House E&C Reconciliation Bill Markup, RFK Jr. Testifies on Budget Proposal

May 15, 2025

1) First, I’m pleased to report that tonight the Senate is moving our OMIG Bill!  The Senate has long supported our efforts on this critical issue and we are grateful to the bill sponsor, Senator Pete Harckam and all of the Senators who have supported this work over the years.  Onward! 
2) Below is a clear and concise summary from The National Council re: many critical issues we’ve been focused on at the national level. 
3) Below the National Council info, and if you want to read more about House Energy & Commerce choices as they relate to health insurance coverage, check out the HealthAffairs article at the bottom of this email.
 

First 100 Days

Welcome back to our biweekly update on the start of the 119th Congress and the Trump-Vance administration.

Halls of Congress

  • House E&C Bill Unveiled: On Sunday, May 11, the House Energy and Commerce Committee (E&C) finally released their legislative recommendations for budget reconciliation. The committee was tasked with finding savings of roughly $880 billion in federal spending, and early estimates from the Congressional Budget Office (CBO) predict that the proposals would reduce the deficit by $912 billion between 2025 and 2034. Preliminary CBO estimates also show that the Medicaid portions of the legislation could lead to 7.6 million people losing Medicaid coverage. That would be in addition to the 5.1 million people the CBO projects will become uninsured if Congress chooses not to renew the enhanced exchange subsidies due to expire at the end of the year.
  • What’s in the Bill: Summaries of the bill are available here and here, and bill text can be found The bill proposes numerous Medicaid reforms, including the following:
    • Work/community engagement requirements for certain individuals, with several limited exceptions, including exceptions for individuals with a substance use disorder or a “disabling mental disorder,” and exceptions for individuals “participating in a drug addiction or alcohol rehabilitation program.” Specifics on these and other exceptions within the bill will need to be determined by individual states and the Department of Health and Human Services (HHS).
    • A moratorium on new provider tax arrangements and limits on certain specific existing provider tax arrangements.
    • A requirement for states to impose cost-sharing on Medicaid Expansion adults with incomes over 100% of the federal poverty level, up to $35 per service and up to 5% of total income. States would be required to impose cost-sharing on all adults who earn just above the federal poverty level — approximately $15,650 for a single person or $21,150 for a two-person household. While the text does include exceptions to this requirement for certain visits, including primary care visits, no exceptions are included for mental health and substance use treatment services.
    • Limits on certain state-directed Medicaid payments.
    • A 10% reduction in Federal Medical Assistance Percentage (FMAP) for states that, per the committee summary document, “use their Medicaid infrastructure to provide health care coverage for illegal immigrants under Medicaid or another state-based program.” It is currently illegal for undocumented immigrants to receive coverage, but several states take on the full amount of coverage without any federal match.
    • Requiring states to conduct eligibility determinations for Medicaid Expansion population adults every six months. Current law requires such determinations to occur every 12 months.
    • Sunsetting the temporary 5% enhanced FMAP afforded to states that opt to expand Medicaid under the American Rescue Plan Act. This provision would apply prospectively, not affecting states currently receiving an enhanced federal match under this authority.
    • Limiting retroactive coverage in Medicaid to one month prior to an individual’s application date. Current law provides retroactive coverage for up to three months before an individual’s application date.
    • Prohibiting federal financial participation (FFP) in Medicaid for individuals whose citizenship, nationality or immigration status has not been verified.
    • Instituting eligibility and income verification processes for Patient Protection and Affordable Care Act (ACA) enrollees. This provision would also roll back income-based special enrollment periods in the federally facilitated and state ACA exchanges.
  • What’s NOT in the Bill: The bill does not contain some long-rumored proposals, like per capita caps or block grants for Medicaid, FMAP reductions for the traditional Medicaid population, lowering of the FMAP floor or reducing the FMAP rate for the District of Columbia.
  • House E&C Hearing: The House E&C Committee held a markup of the reconciliation bill on Tuesday, May 13 (summary available here). The marathon hearing lasted more than 24 hours before the committee voted 30-24 along party lines to advance the measure. Committee Democrats offered 190 amendments aiming to strip or modify provisions of the bill impacting Medicaid, none of which were ultimately adopted. Debate on the bill covered a broad range of topics, including concerns over coverage disruptions, disruptions to services for mental health and substance use disorder treatment, potential hospital closures, and disagreements over how projected savings should be reinvested.
  • What Lawmakers Are Saying: Members of Congress from both parties and both chambers are expressing concerns about various pieces of the larger reconciliation package as it comes together. Senate Majority Leader John Thune signaled changes to come in the upper chamber (subscription required), saying, “I know that the committees marked up into the wee hours, and hopefully we’ll get something that potentially we can use as a base here from the Senate to work on. I think we assumed all along that the Senate would have its input on this … That’s been the expectation.”
  • Ron Johnson (R-Wisc.) also weighed in, saying “[t]he ‘big, beautiful bill,’ I think that’s the Titanic,” as he believes the final House package will not cut spending deeply enough to satisfy deficit hawks in the Senate. On the other side of the aisle and the Hill, E&C ranking member Rep. Frank Pallone (D-NJ) decried the potential impacts of bill’s the work requirements provision (subscription required), saying, “What I believe you’re doing, not intentionally, is figuring out every way possible for [enrollees] not to qualify, either because they can’t fill out the paperwork [or] they don’t know how to do it.”
  • Josh Hawley (R-Mo.) penned an op-ed in the New York Times earlier this week, warning that the scope of the proposed Medicaid reforms could lead to substantial political blowback.
  • Next Steps: The E&C bill now moves to the chamber’s Budget Committee, where lawmakers will combine it with legislation produced by other committees. The Budget Committee will hold a hearing on the bill tomorrow, Friday, May 16, at 9 a.m. ET. The combined legislative package would need to be voted on by the full House and the full Senate before being sent to the president’s desk to be signed. A vote on the House floor could come as soon as next week.
  • The House GOP Conference will also meet tomorrow to try and work through Republican members’ remaining concerns about the overall reconciliation package.

