Health Issues

A federal rule published in June 2025 ^{will deliver significant changes to Affordable Care Act Marketplace enrollment, with some of the regulations becoming effective in August 2025. Here’s a look at the Marketplace Integrity and Affordability final rule’s changes and when they will take effect.}

The first wave of changes – effective August 25, 2025

1. Pausing the special enrollment period for low-income individuals

Who’s affected: This will apply nationwide, meaning low-income people will no longer have year-round access to enroll in Marketplace plans.

Permanent? No. This is a pause rather than a termination. HHS has clarified that the low-income SEP will once again be available, at the option of each exchange, for plan year 2027.

Rationale for rule: HHS stated that the low-income SEP played a significant role in allowing fraudulent enrollments that made headlines in 2024, ^{and is potentially resulting in adverse selection, with people waiting until they’re sick to enroll in coverage.}

2. DACA recipients lose eligibility for coverage

Who’s affected: HHS estimates that 10,000 DACA recipients will lose Marketplace coverage as a result of this rule, and 1,000 people will lose Basic Health Program (BHP) coverage. ^{DACA recipients became eligible for Marketplace coverage in November 2024, but access to enroll in Marketplace plans was soon revoked in 19 states that sued to prevent DACA recipients from enrolling. DACA recipients in the rest of the country have continued to be eligible, but that will end in August 2025.}

What changes: Deferred Action for Childhood Arrivals (DACA) individuals who are currently enrolled in the Marketplace will be disenrolled as of August 25, 2025. ^{Under the same rule DACA recipients will also become ineligible for BHP coverage because they will no longer be considered “lawfully present” for the purpose of accessing Marketplace or BHP coverage, although only Minnesota and Oregon operate BHPs.}

3. Stricter income verification for Marketplace applications

Who’s affected: Applicants with income mismatches or missing IRS data.

What changes: Marketplace applicants will need to provide proof of household income if the applicant attests to an income that doesn’t match the information the exchange gets from its trusted data sources (such as the Internal Revenue Service).

This will include scenarios in which there are inconsistencies between what’s attested and what the Marketplace obtains from trusted data sources, such as the IRS, as well as scenarios in which the IRS doesn’t have tax return data on file for the applicant. It will also apply to situations in which the applicant attests to having a household income of at least 100% of the federal poverty level, but the exchange’s data sources indicate that’s not the case. In other words, the data sources show that the applicant is potentially in the coverage gap, but the applicant is attesting that they aren’t. The applicant will need to provide proof of their income to qualify for Marketplace financial assistance.

The final rule also permanently removes the current automatic 60-day extension to the regular 90-day window that applicants are given to provide requested income documentation.

Permanent change? This rule change is temporary – through the end of 2026.

4. Required payment of new coverage premiums if applicant has past-due premiums

Who’s affected: Enrollees who owe past-due premiums to an insurer and submit an application for a new policy with that insurer.

What changes: In this situation, the insurer will be allowed to add the past-due premium to the amount the applicant must pay to effectuate the new policy, as long as this is allowed under state law. ^{If the applicant doesn’t pay the past-due premium, the insurer will be allowed to refuse to effectuate the new policy.}

Impact: Higher out-of-pocket costs and less generous premium subsidies. Because the IRS uses the same premium indexing methodology to determine the percentage of income that Marketplace enrollees pay in after-subsidy premiums, the new methodology will also have the effect of reducing premium subsidies. This is because it will increase the percentage of income that people pay in after-subsidy premiums.

2. $5 minimum premium for auto-renewed $0 premium plans

Who’s affected: Auto-renewed enrollees in $0 premium plans on HealthCare.gov. Although auto-renewal is not a consumer’s best option (it’s better to actively compare plan choices each year), it’s widely used. During the open enrollment period for 2025 coverage, nearly 20.2 million people renewed their Marketplace coverage, and 10.8 million of those people used auto-renewal.

What changes: Under the new rules, if a person is enrolled in a $0 premium plan (meaning their premium subsidy covers the entire premium) and relies on auto-renewal for 2026, they will not have $0 premium coverage in 2026 until they reconfirm their eligibility information in their Marketplace account. Instead, they will have a minimum net premium of at least $5/month.

Duration: This rule change is temporary, just for the 2026 plan year ^{and does not apply to state-run exchanges.}

But H.R.1, the budget bill that was enacted on July 4, 2025 (known as the One Big Beautiful Bill Act), effectively calls for Marketplace auto-renewal to end altogether, starting with the 2028 plan year (the open enrollment period in the fall of 2027). From that point on, Marketplace enrollees will have to verify their ongoing eligibility for coverage and premium subsidies each year. Marketplaces will have the option to rely on automatic verification protocols for confirming enrollee information, in cases where it’s available via the Marketplace’s trusted data sources.

3. Bronze-to-Silver auto-renewal banned

Who’s affected: Marketplace enrollees with Bronze plans who are eligible for cost-sharing reductions (CSR) and let their coverage auto-renew.

What changes: The final rule permanently removes an auto-renewal protocol that HealthCare.gov adopted in 2024, allowing the Marketplace to switch a consumer from a Bronze plan to a Silver plan in some circumstances.

Impact: Enrollees may miss out on CSR unless they take action.

Details: Under the existing guidance, if an applicant is eligible for CSR, enrolled in a Bronze plan, and a Silver plan is available in the same product (HMO, PPO, etc.), with the same provider network, and with equal or lesser after-subsidy premiums, the exchange can auto-renew the enrollee into the Silver plan. This allows the enrollee to take advantage of their CSR benefits, which are only available on Silver plans.

The final rule prohibits this protocol, starting with the 2026 plan year. Instead, the auto-renewal will keep the enrollee in their existing plan if it continues to be available.

