Executive Summary:

• Declining in the Affordable Care Act Marketplace cannot be reduced to a single cause – it reflects a convergence of designed legislative sunsets, a crackdown on improper enrollment, and a fiscal choice to limit spending.
• The expiration of the enhanced premium tax credits reverts the Affordable Care Act subsidy to its initial statutory structure, averting nearly $350 billion in deficit spending over the next ten years and refocusing the program on low-income households.
• Premium subsidies change who pays for care, but not why care is so expensive —hiding the root causes of health care inflation.

Introduction:

Recent KFF data has shown out-of-pocket premiums surging following the expiration of the enhanced Affordable Care Act (ACA) premium tax credits. While many analysts claim that premiums have resulted in widespread disenrollment from ACA plans, the Trump administration and Centers for Medicare and Medicaid Services (CMS) continue to offer a different narrative. They frame disenrollment as a long-overdue cleanup of fraud and improper enrollment, and in recent weeks have continued to escalate a crackdown on alleged fraud in the ACA marketplace.

New data indicating consumers are facing rising premiums is not an indication that allowing enhanced tax credits to expire was a mistake. It is natural that the expiration of the enhanced tax credits would contribute to premium increases. The level of subsidies that existed before the passage of the American Rescue Plan were already generous and sufficient in providing affordable coverage for millions of Americans. Ultimately, this shift in enrollment reflects more than a single cause – it is the product of legislative design, program integrity efforts, and fiscal tradeoffs converging at once. And beneath this lies a more fundamental question the subsidy debate obscured: whether policy is addressing the cost of care itself or deciding who absorbs it.

Background:

The enhanced premium tax credits originated under the American Rescue Plan of 2021 and were extended through 2025 by the Inflation Reduction Act of 2022, with both being passed along party lines through reconciliation. The original, pre-2021 ACA subsidy structure did not disappear, but was suspended and resumed once the enhancement expired.

Two design changes made the enhanced credits different from the original ACA premium tax credits. First, it removed the income cap that had previously limited tax credits to households earning below 400 percent of the federal poverty level, which allowed the assistance to extend to higher earners. Second, it lowered required premium contributions as a percent of income, resulting in a growth in enrollment from roughly 11 million to over 24 million in just four years.

The Congressional Budget Office (CBO) projects that around 4 million enrollees will become uninsured over the next several years because of the expiration of enhanced tax credits.  Recent analysis from KFF shows that national premiums have substantially increased – a benchmark 40-year-old ACA policy enrollee saw their average out-of-pocket premiums rise from $50 in 2025 to $172 in 2026. Increases vary significantly by state, and states that run their own marketplaces have generally seen a smaller increase in premiums than those relying on the federal platform.

Trump Administration and ACA Fraud Prevention

The Trump administration has attributed the bulk of disenrollment to systemic fraud and misconduct within the program. The Department of Health and Human Services (HHS) and CMS argue that once subsidies covered the entire premium for many plans, enrollees stopped receiving monthly bills. Some brokers exploited administrative loopholes – using lead-generation web forms and third-party enrollment application programming interfaces (APIs) – to enroll consumers without consent or switch their plans without knowledge to collect monthly commissions. Because the subsidy covered 100 percent of the premium, consumers were unaware of these “ghost plan” enrollments until tax season. CMS Administrator Mehmet Oz reported that the agency estimates up to 35 percent of marketplace sign-ups may involve improper enrollments. In 2025 alone, CMS canceled 250,000 unauthorized enrollments and identified 200,000 unauthorized plan switches. From the administration’s perspective, most of the disenrollment reflects a necessary cleanup of the ACA market rather than consumer price increases – and the expiration of subsidies was key to restoring integrity to the program.