Appropriations Updates
  • RFK Hearings: On Wednesday, May 14, HHS Secretary Robert F. Kennedy, Jr. appeared before legislative panels in both chambers of Congress (summary available here). Kennedy met with the House Labor, Health and Human Services, Education and Related Agencies Appropriations Subcommittee and the Senate Health, Labor Education, and Pension (HELP) Committee, where he attempted to defend planned deep funding reductions to HHS in President Trump’s proposed budget. He framed the moves as a push to eliminate waste and streamline the agency, as lawmakers warned of the potential impacts of tens of thousands of layoffs, billions in frozen funds, and accusations that his agency is refusing to spend money already approved by Congress.
  • The congressional hearings follow the Trump administration’s recent release of its proposed FY26 “skinny budget,” a high-level budget request that cuts more than 20% in nondefense spending — a proposed level of changes Congress is not accustomed to. The request also outlines funding reductions for the Substance Abuse and Mental Health Services Administration (SAMHSA), while stating its commitment to “combatting the scourge of deadly drugs” and proposal to “refocus activities formerly a part of SAMHSA and [reduce] waste by eliminating inefficient funding.” More will emerge on the administration’s request when more detailed agency request documents are published. Congress is not obligated to follow the president’s proposed budget; it provides a starting point for appropriations negotiations and a statement of the president’s priorities.
  • In response to specific questions about SAMHSA at the hearings, Secretary Kennedy said, “We are not shuttering SAMHSA. What we want to do is we want to shift that function into a place where we’re going to be able to administer it more efficiently.” The response references HHS’ plans to fold SAMHSA into the newly created “Administration for a Health America,” an HHS subagency that would encompass SAMHSA, the Health Resources and Services Administration (HRSA), and several other HHS subdivisions.

Agency and Regulatory Updates
  • Parity Rule Lawsuit: Last week the Trump Administration requested, and was granted, a pause in the ongoing litigation challenging the mental health parity rules finalized last September. The Administration’s basis for the pause is that they are considering modifying or rescinding the rules, specifically stating that in the court filing that “[b]ecause the Departments do not intend to enforce parts of the rule and have indicated that they intend to reconsider the regulation challenged in this litigation, the government respectfully submits that it would be appropriate to place this case in abeyance pending the completion of that reconsideration process.” Among other provisions, the rule requires insurers to analyze their non-quantitative treatment limitations (NQTL) — such as adequacy of provider networks, reimbursement for out-of-network providers and frequency of prior authorizations — to ensure compliance with the Mental Health and Addiction Equity Act.
  • HHS Reorg Litigation: On May 12, Judge Susan Illston of the U.S. District Court for the Northern District of California granted a temporary restraining order (TRO) suspending the planned departmental reorganization of HHS. The TRO comes in a case filed by labor unions, nonprofits and city governments seeking to halt federal layoffs and agency reorganizations pursuant to an executive order issued in February which sought to make large scale changes to the federal workforce, among other changes. The TRO, which was quickly appealed by federal government lawyers, does not require HHS or other federal agencies to rehire laid off employees, but pauses any further layoffs and reorganization of federal agencies. While not explicitly stated within the text of the TRO, it appears that the order also temporarily halts the planned SAMHSA reorganization. We will continue to provide updates on this case as they develop.
  • Provider Tax Proposed Rule: The Centers for Medicare & Medicaid Services (CMS) also proposed a rule Monday afternoon to “shut down [a] Medicaid loophole” related to states’ targeted taxes on managed care organizations. The CMS proposal was issued as some critics look to reform provider taxes, arrangements in which states collect funds from providers and managed care organizations that are matched anywhere from 50% to 77% by federal dollars. The proposed rule comes as the House Energy and Commerce reconciliation bill also includes a provision similarly aiming to close the “loopholes” described by CMS.
  • OTP Updates: CMS recently released CY 2025 updates to opioid treatment program (OTP) requirements in Medicare pursuant to the 2025 Physician Fee Schedule.
  • HHS Guidance Document Rescissions: HHS also issued a notice of documents identified for rescission, specifically noting that the agency planned to rescind four informal guidance documents. The agency stated that because the guidance documents had originally been promulgated without notice and comment, the documents could also be rescinded without the opportunity for public comment. Among the documents identified for rescission were:

Advocacy Corner
 
 
 