State-run exchanges “may retain their flexibility regarding their re-enrollment hierarchies at the discretion of the Secretary of Health and Human Services.” So a state-run exchange can seek HHS approval for a different approach to auto-renewal protocols.

4. Pre-enrollment SEP eligibility verification

Who’s affected: Special enrollment period applicants in states with exchanges that use HealthCare.gov for enrollment.

What changes: In recent years, HealthCare.gov applicants using a SEP have only been required to provide proof of their SEP eligibility if the qualifying life event was the loss of other qualifying coverage. ^{The final rule removes that limitation, allowing pre-enrollment eligibility verification for any qualifying life event.}

The exchange will be required to conduct pre-enrollment SEP eligibility verification for at least 75% of new SEP enrollments.

Permanent? No. This requirement will be in place only for the 2026 plan year.

All states? The proposed rule called for this to apply nationwide, but it was only finalized for states that use HealthCare.gov. ^{State-run exchanges will continue to have the option to verify applicants’ SEP eligibility or not (some already do so, while others do not).}

So, the open enrollment period for plan year 2026 begins on November 1, 2025 and will continue through January 15, 2026 in most states. State-run exchanges will have the option to extend it even later than that, which several have historically done.

But starting in the fall of 2026, and for future years, open enrollment will be shorter:

• In states that use gov, it will run from November 1 to December 15.
• States that run their own exchanges will have the option to extend open enrollment, but only within certain parameters:
  • It must begin no later than November 1
  • It can’t continue past December 31
  • It can’t last longer than nine weeks.

All policies selected during open enrollment will take effect January 1.

As is already the case, the open enrollment period will continue to apply both on-exchange and off-exchange.

Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written hundreds of opinions and educational pieces about the Affordable Care Act for healthinsurance.org.

People in lower-income families with employer coverage spend a greater share of their income on health costs than those with higher incomes, and the cost of employer sponsored health insurance—including premiums, deductibles, and other out-of-pocket costs—has risen steadily over time. Low-income workers offered health insurance through their employer are typically not eligible for subsidies on the Affordable Care Act (ACA) Marketplaces, even if they would face lower costs to buy coverage and with reduced cost sharing.

This analysis uses information from the 2024 Annual Social and Economic Supplement (ASEC) to the Current Population Survey to look at the share of family income people with employer-based coverage pay toward their premiums and out-of-pocket payments for medical care. It considers non-elderly people living with one or more family members who are full-time workers and have employer-based coverage.

The analysis is available through the Peterson-Kaiser Health System Tracker, an online information hub dedicated to monitoring and assessing the performance of the U.S. health system.

Approximately 66 million people – about 20% of the U.S. population – live in rural areas, where Medicaid covers 1 in 4 adults (a higher share than in urban areas) and plays large part in financing health care services. In rural communities, Medicaid covers nearly half of all births and one fifth of inpatient discharges. The Congressional Budget Office (CBO) estimates that the Medicaid changes in the House-passed budget reconciliation bill—the One Big Beautiful Bill Act—will reduce federal Medicaid spending by $793 billion, decrease Medicaid enrollment by 10.3 million people, and increase the number of uninsured people by 7.8 million. Senators from both parties have raised concerns about potential impacts on rural hospitals and other providers, particularly given the ongoing trend of rural hospital closures.

To address those concerns, Senate Republicans have proposed adding a rural health fund to the reconciliation bill. Initial reports have pegged the size of the fund at $15 billion, though some Republican Senators have argued it should be bigger. The fund would provide $3 billion per year in fiscal years 2027 through 2031, with half distributed equally across all states and half to be distributed by the Centers for Medicare and Medicaid Services (CMS) based at least in part on states’ rural populations, percent of providers located in rural areas, and the situation of hospitals who serve low-income patients. It is unclear how the funds will be distributed across hospitals, other providers, and various state initiatives and whether the funds would be enough to offset any losses for providers under the bill.

This policy watch estimates how the House-passed reconciliation bill would affect federal Medicaid spending in rural areas and the number of rural Medicaid enrollees.

Building on KFF’s earlier estimates of state-by-state Medicaid cuts, this analysis estimates that Medicaid spending in rural areas could decrease by $119 billion over 10 years (Figure 1). The analysis allocates each state’s estimated spending reductions from the earlier analysis of the One Big Beautiful Bill Act to urban and rural areas using the percentage of Medicaid spending that paid for services used by rural enrollees within each state.

Overall, federal Medicaid spending in rural areas could decrease by 15% ($119 billion), which is far more than the $15 billion that has been suggested for the rural health fund. These estimates may underestimate the effects on rural areas because they do not account for the full change in total Medicaid spending, which would include the federal spending reductions and the associated reduction in state Medicaid spending stemming from lower enrollment. The estimates also do not account for the 8.2 million people who are expected to be uninsured because of changes in the Affordable Care Act. Those coverage losses stem from $268 billion in cuts to Affordable Care Act (ACA) Marketplace coverage from the reconciliation bill, the expiration of enhanced ACA subsidies that were enacted during the COVID-19 pandemic, and the impact of proposed Marketplace integrity rules. Federal spending cuts and coverage losses could have implications for rural hospitals and other providers, including increases in uncompensated care. While providers could potentially offset some of the cuts, financial pressure on hospitals and other providers could lead to layoffs of staff, more limited investments in quality improvements, fewer services, or additional rural hospital closures.

Over half of the spending reductions in rural areas are among 12 states that have large rural populations and have expanded Medicaid under the ACA, each of which could see rural federal Medicaid spending decline by $4 billion or more. Those states include Kentucky, North Carolina, Ohio, Illinois, Virginia, Michigan, New York, Washington, Pennsylvania, Oklahoma, Louisiana, and Arkansas. Kentucky would experience the largest rural Medicaid spending reduction, with an estimated drop of over $10 billion over 10 years. Larger effects in expansion states reflect the fact that expansion states would experience spending reductions under the House-passed reconciliation bill equal to 13% of their projected Medicaid spending, compared with only 6% in non-expansion states. Over half of the estimated federal spending cuts stem from provisions that only apply to states that have adopted the ACA expansions, including work requirements, more frequent eligibility determinations, and new cost sharing requirements. As a result, the effects of the reconciliation bill in rural areas will be larger for expansion than non-expansion states. The $119 billion decline in federal spending does not account for any changes in states’ Medicaid spending.

