimated to provide $215 million this year to support state subsidies, New Jersey Health Plan Savings, providing greater affordability in the market by lowering premiums for hundreds of thousands of New Jerseyans.
Unfortunately, the press release doesn't specify how this funding will be allocated in 2026 (will they keep it the same as now or modify it as California is doing?). The only guidance I have on the state-based subsidy program is from this letter back in June (h/t Louise Norris for the link):
"Given the uncertainty created by the Congress, the Department is not yet able to determine the allocation of New Jersey Health Plan Savings (NJHPS) if the enhanced advance premium tax credits (APTC) are not extended, but the Department will ensure the necessary adjustments to maximize the NJHPS. However, since the federal APTC are expected to total almost $3 billion and the enhanced portion of that is estimated to be over $500 million in 2025, it is impossible for the NJHPS to compensate for enhanced APTC if APTC are not extended."
So we're talking about perhaps 40% of the lost federal subsidies, with the funding mostly coming from retooling the existing state subsidy program, which reduces premiums by anywhere between $20 - $100/month per enrollee depending on their household income (h/t Andrew Sprung for this info):
- Income up to 150% FPL: $20/mo
- 150 - 200% FPL: $40/mo
- 200 - 250% FPL: $50/mo
- 250 - 400% FPL: $100/mo
- 400 - 500% FPL: $50/mo
New Mexico has roughly 60,000 currently-subsidized exchange enrollees, plus perhaps ~18,000 unsubsidized either on or off the exchange. Premiums are expected to jump an eye-opening 36% next year.
Fortunately, unlike the other states on this list which have only been able to backfill a portion of the federal tax credits which are set to expire, New Mexico has pulled of something of a miracle, as I wrote about last week:
While it appears that Congress will allow enhanced federal Premium Tax Credits to expire, New Mexico’s Health Care Affordability Fund (HCAF) will cover the loss of the enhanced premium tax credits for households with income under 400% of the Federal Poverty Level (or $128,600 for a family of four), providing up to $68 million in premium relief for working families who enroll in coverage through BeWell in 2026. Federal and state premium assistance will continue to reduce the impact of the rate increases.
I confirmed independently that yes, this means they're covering 100% of the lost subsidies for every enrollee under 400% FPL who currently qualifies for them...but then they went one step further:
...A Senate committee Thursday morning agreed on a bipartisan vote to advance HB2, intended to protect about 6,300 New Mexicans from huge health care premium increases if federal tax credits expire as scheduled later this year.
...Accompanying the legislation the committee approved Thursday is a $17.3 million appropriation into the Health Care Affordability Fund, which the HCA oversees, to cover the premiums for policyholders whose income is 400% of more of the federal poverty line. The Legislature earlier this year approved funding to cover the tax credits for those who make under that threshold.
Sure enough, the bill has since passed the NM Senate and has been signed into law by Gov. Lujan-Grisham.
This means that ALL New Mexico exchange enrollees will be protected from the expiring credits.
What's more impressive still is that also unlike other states, NM has somehow managed to find the funding to do this without cannibalizing their existing "Turquoise Plan" supplemental subsidy program:
This program was introduced in 2023; it reduces benchmark Silver premiums for enrollees earning up to 200% FPL down to $0, while also reducing them by lesser amounts for enrollees earning between 200 - 400% FPL. It also dramatically upgrades the cost sharing reduction subsidies while rebranding Silver CSR plans as “Turquoise Plans” for easier consumer marketing.
ARKANSAS, ILLINOIS & WASHINGTON:
Most of the above states (Nevada excepted) are mitigating the looming net premium hikes by offering direct supplemental financial assistance to enrollees, mostly those under 400% FPL.
Three more states are going a different route: PREMIUM ALIGNMENT.
I wrote up a wonky explainer about how "Silver Loading" works a few years back, and wrote up a longer piece about Premium Alignment (which Silver Loading and Silver Switching are subsets of) here, so I won't rehash the details again.
Suffice it to say that this is a healthcare policy pricing strategy which maximizes the federal tax credit funding available for a significant chunk of ACA enrollees while (if done properly) holding all enrollees harmless and which does so without raising taxes or fees at either the state or federal level...all while simultaneously bringing the ACA itself in line with the legislative text of the law!
Not a bad hat trick! There are actually a number of other states which have already implemented Premium Alignment pricing in the past, including both blue states like Maryland, Colorado and New Mexico as well as red states like Texas and Wyoming, so this is truly a nonpartisan, common sense thing which every state should be doing but only a dozen or so far.
In addition to the nine states above, there are several others which have existing programs to make individual market coverage more affordable but which are either not expanding those programs or (in some cases) will be forced to shrink them due to federal budget cuts.
This includes Massachusetts' "ConnectorCare" program; Connecticut's "Covered CT;" the Premium Assistance program in Vermont; and the Basic Health Plan (BHP) programs in Minnesota, Oregon and New York (NY in particular is gonna be hit hard). As I wrote about a few days ago, the District of Columbia is also newly launching their own BHP program, but I'm not counting this as "new" since it's actually replacing a more generous program which currently provides Medicaid coverage for more enrollees.
I'll be writing in more depth about all of the programs above in my upcoming 2026 Open Enrollment Period Guide, coming in another week or two.
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