Appropriations Updates
  • RFK Hearings: On Wednesday, May 14, HHS Secretary Robert F. Kennedy, Jr. appeared before legislative panels in both chambers of Congress (summary available here). Kennedy met with the House Labor, Health and Human Services, Education and Related Agencies Appropriations Subcommittee and the Senate Health, Labor Education, and Pension (HELP) Committee, where he attempted to defend planned deep funding reductions to HHS in President Trump’s proposed budget. He framed the moves as a push to eliminate waste and streamline the agency, as lawmakers warned of the potential impacts of tens of thousands of layoffs, billions in frozen funds, and accusations that his agency is refusing to spend money already approved by Congress.
  • The congressional hearings follow the Trump administration’s recent release of its proposed FY26 “skinny budget,” a high-level budget request that cuts more than 20% in nondefense spending — a proposed level of changes Congress is not accustomed to. The request also outlines funding reductions for the Substance Abuse and Mental Health Services Administration (SAMHSA), while stating its commitment to “combatting the scourge of deadly drugs” and proposal to “refocus activities formerly a part of SAMHSA and [reduce] waste by eliminating inefficient funding.” More will emerge on the administration’s request when more detailed agency request documents are published. Congress is not obligated to follow the president’s proposed budget; it provides a starting point for appropriations negotiations and a statement of the president’s priorities.
  • In response to specific questions about SAMHSA at the hearings, Secretary Kennedy said, “We are not shuttering SAMHSA. What we want to do is we want to shift that function into a place where we’re going to be able to administer it more efficiently.” The response references HHS’ plans to fold SAMHSA into the newly created “Administration for a Health America,” an HHS subagency that would encompass SAMHSA, the Health Resources and Services Administration (HRSA), and several other HHS subdivisions.

Agency and Regulatory Updates
  • Parity Rule Lawsuit: Last week the Trump Administration requested, and was granted, a pause in the ongoing litigation challenging the mental health parity rules finalized last September. The Administration’s basis for the pause is that they are considering modifying or rescinding the rules, specifically stating that in the court filing that “[b]ecause the Departments do not intend to enforce parts of the rule and have indicated that they intend to reconsider the regulation challenged in this litigation, the government respectfully submits that it would be appropriate to place this case in abeyance pending the completion of that reconsideration process.” Among other provisions, the rule requires insurers to analyze their non-quantitative treatment limitations (NQTL) — such as adequacy of provider networks, reimbursement for out-of-network providers and frequency of prior authorizations — to ensure compliance with the Mental Health and Addiction Equity Act.
  • HHS Reorg Litigation: On May 12, Judge Susan Illston of the U.S. District Court for the Northern District of California granted a temporary restraining order (TRO) suspending the planned departmental reorganization of HHS. The TRO comes in a case filed by labor unions, nonprofits and city governments seeking to halt federal layoffs and agency reorganizations pursuant to an executive order issued in February which sought to make large scale changes to the federal workforce, among other changes. The TRO, which was quickly appealed by federal government lawyers, does not require HHS or other federal agencies to rehire laid off employees, but pauses any further layoffs and reorganization of federal agencies. While not explicitly stated within the text of the TRO, it appears that the order also temporarily halts the planned SAMHSA reorganization. We will continue to provide updates on this case as they develop.
  • Provider Tax Proposed Rule: The Centers for Medicare & Medicaid Services (CMS) also proposed a rule Monday afternoon to “shut down [a] Medicaid loophole” related to states’ targeted taxes on managed care organizations. The CMS proposal was issued as some critics look to reform provider taxes, arrangements in which states collect funds from providers and managed care organizations that are matched anywhere from 50% to 77% by federal dollars. The proposed rule comes as the House Energy and Commerce reconciliation bill also includes a provision similarly aiming to close the “loopholes” described by CMS.
  • OTP Updates: CMS recently released CY 2025 updates to opioid treatment program (OTP) requirements in Medicare pursuant to the 2025 Physician Fee Schedule.
  • HHS Guidance Document Rescissions: HHS also issued a notice of documents identified for rescission, specifically noting that the agency planned to rescind four informal guidance documents. The agency stated that because the guidance documents had originally been promulgated without notice and comment, the documents could also be rescinded without the opportunity for public comment. Among the documents identified for rescission were:

Advocacy Corner
 

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The House Republican Budget Reconciliation Legislation: Unpacking The Coverage Provisions

May 14, 2025, Health Affairs1

On May 11 and 12, 2025, the Energy and Commerce Committee and the Ways and Means Committee of the U.S. House of Representatives, respectively, released draft legislative text for Republican-led budget reconciliation legislation. Both committees marked up their respective legislation on May 13, with the goal of having the full reconciliation package passed by the House by Memorial Day. The Senate would then consider the package.

This bill, if enacted, would severely cut federal health care spending—including the most significant cut to the Medicaid program in its 60-year history—and highly restrict eligibility for marketplace coverage, jeopardizing the record-high marketplace enrollment of 24.3 million people for 2025. As just some examples, the bill would impose mandatory work requirements on many Medicaid applicants and enrollees, require certain Medicaid enrollees to pay copays, severely limit state flexibility, and defund Planned Parenthood, among many other changes. The two committees also want to codify—and, in some instances, go far beyond—much of Trump administration’s marketplace rule that would, if enacted, restrict marketplace eligibility, enrollment, and affordability.