Building on KFF’s earlier estimates of state-by-state Medicaid enrollment declines, an estimated 1.5 million fewer people could be covered by Medicaid in rural areas under the reconciliation bill in 2034. The analysis allocates each state’s estimated enrollment loss from the earlier analysis of the One Big Beautiful Bill Act to urban and rural areas using the percentage of Medicaid enrollees in rural areas within each state. The same 12 states with the largest spending reductions account for over half of the estimated enrollment losses, each of which could experience enrollment declines of 50,000 or more rural enrollees in 2034. Currently, the uninsured rate is lower in expansion states than in non-expansion states, but it’s unclear whether that could change if the reconciliation bill passes. Research consistently links health coverage to improved health and to reduced mortality. The 1.5 million people who lose Medicaid in rural areas does not account for other increases in the uninsured rate stemming from reconciliation provisions affecting the number of people with coverage purchased through the ACA Marketplaces. It also does not account for the expiration of enhanced premiums tax credits, which were temporarily established during the COVID-19 pandemic, and the impact of proposed Marketplace integrity rules.

Read the news release about these poll findings.

Key Takeaways

• The “One Big Beautiful Bill Act” that was passed by House Republicans and is currently being discussed by the U.S. Senate is viewed unfavorably by a majority of adults (64%), including large majorities of independents and Democrats. Six in ten Republicans have a favorable opinion of the bill, but this support is largely driven by supporters of the Make America Great Again (MAGA) movement, while two-thirds of non-MAGA Republicans view the bill unfavorably. Among both Republicans and MAGA supporters, support drops at least 20 percentage points, with less than half of each group viewing the law favorably after hearing it would increase the country’s uninsured rate and decrease funding for local hospitals.
• As the Republican-backed bill proposes sweeping cuts to Medicaid spending as well as changes to the Affordable Care Act (ACA), overall favorability of both programs reach all-time highs. Overall favorability of Medicaid, the health care program for low-income adults and children is now at 83%, including majorities of Democrats (93%), independents (83%), and Republicans (74%). This is an uptick in favorability from January 2025 of six percentage points overall and an 11-point increase among Republicans. In addition, two-thirds of the public now view the ACA favorably. KFF polling found a similar uptick in favorability of the ACA during the 2017 repeal efforts. In general, large majorities of the public, including most Democrats, independents, and Republicans, think it is the government’s responsibility to provide health insurance to people who cannot afford it.
• A majority of the public (68%), including nine in ten Republicans and MAGA supporters, as well as half of Democrats support Medicaid work requirements as described in the House bill. Yet, most people are not aware that the majority of Medicaid recipients are already working, and attitudes can change once people are provided with additional information. For example, support for Medicaid work requirements drops as low as 35% (a 33-point decrease in support) when proponents hear that most people on Medicaid are already working and that many would be at risk of losing coverage because of difficulty completing paperwork to prove their eligibility. On the other hand, support increases as high as 79% (an 11 point increase) if opponents hear the argument that imposing these requirements could save money and help fund Medicaid for the elderly, people with disabilities and low-income children, showing how persuasive an argument can be even if it is not factually true.
• Adults who currently are insured through Medicaid describe a variety of ways they would be affected if they lost Medicaid coverage. More than half say it would be “very difficult” to afford their prescription medications (68%), afford to see a health care provider (59%) or get and pay for another form of coverage insurance coverage (56%) if they lost Medicaid. In addition, most Medicaid enrollees say losing Medicaid coverage would have a “major impact” on their financial well-being (75%), overall quality of life (69%), their mental health (66%), and their physical health (60%).

The Tax and Budget Bill

Last month House Republicans passed a sweeping legislative package that combined tax cuts with other legislative priorities of President Trump. Known as the “One Big Beautiful Bill Act,” the tax and budget bill contains health care provisions which include significant changes to the Medicaid program and the Affordable Care Act (ACA). As the Senate takes up this legislation, the latest KFF Health Tracking Poll finds strong partisan views on key health care provisions in the proposed bill.

Nearly two-thirds of the public (64%) hold an unfavorable opinion of the tax and budget bill being discussed by Congress, while one-third (35%) hold a favorable view. And while there are strong partisan differences, there is a lack of support among Republican and Republican-leaning independents who do not align with President Trump’s Make America Great Again (MAGA) movement.

Generally, six in ten Republicans have a favorable opinion of the bill compared to large majorities of both independents (71%) and Democrats (85%) who have an unfavorable opinion. Support for the legislation rises as high as 72% among MAGA supporters, a key constituency of President Trump. Yet, among Republicans and Republican-leaning independents who are not MAGA supporters, two-thirds (66%) have an unfavorable view of the bill.

In addition, two groups that will be most directly impacted by the tax and budget bill – individuals with Medicaid coverage and people who buy their own insurance on the ACA Marketplaces – are largely negative towards the bill. At least six in ten people who purchase their own health coverage (64%) and Medicaid enrollees (61%) say they have an unfavorable view of the tax and budget bill being discussed by Congress. A recent KFF poll found that substantial shares of people who buy their own coverage and those with Medicaid coverage identify as Republican or Republican-leaning independents (45% and 27%, respectively).

Many are aware of how the bill impacts spending on federal health programs but some confusion remains about the implications for average Americans. More than half of the public correctly say that if the bill was signed into law, it would increase federal spending on border security (58%) and about half are aware it would add to the federal budget deficit (50%). About half are also aware the bill would decrease federal spending on food assistance for low-income Americans (53%), Medicaid (51%), and the ACA (48%).