The fraud argument draws significant pushback. Critics attribute enrollment declines predominantly due to price shocks and minimizes the role of improper sign-ups and broker abuse. The truth is that the debate is often presented as a false dichotomy. A nuanced view of the situation requires acknowledging that both forces actively shape disenrollment. Critics are correct that premium increases are a primary driver of lower enrollment. When monthly out-of-pocket costs jump significantly, a substantial number of legitimate enrollees drop or adjust their coverage. Conversely, dismissing integrity efforts as negligible ignores the documented cases of program abuse enabled by zero-premium plans. CMS’ canceling of hundreds of thousands of unauthorized plans, and purging of duplicate or non-compliant enrollments, is evidence of fraud prevention’s part in decreasing overall enrollment. While Congress removed the primary financial incentive by letting the enhanced subsidies expire, CMS reinforced these integrity efforts by closing administrative oversight loopholes and penalizing rogue brokers.

Case for Expiration of Enhanced Tax Credits

The Trump administration has aptly labeled the expiration of subsides as a means of maintaining program integrity. Other arguments that led to the expiration of the tax credits include legislative design, targeted spending, and fiscal restraint.

A sunset provision reaching its expiration date is not a policy failure or manufactured crisis – it is the law functioning precisely as it was written and designed. Congressional leaders explicitly authored enhanced premium tax credits as temporary, time-limited measures within the American Rescue Plan of 2021 and the Inflation Reduction Act of 2022. Treating their scheduled end as an emergency ignores the reality that temporal limits were essential to their original passage. They were specifically calibrated as short-term relief to offset the acute economic disruption of the COVID-19 pandemic and the broader inflationary surge that followed in 2022.

The uncapped, higher-income eligibility introduced in 2021 was also a design choice worth reconsidering. Extending the tax credits to those above the previous 400 percent federal poverty line cap diluted the purpose of a program originally aimed to aid people who were priced out of coverage, and returning to an income-capped structure redirects assistance towards the enrollees who need it the most, even if it results in a cost increase for higher earners who benefitted from temporary expansion.

The cost of making enhanced subsidies permanent would have been substantial. The CBO estimated a permanent expansion would add roughly $350 billion to the federal deficit over ten years. For proponents of fiscal discipline, preventing this multi-hundred-billion-dollar expansion of open-ended entitlement spending provided a very solid rationale for letting the temporary provisions lapse.

The More Important Point About the U.S. Health Care System

The fierce debate over ACA subsidies ultimately points to a fundamental flaw within U.S. health care policy: whether the federal government or the individual pays for insurance premium is a question of who pays, not why the bill is so high in the first place.

By treating premium tax credits as the primary tool for affordability, policymakers are applying an expensive band-aid to a broken pricing system rather than forcing substantial structural reform. The underlying cost of health care in the United States is driven by a wide range of factors including inflation across the delivery system, hospital consolidation that hurts competition, high prescription drug prices, and high administrative overhead.

Confident that explicit and implicit federal health insurance subsidies will absorb price adjustments, plans face little pressure to cut administrative overhead, negotiate lower service costs, or rein in drug prices. When temporary subsidy expansions expire or revert to the levels they were at before expansion, the band-aid is abruptly ripped off. Ensuing price shocks and disenrollment is not merely the result of a statutory sunset, but the consequence of a policy that focuses on targeting a reflection of high costs rather than the costs themselves.

Subsidies can be an effective way to make coverage more affordable in the short-term, especially as a direct response to upward cost pressure from a troubled economy. Yet until federal policy directly targets the underlying costs of medical care, subsidies and spending should remain ways to provide short-term relief, not permanent structures that should be relied upon to make the cost of care affordable.

Conclusion

The decline in marketplace enrollment cannot be reduced to a single cause. It was the product of legislative sunset functioning as designed, a genuine integrity crackdown, and a fiscal choice to limit spending. The more consequential lesson lies beneath that convergence: premium tax credits only determine who pays for coverage, not why it costs so much. Real, lasting affordability will come only when policy stops financing the symptoms and starts targeting the true cause of expensive health care.

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