As a result, millions more Americans would be left uninsured, leading to higher medical debt for families, more uncompensated care for health care providers, and strains on state budgets. More than 20 Democratic governors said on May 12 that the bill’s cuts to Medicaid would “disastrous” and that it would be “impossible” for states to backfill this loss of federal funding. Those fortunate enough to still have health insurance would face higher health care costs, more red tape, and new roadblocks as they try to enroll in and maintain their coverage.

According to Congressional Budget Office’s (CBO’s) preliminary estimates of the Energy and Commerce Committee’s draft, at least 7.7 million people would lose Medicaid or marketplace coverage as a result of new policies in the legislation. An additional 1.8 million people would lose coverage as a result of provisions in the legislation codifying parts of the proposed marketplace rule mentioned above. (Under CBO conventions, half that total was incorporated into baseline projections when the rule was proposed, so only the other half, 0.9 million additional uninsured people, count towards CBO’s scoring of the legislation.)  

On top of this, 4.2 million people would be uninsured if Congress fails to extend enhanced premium tax credits for marketplace coverage (which House Republicans seem on track to do by rejecting an amendment to do so by House Democrats during the Ways and Means Committee mark up). This rises to about 5 million people by 2034 after adding in the other half of the impact of the Trump administration’s marketplace rule. CBO confirms that, overall, at least 13.7 million more people would be uninsured in 2034 as a result of these policies; per their usual, KFF has some helpful graphics explaining these impacts.

Overview Of The Drafts

The Energy and Commerce proposal includes at least $912 billion in federal spending cuts over the next decade, the majority of which (at least $715 billion) stem from cuts to Medicaid and the Affordable Care Act under Subtitle D. Similar to the coverage losses, these estimates are only expected to increase as the CBO continues its analysis.

Given the score, it is perhaps unsurprising that most of the Energy and Commerce draft is dedicated to the health care cuts described below. The bill would also include several other major health care policies that are not discussed here but include updates to the Medicare physician fee schedule beginning in 2026; delays (to fiscal years 2029 through 2031) of about $8 billion in annual Medicaid disproportionate share hospital reductions; expanded treatment of orphan drugs under the Medicare drug negotiation program; and new requirements on pharmacy benefit managers that participate in Medicare Part D. Beyond health care, the bill would rescind or repeal many major Biden-era energy and environmental programs as well as set new policies on topics like spectrum and artificial intelligence.

The Ways and Means proposal is much broader than health coverage and would, for instance, permanently extend Trump-era tax cuts, terminate a wide range of clean energy tax incentives, create new Money Accounts for Growth and Advancement (MAGA) savings accounts for children, modify the low-income housing credit, repeal taxes on indoor tanning and gun silencers, expand the definition of rural emergency hospital under the Medicare program, and increase the debt limit. Most of the health coverage proposals are included in subtitles A and C. In addition to those discussed below, the draft would transfer $25 million from the Medicare trust fund so the Department of Health and Human Services (HHS) could contract with artificial intelligence companies on improper Medicare payments and recoup overpayments and make a series of changes to health savings accounts rules.

Cutting Marketplace Coverage

Both committees’ drafts include significant changes to the Affordable Care Act. Collectively, the two drafts would codify the Trump administration’s proposed marketplace rule and a prior Trump-era rule on individual health coverage reimbursement arrangements (ICHRAs). By codifying these changes, the bill would prevent a future administration from reversing these changes to help increase access to affordable marketplace coverage as the Biden administration did. Even if passed by the House, it remains to be seen whether these policy provisions would satisfy the so-called “Byrd” rule in the Senate.

As discussed below, the Ways and Means Committee draft would make even broader changes to, for instance, prohibit passive reenrollment and claw back excess advance premium tax credits from taxpayers. A separate article will discuss the codification of ICHRAs and some of the changes to health savings accounts.

Codifying The Proposed 2025 Marketplace Rule (And Beyond)

The Energy and Commerce proposal (and parts of the Ways and Means Committee proposal) would codify the entirety of the Trump administration’s proposed marketplace rule other than the rule’s attempt to impose additional standards on agents, brokers, and web-brokers. This is ironic because much of the rule’s premise is based on the need to tamp down on improper enrollment and other abuses by agents, brokers, and web-brokers. In several instances, the Ways and Means Committee proposal would go even further than the proposed rule; those deviations are highlighted below.

The Trump administration had estimated that its proposed rule would result in up to 2 million people losing marketplace coverage in 2026 alone. Consistent with the Trump administration’s estimate, the CBO expects that the Energy and Commerce Committee draft rule would increase the number of uninsured people by 1.8 million people in 2034. Notably, neither the Trump administration nor the CBO account for how these changes will affect the risk pool. By making it harder to enroll in marketplace coverage, the rule will likely discourage younger and healthier consumers from doing so, leading to imbalanced risk pools and higher premiums for those who remain.

Limiting The Annual Open Enrollment Period

The Energy and Commerce Committee proposal would permanently limit the annual open enrollment period (OEP) to 45 days—from November 1 through December 15—beginning with the 2026 OEP. This would apply to all marketplaces, including state-based marketplaces that have long had flexibility to set longer OEPs. (The bill also gives the Secretary the authority to set an OEP for plan years beginning before January 1, 2026, but it is not clear how that would be used, if at all.)