While the CBO has estimated at least 10 million people would lose coverage under the bill, many Republicans disagree and say the savings will come from reducing fraud, waste, and abuse. Slightly less than half of the public say the bill would decrease the number of people in the U.S. with health insurance (45%) with about a quarter saying the bill would either make no change to the number of people with health insurance or would increase it. Another three in ten say they are unsure what the impact would be on the uninsured rate.

There is also some confusion on the impact of the bill on the amount most people would pay in taxes. The House version of the bill is expected to cut taxes for most Americans, but four in ten (38%) think it would increase taxes, 21% correctly say it would decrease taxes, and about four in ten saying the tax rate would either not be changed (15%) or they are not sure (25%).

Republicans Say Medicaid Savings Will Come From Cutting Fraud and Waste, Democrats Say It Will Come From Taking Health Coverage Away

Partisan views of the changes to Medicaid may be directly tied to where people think the savings would come from. The bill would reduce federal spending on Medicaid by nearly $800 billion and six in ten adults say the savings will come from taking health coverage away from people who need it while four in ten (39%) say the savings will come from reducing fraud and waste. The vast majority of Democrats (89%) and six in ten (63%) independents say the savings will come from taking health coverage away from people who need it. More than three-fourths of MAGA supporters also say the savings will come from reducing fraud and waste, while non-MAGA Republicans and Republican-leaning independents are more divided in their views of where the savings will come from.

Public Disapproval of Big Beautiful Bill Increases When Hearing it Increases Uninsured Rate and Decreases Funding for Local Hospitals

While the legislation continues to be debated as the debate moves from the House to the Senate, the Congressional Budget Office (CBO) released their report estimating the legislation would increase the number of adults without health insurance by more than 10 million and reduce federal spending on Medicaid by almost $800 billion. In addition, several Republican Senators have said they oppose the provision in the House-passed legislation that freezes states’ provider taxes at their current rate and prohibits states from establishing new provider taxes because of the negative impact it may have on rural hospitals.

Reflecting these ongoing discussions, public attitudes towards the legislation are dynamic and can shift after hearing some of these details. For example, public support for the legislation drops 14 percentage points to 21% after hearing that the legislation would decrease funding for local hospitals. In addition, three-fourths of the public (74%) have an unfavorable view of the legislation after hearing that the bill would increase the number of people without health insurance by about 10 million.

On the other hand, hearing that the bill would reduce federal spending on Medicaid by more than $700 billion seemingly has no impact on public opinion with two-thirds still holding unfavorable views of the bill after hearing this.

Reflecting the difficulty facing Republican lawmakers, a majority of Republicans and MAGA supporters view the law unfavorably after hearing that it would decrease funding for local hospitals (64% and 55%, respectively) or increase the number of people without health insurance by about 10 million (59% and 52%, respectively).

Across partisans, overall favorability drops once the public hears details about funding decreases and coverage losses. Republicans’ and MAGA supporters’ favorability of the legislation drops at least 20 percentage points with now less than half of each group saying they view the law favorably after hearing the bill would increase the uninsured rate in the country and that it would decrease funding for local hospitals.

Support for Key Health Care Provisions

The bill includes a provision that would penalize states that have used their own funds to expand coverage to immigrants, including some undocumented immigrants, by reducing the federal Medicaid match rates for their ACA Medicaid expansion group. Overall, a small majority of the public (54%) oppose this provision while 45% support it. There are stark partisan differences on this proposal as Republicans are more than twice as likely as Democrats to support reducing funding for states that use their own funds to provide Medicaid coverage to immigrants. Among MAGA supporters, three in four (76%) say they support this provision in the bill as do more than half of non-MAGA Republicans and Republican-leaning independents (55%).

Medicaid Work Requirements

Incorporating work-requirements for people on Medicaid is a core aspect of the House-passed legislation. While most analyses have shown that most working-age adults on Medicaid are already working or have a disability or caregiving duties, the public is largely unaware of this fact. A majority of the public (56%) think most adults with Medicaid coverage are unemployed, while about four in ten (43%) are aware most adults who have Medicaid coverage are working.

A slight majority of Democrats (57%) and about half of independents (48%) are aware that most working-age adults on Medicaid are already working. However, more than three in four Republicans and majorities of both MAGA and non-MAGA Republicans and Republican-leaning independents are unaware that most working-age adults on Medicaid are working.

The latest KFF Health Tracking Poll finds majorities of the public, including nine in ten Republicans (88%) and MAGA supporters (93%), as well as half of Democrats (51%), support requiring nearly all adults with Medicaid coverage prove they are working, looking for work, in school, or doing community service, with exceptions for caregivers and people with disabilities.

Yet attitudes towards this provision can change once people are provided with additional information and arguments. For example, when those who support Medicaid work requirements hear that most people on Medicaid are already working and many would be at risk of losing coverage because of difficulty of completing the paperwork to prove their eligibility, about half of supporters change their view, resulting in two-thirds (64%) now opposing Medicaid work requirements and one third (35%) supporting it (a 33 percentage point decrease in support).

Similarly, after supporters hear that work requirements would not have a significant impact on employment but would increase state administrative costs, support drops to 40% (a 28 point decrease).

On the other hand, when those who initially oppose work requirements hear the argument that imposing these requirements could save money and help fund Medicaid for the elderly, people with disabilities and low-income children, overall support increases from 68% to 79% (an 11 point increase). While this argument is persuasive, it is not factually accurate.

The arguments for and against work requirements work similarly across partisans, with overall support for Medicaid work requirements dropping significantly once initial supporters of the provision hear that imposing such a requirement would put many people at risk of losing coverage due to the difficulty proving eligibility through required paperwork, or that that imposing such a requirement would have no significant impact on employment but would increase state administrative costs.