Eliminating The Low-Income Special Enrollment Period

Beginning in 2026, the Secretary could not require, and marketplaces could not allow, a special enrollment period (SEP) based on “the relationship of the income of such individual to the poverty line.” This change would apply to all marketplaces, including state-based marketplaces. The Ways and Means Committee draft would additionally bar premium tax credit eligibility for those who enrolled in a plan using a SEP based on “the relationship of the individual’s expected household income to such a percentage of the poverty line (or such other amount).” This change would go into effect for plans three calendar months after enactment of this legislation, and the Ways and Means Committee authorizes interim final and temporary regulations to implement these changes as needed.

By restricting future SEPs based on income, both committees’ drafts seem to go further than the proposed rule, which simply eliminated the specific low-income SEP option put in place by the Biden administration for those whose income is at or below 150 percent of the federal poverty level. Under the proposed rule, the low-income SEP option would disappear on the effective date of the rule (so possibly in 2025) whereas this limit would apply beginning in 2026 under the Committee proposals.

New Verification Requirements

The Energy and Commerce Committee proposal would impose new SEP and income verification requirements that are consistent with the proposed marketplace rule. The Ways and Means Committee proposal would go much further by imposing new verification requirements on all marketplace applicants—including those who enroll through an OEP—in a way that essentially prohibits passive reenrollment (thereby prohibiting automatic reenrollment).

Beginning in 2026, all marketplaces—including state-based marketplaces—would be required to verify SEP eligibility for each individual before they are enrolled in marketplace coverage. This Energy and Commerce Committee provision is worded in a confusing way, but it appears to require each marketplace to select one or more SEPs for which they must conduct pre-enrollment verification for at least 75 percent of all new enrollments. The rule’s requirements are more specific: the federal marketplace would be required to conduct pre-enrollment SEP verification of eligibility for five SEPs (marriage, adoption, moving to a new coverage area, loss of minimum essential coverage, and Medicaid/CHIP denial) and state-based marketplaces would be required to conduct pre-enrollment SEP verification for at least 75 percent of new enrollments.

The Energy and Commerce Committee proposal would also codify income verification requirements beginning in 2026. Marketplaces would (1) have to resolve and verify income when tax data shows a consumer’s income is below 100 percent of the federal poverty level but the consumer attests to a higher income; and (2) not be able to rely on self-attested household income. Consistent with the rule, the bill would require HHS to eliminate an automatic 60-day extension for individuals to provide documentation to resolve income-related data matching issues (as the rule does). These changes would result in additional administrative burdens for consumers and marketplaces alike. 

The Ways and Means Committee proposal would amend the tax code to require marketplaces to verify an individual’s eligibility before the person qualifies to receive premium tax credits or cost-sharing reductions. This requirement, which would apply beginning in 2028, appears to apply to any enrollment opportunity (whether through the OEP or a SEP). The marketplace must “us[e] applicable enrollment information that shall be provided or verified by the applicant”—meaning the consumer must provide it—and that affirms their income, immigration status, health coverage status, place of residence, family size, and any other information that HHS identifies as necessary for eligibility verification. Marketplaces already verify applicant eligibility related to these factors, but they would be required to newly establish a pre-enrollment verification process that begins on August 1 of each year to begin verifying eligibility for the following year.

As noted above, this would essentially bar automatic reenrollment, a process that millions of consumers rely on each year and overlaps with the premium penalty outlined in the next section.

Premium Penalties For Auto Reenrollees

The Energy and Commerce Committee proposal would create a new section to allow HHS to reduce advance premium tax credits to consumers beginning in 2027. In its rule, HHS proposed to require consumers who are automatically reenrolled into marketplace coverage with no premium to pay $5 per month until they confirm their eligibility information. The bill would do the same but gives HHS the express ability to increase (not reduce) this amount as appropriate. The bill would apply this premium to “specified reenrolled individuals,” which refers to qualified health plan enrollees who are eligible for a $0 premium payment (because they qualify for full advance premium tax credits). Given this specific definition, this requirement may not affect consumers in states or enrolled in plans that do not have $0 premium plans because of state-mandated benefits.

It is unclear why this provision is still necessary—other than to, perhaps, cause consumer confusion and encourage coverage losses—in light of the even broader proposal in the Ways and Means Committee draft. As noted above, the Ways and Means Committee would prohibit any passive reenrollment by requiring consumers to produce information that proves their eligibility to the marketplace before they qualify for premium tax credits. This would apply during new OEPs, each annual reenrollment, and during SEPs. The legislation thus seems to include multiple overlapping and confusing ways of prohibiting automatic reenrollment that would disrupt coverage for millions of people who are used to being auto-reenrolled into marketplace coverage.

Barring Premium Tax Credits Over Failure To File And Reconcile

Beginning in 2026, consumers would be barred from receiving premium tax credits if they failed to file an income tax return for the prior tax year or if they had not reconciled prior advance premium tax credit. The Secretary of HHS would have flexibility to accept an attestation from a consumer who filed and reconciled but whose return may not have been processed by Internal Revenue Service. Marketplaces would also be required to notify consumers if they failed to meet these requirements for a prior tax year. This change would be codified in both the Energy and Commerce Committee and Ways and Means Committee proposals, the latter of which would directly make individuals ineligible for a “coverage month” for any month where they have failed to file and reconcile prior year tax credits.

Guaranteed Issue And Repayment Of Past Due Premiums

The Energy and Commerce Committee proposal would amend the Affordable Care Act’s guaranteed issue provision to allow insurers to deny coverage under certain circumstances. Beginning in 2026, insurers could refuse to cover an individual who owes that insurer any amount of premiums from any period of time. Insurers could only do so to the extent allowed by state law and would be allowed to attribute any new premium payments to past premium debts.

Actuarial Value And De Minimis Variation

Beginning in 2026, the Energy and Commerce Committee proposal would require HHS to amend its rules and revert to the standards for actuarial value and de minimis variation that were in place for plan year 2022. Those standards were put in place by the first Trump administration and reflect de minimis ranges of +5/-4 percentage points for expanded bronze plans and +2/-4 percentage points for other plans. The bill would also expressly eliminate Biden-era exceptions regarding a +2/0 percentage point de minimis range for individual market silver qualified health plan certification and revise the third exception to allow a de minimis range of +1/-1 percentage points for cost-sharing reduction plan variations. These changes would erode the value of marketplace coverage and contribute to consumer confusion about coverage options.

Premium Adjustment Percentage

Beginning in 2026, HHS would be required to use a specific premium adjustment percentage methodology that was first adopted under the Trump administration in 2019. The annual premium adjustment percentage is a measure of premium growth used to set the rate of increase for the maximum annual limit on cost-sharing and the required contribution percentage for exemption eligibility. The percentage is generally determined by the Secretary of HHS on an annual basis but, if the methodology were codified as the Energy and Commerce Committee proposal would do, HHS would have very little flexibility in revising or updating the methodology as needed.

As discussed here, this methodology would already have a significant impact for 2026. Per the Trump administration’s proposed marketplace rule, the methodology would increase the maximum annual out-of-pocket limit on cost sharing for 2026 to $10,600 for self-only coverage and $21,200 for other than self-only coverage. This would be a 15 percent increase compared to the 2025 plan year limits and a 4 percent increase relative to the percentage adopted by the Biden administration for 2026.

Eliminating Eligibility For DACA Recipients And Other Lawfully Present Immigrants

Beginning in 2026, the Energy and Commerce Committee proposal would eliminate marketplace eligibility for DACA recipients. Under the Affordable Care act, marketplace eligibility and financial assistance is limited to U.S. citizens or nationals as well as those who are “lawfully present” in the United States. By clarifying that “lawfully present” does not include DACA recipients, the proposal would bar DACA recipients from marketplace coverage.

The Ways and Means Committee proposal would do the same but go much further by extending this prohibition to more categories of individuals who are lawfully present in the United States. Specifically, beginning in 2027, the bill would limit eligibility—for premium tax credits, cost-sharing reductions, the Basic Health Program, and Medicare—to “eligible aliens,” which it defines as those who are lawful permanent residents (i.e., green card holders), certain Cuban immigrants, and individuals living in the United States through a Compact of Free Association.

This provision—combined with a separate section that would also newly prohibit eligibility for lawfully present individuals who have long been able to enroll in marketplace coverage beginning in 2027—would eliminate marketplace eligibility for most lawfully present immigrants. This includes individuals with asylum or a pending asylum application, temporary protected status, or deferred action or enforced departure (among other immigration statuses) as well as those admitted as refugees and survivors of trafficking, domestic violence, and other serious crimes.

The Ways and Means proposal would also eliminate an exemption for lawfully present immigrants whose income is below the federal poverty line. Individuals who qualified for this exemption could receive premium tax credits through the marketplace. This exemption was designed to address the fact that many low-income, lawfully present immigrants are ineligible for Medicaid and thus would otherwise be uninsured. The Ways and Means proposal would eliminate this exemption beginning in 2026.

Treatment For Gender Dysphoria

In a provision that seems to diverge the most from the proposed rule (in terms of timing and text), the bill would amend the Affordable Care Act’s essential health benefits requirements to prohibit the coverage of items and services furnished for a “gender transition procedure.” This provision would take effect beginning in 2027 whereas the rule would apply this change beginning in 2026. In further contrast to the rule (which used the phrase “sex-trait modification” that HHS declined to define), the Energy and Commerce Committee proposal defines the term “gender transition procedure” in great detail. This same definition is used in the Medicaid section as well even though the Medicaid ban applies only to minors. The definition itself, which comes from other legislation introduced in the House, is discussed in more detail below.

Other Rule Changes

HHS would be required to eliminate regulations that govern premium payment thresholds beginning in 2026; these policies provide flexibility to insurers regarding payment policies, offering additional options to avoid terminating coverage when an enrollee underpays a premium by a de minimis amount. The bill would also direct HHS to eliminate reenrollment hierarchy standards for automatically reenrolling consumers who were in a bronze plan but are eligible for more generous coverage at no additional cost beginning in 2026.

Clawback of Full Premium Tax Credits

Most marketplace enrollees receive advance premium tax credits, which lower the amount they have to pay each month throughout the plan year. The amount of advance premium tax credits is based on an individual’s projected income for the year at the time they apply for coverage. Then, at tax time, individuals who receive advance premium tax credit must “reconcile” the amount they received (based on estimated income) with their actual income (based on federal income data). If actual income is higher than estimated, the individual may be required to repay all or part of the advance premium tax credit to the federal government. This “clawback” comes at tax time and results in a smaller tax refund or a larger balance owed to the IRS.