On the other hand, support for Medicaid work requirements increases among Democrats and independents after those who initially opposed the proposal hear that imposing such a requirement could save money, helping fund Medicaid for groups like the elderly, people with disabilities, and low-income children.

Planned Parenthood Medicaid Funding

The House bill also includes a provision that would stop all federal health care payments to Planned Parenthood and other clinics for services like birth control and health screenings provided to people on Medicaid, if the clinics also offer abortion services. Overall, about two-thirds of the public (67%) oppose stopping these health care payments to Planned Parenthood and similar clinics, while about one-third (32%) support this provision.

About nine in ten Democrats (89%) and seven in ten independents oppose this provision, while Republicans are more divided with 54% supporting and 46% opposed. The provision to stop payments for health care services to any clinic that offers abortion services is popular among MAGA supporters, with more than six in ten of those who identify as MAGA supporters saying they support stopping payments to Planned Parenthood and similar clinics. Notably, a majority of non-MAGA Republicans and Republican-leaning independents are opposed to stopping payments and Republican women are divided in their views.

Attitudes towards federal Medicaid payments to Planned Parenthood are also somewhat malleable. For example, after those who initially support stopping payments hear that even though no federal payment to Planned Parenthood goes directly to abortion services, cutting off all Medicaid payments to Planned Parenthood and other clinics would make it difficult for many lower-income women to access health services, such as treatment for STDs, cancer screenings, and birth control, overall support for stopping payments drops from 32% to 19%.

Conversely, when those initially opposed to stopping payments to Planned Parenthood hear that even though no federal payment to Planned Parenthood goes directly to abortion services, the organization does provide and refer women for abortions, support for stopping payments increases from 32% to 41%.

Overall support for stopping Medicaid payments to Planned Parenthood decreases by 18 percentage points among Republicans and by 13 points among independents after those who initially support stopping payments hear that cutting off these payments would make it difficult for many lower-income women to access non-abortion health services.

When those who initially oppose stopping all payments to Planned Parenthood hear that that even though no federal payment goes directly to abortion services, the organization does provide and refer women for abortions, overall support for stopping the payments increases by 11 percentage points among Republicans and by 8 points among Democrats and independents.

Public Attitudes towards Medicaid

In 2010, the Affordable Care Act significantly expanded the country’s Medicaid program, which provides health and long-term care coverage to 83 million low-income children and adults in the U.S, and helped millions afford private health insurance through the exchanges. Eight in ten adults (79%) think it is the government’s responsibility to provide health insurance to people who cannot afford it, including nearly all Democrats (93%), more than eight in ten independents (84%), and about six in ten Republicans (62%).

In addition, more than eight in ten adults now view the Medicaid program favorably. This includes large majorities of Democrats (92%), independents (83%), and Republicans (74%) who hold favorable views of Medicaid. Since January 2025, the share across partisans who view Medicaid favorably has increased including an eleven-percentage point increase among Republicans.

Overall views of the ACA are now two to one in favor of the law with two-thirds of the public viewing the ACA favorably while one-third hold unfavorable views of the law. This continues a long-term trend upwards in ACA favorability as the 2010 health care legislation has garnered majority approval since the latest GOP effort to repeal and replace the legislation during the first Trump administration. Notably, a majority of Republicans (63%) still hold unfavorable views of the law.

Provisions in the tax and budget bill passed by the House would reduce ACA enrollment by shortening enrollment windows and increasing required eligibility paperwork for adults who purchase their own health insurance through the ACA marketplaces.

About a third of the public (34%) support this provision, while two-thirds (65%) are opposed. Most Democrats (79%) and independents (68%) are opposed to this provision of the bill, as are half of Republicans (47%). Among supporters of the MAGA movement, more than half (55%) support shortening enrollment windows and increasing eligibility paperwork for those who purchase their own health insurance through the ACA marketplaces.

Public Concerned How the One Big Beautiful Bill Will Impact Families

In addition to gauging overall favorability of the tax and budget bill and its various health care provisions, the latest KFF Health Tracking Poll also asked the public how they expected themselves and others to be impacted by the legislation.

Public Believes Republican Tax and Budget Bill Will Hurt Them and Their Families

Nearly half of the public (44%) think the tax and budget bill will hurt them and their own family, and majorities say the bill will generally hurt undocumented immigrants (71%), people who receive SNAP benefits (60%), middle-class families (50%), people with Medicaid coverage (56%), and immigrants who are in the U.S. legally (52%). A majority of the public also say the bill will hurt people with lower incomes. On the other hand, half (51%) think the bill will help wealthy people. Despite the fact that the bill makes major changes to the ACA marketplaces for people who buy their own insurance, 47% of the public think the bill won’t make much difference for people who buy their own health insurance.

Republicans are much more likely to say they and their family will be helped by the tax and budget bill being discussed by Congress than independents or Democrats, as well as to say the other groups asked about will largely not be impacted. Yet just 32% of Republicans think the bill will help them or their family members. Democrats consistently think all of the groups asked about will be hurt by the GOP tax bill, except for wealthy Americans. Seven in ten Democrats say wealthy people will be helped by the bill as do six in ten independents. At least three-fourths of Democrats say people with lower incomes, immigrants in the country legally, undocumented immigrants, people with Medicaid, and people who get SNAP benefits will be hurt by the bill.

The Public, Especially Those Who Rely on Programs, Worry About Funding Cuts

Seven in ten adults are concerned that more adults and children will have trouble affording food because of changes to the food stamp program in the tax and budget bill. This includes about nine in ten Democrats and three-fourths of independents, and nearly half of Republicans (47%). Among the 42% of adults who are connected to the SNAP program either through themselves or a family member, more than three-fourths (77%) say they are concerned that families will have trouble affording food as a result of the tax and budget bill.

Large majorities of Democrats and independents are also concerned that more adults and children will become uninsured because of changes to Medicaid and the ACA in the tax and budget bill, as are nearly half of Republicans. Among the 44% of adults who have a current personal or family connection to the Medicaid program, nearly eight in ten say they are concerned about the number of people becoming uninsured as a result of the tax and budget bill.

People With Medicaid Are Worried About Impacts of Losing Coverage

Currently more than 40 million adults receive coverage through the country’s Medicaid program and some of them could lose coverage under the tax and budget bill. Among adults 18-64 with Medicaid coverage, more than half say that if they lost Medicaid, it would be “very difficult” to afford their prescription medications (68%), afford to see a health care provider (59%) or get and pay for another form of coverage insurance coverage (56%).

In addition, most Medicaid enrollees say that losing Medicaid coverage would have a “major impact” on their financial well-being (75%), overall quality of life (69%), their mental health (66%), and their physical health (60%). Four in ten say it would have a “major impact” on their ability to work.

The House-passed reconciliation bill includes only a few provisions that directly affect Medicare spending. It includes no provisions related to Medicare Advantage, the private plan alternative to traditional Medicare, even though analysis by the Medicare Payment Advisory Commission (MedPAC) estimates payments to Medicare Advantage plans are $84 billion (or 20%) more than spending for similar beneficiaries in traditional Medicare. In contrast, the bill instead focuses on major changes to Medicaid and the Affordable Care Act (ACA), which would reduce federal spending by over $1 trillion and increase the number of uninsured people by an estimated 10.9 million. (When combined with the effects of allowing the ACA’s enhanced premium tax credits to expire, CBO estimates 16 million more people will be uninsured in 2034.) Despite some reports last week that Senate Republicans were considering including changes to how the federal government adjusts payments to Medicare Advantage plans based on the health status of their enrollees, those now appear unlikely to be included in the Senate version.

The Medicare Advantage quality bonus program, established by the Affordable Care Act, increases Medicare payments to Medicare Advantage plans based on a five-star rating system. Plans may, but are not required to, use the additional payments to cover the cost of supplemental benefits, including reduced cost sharing, extra benefits not covered by traditional Medicare (e.g., vision, hearing and dental), and lowering Part B and/or Part D premiums. The star ratings are intended to help consumers make informed decisions when choosing among Medicare Advantage plans and the bonus payments are intended to encourage plans to compete based on quality. However, MedPAC and others have observed that the star ratings incorporate too many measures, do not adequately account for social risk factors, and may not be a useful indicator of quality because star ratings are reported at the contract rather than the plan level. Medicare Advantage contracts typically include multiple plans, which may have different benefits, costs, networks, service areas, and enroll different populations (i.e., plans that are open for general enrollment and special needs plans that limit enrollment to dual-eligible individuals).

Critiques of the quality bonus program have led to calls to replace, reform or end the program. In 2018, the Congressional Budget Office estimated that eliminating the quality bonus program would lower federal spending by almost $100 billion over ten years. Given the sharp increase in both actual and projected Medicare Advantage enrollment since CBO’s analysis, the savings from eliminating bonuses could be substantially higher. For example, 33 million people were enrolled in Medicare Advantage in 2024, which was 5 million more than CBO projected at the time of the analysis, and CBO’s most recent projections for future Medicare Advantage enrollment are nearly 30% higher than previously projected. The degree to which changes to the quality bonus program would impact plan quality or the availability of supplemental benefits would depend on the specifics of any proposal and how insurers modified plan offerings in response. Though the proposal that had reportedly been under consideration by the Senate, the No UPCODE Act, does not directly address the quality bonus program, to the extent the changes in the legislation results in lower risk scores of Medicare Advantage enrollees, spending under the quality bonus program would also be lower.

This analysis examines trends in bonus payments to Medicare Advantage plans, enrollment in plans in bonus status (plans that qualify for a benchmark increase based on their quality star rating), and how these measures vary across plan types using publicly available information on Medicare Advantage enrollment, payment rates, and quality ratings.

Key Takeaways:

• Federal spending on Medicare Advantage bonus payments will total at least $12.7 billion in 2025, similar to spending in 2023, and more than four times higher than in 2015. Since 2015, Medicare has spent at least $87 billion on quality bonus program payments.
• Most Medicare Advantage enrollees (75%) are in plans that are receiving bonus payments in 2025. Since 2019, at least 7 in 10 Medicare Advantage enrollees have been in a plan receiving a bonus payment.
• The average bonus payment per enrollee is highest for employer- and union-sponsored Medicare Advantage plans ($438) and lowest for special needs plans ($332), raising questions about the implications of the quality bonus program for high-need beneficiaries.

Medicare Advantage plans will receive at least $12.7 billion in bonus payments in 2025.

Estimated bonus payments to Medicare Advantage plans will total at least $12.7 billion in 2025, similar to 2023. Bonus payment spending had decreased slightly in 2024 following a decline in star ratings after the expiration of COVID-19 pandemic-era policies. Those policies prevented individual measures that go into calculating the star ratings from declining between 2021 and 2022 and temporarily increased star ratings for certain plans. Bonus payments have increased sharply since the program started, more than quadrupling from $3.0 billion in 2015 to $12.7 billion in 2025 (Figure 1). The total spending on the quality bonus program is less than 2.5% of the projected payments to Medicare Advantage plans in 2025 ($540 billion).

Medicare spending on bonus payments has grown faster than enrollment in Medicare Advantage, which has doubled since 2015. This spending comes at a time when the Medicare program is facing growing fiscal pressures. Medicare Advantage benchmarks (and corresponding spending) have grown faster than traditional Medicare spending in part because of the increase in bonus payments.