Liability for excess advance premium tax credits is currently capped for enrollees who earn between 100 and 400 percent of the federal poverty level (and some who earn below the poverty level in some circumstances). For 2025, those who earned less than 200 percent of the federal poverty level will repay no more than $375. This amount increases to $1,625 for those whose income is between 300 and 400 percent of the federal poverty level. Marketplace enrollees agree to regularly report their income and other household changes to help safeguard against major surprises in advance premium tax credits liability at tax time. But these repayment limits help insulate low-income enrollees from being forced to pay back even higher excess advance premium tax credits.

The Ways and Means proposal would fully eliminate this financial protection beginning in 2026. All taxpayers, including very low-income consumers, would be required to pay back in full any excess advance premium tax credits to the IRS. This new financial burden could especially affect low-income consumers whose income is hard to predict and may fluctuate over time. Repayment amounts are far from insignificant and could be the difference between being evicted or paying one’s rent or mortgage.

Cutting The Medicaid Program

Much of the Energy and Commerce Committee’s proposal is dedicated to draconian cuts to the Medicaid program. The legislation would affect all Medicaid populations—including children, those with disabilities, pregnant women, and low-income adults—but many of its policies have been expressly designed to undermine Medicaid expansion to low-income adults under the Affordable Care Act. As of May 13, the CBO estimated that this proposal would reduce federal Medicaid spending by $625 billion; about half of these cuts—more than $300 billion—are due to work requirements. The bill would also cause at least 7.6 million more people to be uninsured in 2034 with more than 10 million people losing Medicaid coverage as a result of these changes. This article offers a high-level summary of some of the bill’s key provisions. Health Affairs Forefront will publish additional, more detailed analysis of the proposed changes to the Medicaid program in the future.

Burdens On Beneficiaries

As anticipated, the Energy and Commerce Committee’s draft would impose new work requirements on certain Medicaid enrollees by requiring states to add work requirements to their state Medicaid plans. Many enrollees—namely low-income adults—would be newly required to show that they are working, doing community service, or enrolling in an educational program (or some combination of these activities) for at least 80 hours each month. Proof would be required when an individual first applies for coverage as well as for those already enrolled to maintain their coverage. These initial and ongoing requirements create navigational burdens that would deter people from seeking coverage to begin with. These provisions apply both in states operating under regular state Medicaid plans and states whose programs operate under Section 1115 waivers, meaning that the new requirements would leave states with little flexibility. States would need to begin complying with work requirements standards in 2029.

To comply, states would have to verify that an individual satisfies the work requirement before they can enroll and on at least a semi-annual basis thereafter, although enrollees must show continual work during the months ahead of regular determinations. Here, the bill gives states flexibility but only in one direction: States could conduct verifications even more regularly on, say, a monthly basis. States would also confirm compliance when redetermining eligibility, which the bill would make more frequent for the Medicaid expansion population. States would be able to draw down from $100 million for fiscal year 2026 to develop these new systems, and HHS would have $50 million to implement these requirements federally (and issue new rules by July 1, 2027). Those who are unable to satisfy the work requirements would also be blocked from receiving subsidized marketplace coverage, meaning marketplaces too would have to process additional paperwork to assess eligibility.

Work requirements would result in significant administrative burdens for enrollees and states alike, with red tape that would result in coverage losses, as Sara Rosenbaum chronicled here. We need to look no further than Arkansas: After the state implemented its work requirements, more than 18,000 people lost their Medicaid coverage, leading some to lose their jobs as well. Because the bill would also require paperwork at the point of initial enrollment, Georgia’s experience is also instructive: Initial enrollment rates are a tiny fraction of the projected eligible population. Similar results are expected if this bill is enacted—only the impacts would be felt nationwide with coverage losses, uncompensated care, economic disruption, and strained budgets in every state in the country.

Perhaps anticipating this outcome, the bill includes exceptions to work requirements for certain categories of individuals (e.g., pregnant women, foster youth, those who are medically frail, etc.) and allows states to offer limited “hardship” waivers under certain circumstances (e.g., natural disasters or in areas of high unemployment). The bill would also require outreach to enrollees so individuals understand their work requirements obligations and due process protections before an enrollee can lose their coverage. These nods notwithstanding, work requirements have succeeded only in imposing enormous barriers to coverage and remain a solution in search of a problem: 92 percent of Medicaid enrollees under the age of 65 work full- or part-time or are not working because of caregiving responsibilities, an illness or disability, or because they are in school.

The bill also does not stop at work requirements. Those able to satisfy this requirement and maintain their coverage would face higher out-of-pocket costs and still more red tape. Under the draft legislation, a Medicaid expansion enrollee whose income is just above the federal poverty level (i.e., $15,650 for one person and $32,150 for a family of four in 2025) could not face premiums. But states would be required to impose cost sharing of up to $35 per service—capped at 5 percent of the individual’s income—beginning in October 2028. This cost sharing would not apply to primary care, prenatal care, pediatric care, or emergency room care (with some caveats). Perhaps recognizing that imposing cost sharing on very low-income individuals would lead to uncompensated care for providers, the bill would allow health care providers (if their state approves) to ration care based on ability to pay—by conditioning treatment on the individual’s ability to pay the cost sharing.