These estimates are a lower bound because bonus payments are risk adjusted, which is likely to increase bonus payments. The estimates also do not include additional spending that results if plans increase their bids when their benchmark is higher because of being in bonus status. For example, a plan might increase its bid to increase payments to providers, add more expensive providers to its network, or retain a larger amount as profit, provided they meet medical loss ratio requirements.

The distribution of bonus spending across plan types is similar to the distribution of enrollment in 2025, though employer plans comprise a slightly larger share of bonus spending than enrollment. Individual plans account for 61% ($7.8 billion) of bonus spending and 62% of enrollment, employer plans account for 20% ($2.5 billion) of bonus spending and 17% of enrollment, and special needs plans account for 19% ($2.4 billion) of bonus spending and 21% of enrollment in 2025 (Appendix Table 1).

Most Medicare Advantage enrollees (75%) are in plans that receive bonus payments.

In 2025, nearly 26 million people, or 75% of Medicare Advantage enrollees, are in plans that are receiving bonuses. That compares to just under 9 million people (55%) in 2015 (Figure 2). The share of enrollees in plans that receive bonus payments in 2025 is slightly higher than the previous year (72%).

Average annual bonus payments are highest for enrollees in employer- and union-sponsored plans.

In 2025, Medicare Advantage plans receive an average annual bonus of $372 per enrollee, more than double the $184 average bonus per enrollee in 2015 (Appendix Table 2). Average bonuses in group employer- and union-sponsored plans have consistently been higher than for other plans. The average bonus per enrollee in a group employer- or union-sponsored Medicare Advantage plan is $438 in 2025, compared to $368 for individual plans and $332 for special needs plans (SNPs) (Figure 3).

Bonuses are higher per enrollee in employer plans because these plans have higher average star ratings, resulting in a larger share of enrollees receiving coverage from plans that qualify for bonuses. Across the entire period of 2015 to 2025, the share of all enrollees in employer- or union-sponsored plans that received a bonus never went below 80%. In contrast, at least 80% of enrollees in individual and special needs plans were in a plan that received a bonus in only one year – 2023 (Figure 4).

Relatively low bonus payments for special needs plans, raises questions about the implications for higher need beneficiaries, including people who are dually eligible for Medicare and Medicaid.

On May 22, 2025, the U.S. House of Representatives passed a budget reconciliation bill—called the One Big Beautiful Bill Act (OBBBA)—that includes significant reductions in federal Medicaid spending to help offset the cost of tax cuts, along with changes to the Affordable Care Act (ACA), immigration reforms and  other provisions. Together, the combination of policies that increase the number of uninsured, policies that limit the ability of states to raise revenues to increase provider payments, and other changes are expected to have financial consequences for hospitals, affecting some hospitals more (or less) than others. Financial pressure on hospitals could affect patient care to the extent that hospitals respond by cutting certain expenses—such as by offering fewer services, laying off staff, or investing less in quality improvements—or close altogether, especially in rural areas. This is in addition to the direct impact of losing coverage on individuals, who would be less likely to obtain needed care as a result.

According to the Congressional Budget Office (CBO), the bill is projected to cut federal Medicaid spending by $793 billion and reduce spending related to the ACA Marketplaces by $268 billion over a decade, totaling $1.04 trillion in cuts after accounting for the indirect effects on federal revenues. CBO projects that the number of uninsured Americans would increase by 10.9 million as a result of the OBBBA—7.8 million due to changes to Medicaid and 3.1 million due to changes to the ACA exchanges—and by 16.0 million when combined with the expected expiration of the ACA enhanced premium tax credits and the implementation of proposed rules for the ACA exchanges. The substantial increase in uninsured Americans would likely lead to more uncompensated care, putting an additional strain on hospital finances. The bill would also restrict states’ future ability to raise the state share of Medicaid revenues through provider taxes, which often support higher payments for hospitals, and would limit the ability of states to create new state directed payments to increase payments to hospitals. The impact of the OBBBA on hospital finances would vary across hospitals. For example, it is likely that the OBBBA would have a disproportionate impact on hospitals caring for a relatively large number of Medicaid patients and other patients with low incomes.

Because the OBBBA is projected to increase the deficit, CBO projects it would trigger about $500 billion in mandatory reductions in Medicare spending between 2026 and 2034, including a 4% reduction in payments to hospitals, unless Congress takes action to circumvent them (which Congress has historically done).

This issue brief discusses the potential implications of the OBBBA for hospitals and explains how some hospitals (such as rural hospitals as well as urban hospitals that serve a large share of Medicaid patients) may be less well positioned than others (such as hospitals that serve a large share of commercial patients) to absorb revenue losses given their current financial status. Analyses of hospital operating margins are based primarily on RAND Hospital Data and reflect 2023 numbers.

About 4 in 10 hospitals had negative operating margins, and 12% had margins below -10%, but 24% had margins at or above 10%, suggesting some will have greater capacity than others to absorb any losses

About four in ten (39%) hospitals had negative operating margins in 2023 (Figure 1). Operating margins are a measure of financial standing that indicate the extent to which hospitals profit or lose money on patient care and other operating activities. Hospitals with negative operating margins could have a particularly hard time absorbing any losses resulting from the reconciliation bill. This could especially be the case for the more than one in ten (12%) hospitals with operating margins below -10%.

However, the remaining three fifths (61%) of hospitals had positive margins, though some of these hospitals had relatively modest margins (e.g., 22% had positive margins of less than 5%).  Roughly a quarter of all hospitals (24%) had relatively high margins of at least 10%. These hospitals may be most likely to withstand major spending reductions in the OBBBA.

Rural hospitals were more likely to have negative margins than urban hospitals

A larger share of rural versus urban hospitals had negative margins (44% versus 35%) (Figure 2). The share with negative margins was especially high among hospitals in the most remote rural areas (49%), defined here as rural areas not adjacent to a metropolitan area.