The bill would also require states to redetermine the eligibility of Medicaid expansion enrollees every six months (instead of annually) and conduct more frequent address checks and other eligibility verifications. These policies would contribute to additional coverage attrition on an ongoing basis.

Burdens On States

Even as the bill would impose new administrative burdens on states, House Republicans want to restrict the ways that states can raise revenue to support their share of the Medicaid program. The bill would prevent states from establishing new provider taxes to help fund their Medicaid program, freeze existing taxes at their current rate, and modify the criteria that HHS uses when assessing certain health care-related taxes for purposes of Medicaid. Existing state-directed payments would remain undisturbed, although HHS is taking administrative action to address certain provider taxes and issued a related proposed rule on May 12. The bill would also direct HHS to revise its regulations to limit state-directed payments to no more than 100 percent of the published Medicare payment rate, require new Section 1115 waivers to be budget neutral, and direct HHS to develop a methodology to potentially claw back federal savings.

The bill would also sunset the increased federal Medicaid match that Democrats in Congress included in the American Rescue Plan to incentivize the remaining nonexpansion states to expand their Medicaid programs. States that have already qualified for this temporary enhanced match—including states that recently expanded such as North Carolina and South Dakota—would continue to receive this 5 percent enhancement for their non-expansion population for two years. But, under this bill, this incentive option would expire at the end of the year and not be available to any new expansion states beginning in 2026.

In addition to these new restrictions, the bill would bar the use of federal funding under Medicaid and CHIP for costs associated with otherwise covered services prescribed or provided in connection with the treatment of gender dysphoria for enrollees under age 18. Specifically, the bill includes a detailed coverage exclusion with a list of otherwise-covered procedures that spans multiple pages and describes in detail the range of services that would be considered to be “specified gender transition procedures.” Notably, many of the procedures on this list are inconsistent with existing standards of care for minors. The bill also includes exceptions where federal Medicaid funds could be used for these services—but only when needed by a non-transgender person. This provision is consistent with legislation introduced by Reps. Dan Crenshaw (R-TX) and Marjorie Taylor Greene (R-GA) and comes at a time when the Trump administration has already taken several steps to undermine health care access for transgender minors.

The bill would also penalize states that use their own funds (i.e., not federal funding) to purchase or offer health insurance coverage to undocumented residents. Beginning in October 2027, states that do so would see their federal share for Medicaid expansion reduced by 10 percentage points, from 90 percent to 80 percent. This would effectively double—from 10 percent to 20 percent—the state’s costs for the Medicaid expansion population. The language of this provision is extremely broad, and it is not clear if this penalty applies only to states that extend Medicaid coverage to undocumented residents—since Congress is choosing to use a cut to federal Medicaid funds to punish states—or if it applies to any type of health program for undocumented residents. Read expansively, the language could conceivably extend beyond programs that enroll undocumented individuals into public insurance (such as Medicaid) to include a state’s more general public funding to providers to offset uncompensated care costs.

Burdens On Providers

Many hospitals could face financial strain due to more uncompensated care under the bill. Uncompensated care would rise as millions more people lose their health insurance and as states impose cost-sharing requirements on low-income enrollees. Beginning in October 2026, the bill would also limit retroactive coverage in Medicaid to one month (instead of three months) prior to an individual’s application date, limiting the extent to which providers would be reimbursed for past claims for those who are eligible for, but not enrolled in, Medicaid.

In a provision that would “defund” Planned Parenthood, the bill would newly prohibit the use of federal Medicaid funds—either through a state or a managed care company—for “prohibited entities” for 10 years. A “prohibited entity” is a nonprofit essential community provider that (1) is “primarily engaged in family planning services, reproductive health, and related medical care;” (2) offers abortions beyond those allowed by the Hyde Amendment (i.e., because the pregnancy is the result of rape or incest or to save the woman’s life); and (3) received at least $1 million in federal and state Medicaid funds in fiscal year 2024 (including affiliates, subsidiaries, etc.). A more detailed CBO score shows that this is the only Medicaid provision in the Energy and Commerce draft that would increase, rather than cut, federal health spending.

If enacted, this provision would reduce access to care for many low-income patients. Planned Parenthood serves about one-third of all female family planning clients and the loss of Medicaid funding could force clinics to close or reduce their service areas, eroding access to maternal health care and other non-abortion services. Congress is considering this new provision ahead of a Supreme Court decision in Medina v. Planned Parenthood South Atlantic over whether South Carolina—and other states in the future—can exclude Planned Parenthood from their Medicaid programs because the organization offers abortion care.

Other Medicaid Changes

The legislation would delay, until 2034, Biden-era regulations to strengthen the Medicaid program by streamlining Medicaid eligibility and enrollment procedures, modernizing outdated recordkeeping requirements, helping children enroll in and keep their health care coverage, and barring annual or lifetime limits on care for children enrolling in CHIP. The delay would not technically repeal these rules, but it would prevent the policies from going into effect. These rules are in stark contrast to the House’s new administrative burdens through work requirements, eligibility redeterminations, and more.

The bill would impose a similar moratorium on a Biden-era rule to impose minimum staffing standards for long-term care facilities, a rule issued in the wake of the COVID-19 pandemic. Finally, the bill would ban “spread pricing” in Medicaid and requires pharmacies to participate in a drug acquisition cost survey to inform Medicaid reimbursement levels for pharmacies.