Rural hospitals have a unique set of financial challenges and could have an especially hard time adjusting to any losses resulting from the OBBBA. For example, rural hospitals tend to be smaller facilities with lower volume. Operating at a smaller scale can lead to a higher cost of providing care on average—e.g., to the extent that the fixed costs of operating a hospital, such as maintaining a minimum number of staff, are spread across fewer patients—and may limit the ability of rural hospitals to offer specialized services.

The ability to absorb any losses resulting from the reconciliation bill would likely vary across rural hospitals, as is true of hospitals overall. More than four in ten (44%) rural hospitals had negative margins, and about one in seven (15%) had margins of less than -10%. Negative margins were more common among rural hospitals in states that had not expanded Medicaid (especially those in the most rural areas) and among sole community, Medicare-dependent, and low-volume hospitals, among other differences. A major provision in the reconciliation bill – a work and reporting requirement in Medicaid – would only apply to the Medicaid expansion. However, other provisions, such as cutbacks on the ACA Marketplaces, would likely disproportionately affect states that have not expanded Medicaid.

At the same time, more than half (56%) of all rural hospitals had positive margins. Nearly a quarter (23%) of rural hospitals had relatively modest margins (less than 5%) while about one fifth (19%) had margins of at least 10%. Positive margins were more common among rural hospitals with more beds, with higher occupancy, that were affiliated with a health system, and that were not government-owned.

Hospitals that serve a large share of Medicaid patients in urban and rural areas were more likely than others to have negative margins, and they could be disproportionately affected by the House-passed bill

Hospitals where Medicaid covered a high share of stays—a group that could also have an especially hard time absorbing any losses resulting from the OBBBA—were more likely than others to have negative margins. For example, 45% of hospitals with high shares of Medicaid patients had negative margins versus 35% among hospitals with low shares. The share with negative margins was relatively high among hospitals with high Medicaid shares in both urban and rural areas (44% and 48%, respectively). Relatedly, operating margins were lower than average among hospitals with high Medicaid shares (e.g., they were 2.3% among hospitals with high shares versus 7.0% among those with low shares).

Hospitals caring for a disproportionate share of Medicaid patients and other patients with low incomes have unique financial challenges. For example, Medicaid and other public payers tend to reimburse at lower rates than private insurance, and it may be more expensive to treat patients with low incomes in ways that are not captured in reimbursement rates.

Further, it is likely that hospitals caring for a relatively large share of Medicaid patients and other patients with low incomes would take the biggest hit under the OBBBA, since the bill achieves much of its savings through Medicaid cuts along with changes to the ACA exchanges that would increase the number of uninsured individuals.

Hospitals with for-profit ownership, high commercial shares, and high commercial-to-Medicare price ratios were more likely to have positive margins than other hospitals, among other differences

While about six tenths (61%) of hospitals had negative operating margins, the share was higher among for-profit hospitals (71%), hospitals where commercial payers cover a relatively large share of stays (73%), hospitals with high commercial-to-Medicare price ratios (75%), hospitals that were part of a broader health system (66%), and hospitals with high market shares (73%) (Figure 4). These hospitals may have an easier time than others in absorbing any losses related to the OBBBA.

In most states (29), at least four in ten hospitals had negative margins in 2023

The share of hospitals with negative margins varied across states, but in more than half of all states (29 states), at least four in ten hospitals had negative margins (Figure 5). At least half of hospitals had negative margins in 14 states. This includes a mixture of red states (such as Kansas and Oklahoma) and blue states (such as Massachusetts and New York). At least 60% of hospitals had negative margins in four states: Kansas, Mississippi, Vermont, and Washington.

Differences in hospital finances across states may be attributable to variations in demographics, hospital ownership and type, commercial reimbursement rates, and state and local health and tax policy. For instance, the share of hospitals in the red may have been relatively low in Texas in part because the state has a relatively large number of for-profit hospitals (which are less likely to have negative margins) among other factors. The relatively low share of hospitals with negative margins in Florida may be at least partly due to relatively high commercial prices as a percent of Medicare rates.

Some states with a relatively large share of hospitals with negative margins may be disproportionately affected by the OBBBA and other policy changes. For instance, three fifths (60%) of hospitals in Mississippi had negative margins. If the OBBBA were enacted, the ACA enhanced tax credits expired, and the proposed rules for the ACA Marketplaces were implemented, then the share of people who are uninsured is expected to increase, putting a particular strain on hospitals in states that experience large increases in the number of uninsured.  The uninsured rate in Mississippi would increase by 6 percentage points—one of the highest increases in the country—based on KFF estimates. As another example, in Washington, where more than three fifths (63%) of hospitals had negative margins, the reduction in federal Medicaid as a share of baseline spending resulting from the OBBBA would be the largest of all states (17% over ten years) according to KFF estimates.

The bill could trigger about $500 billion in mandatory Medicare cuts, including cuts in payments to hospitals and other providers, unless Congress intervenes

Because the bill is expected to increase the federal deficit, CBO projects it would trigger about $500 billion in mandatory cuts to Medicare spending between 2026 and 2034—including a 4% cut in payments to hospitals and other providers—unless Congress intervened. The automatic reductions in Medicare payments to hospitals and other health care providers and plans, known as “sequestration,” would be required under the Statutory Pay-As-You-Go (PAYGO) Act. If these cuts did go into effect, they would come at a time when the Medicare Payment Advisory Commission has recommended that Congress increase Medicare payment rates in 2026 relative to current law and could raise concerns about the adequacy of Medicare reimbursement. Historically, Congress has voted to waive automatic Medicare payment reductions due to sequestration under statutory PAYGO rules.

The budget reconciliation bill that passed in the U.S. House of Representatives in May 2025 ^{includes provisions intended to make ICHRAs – Individual Coverage Health Reimbursement Arrangements – easier to use and more financially attractive for small businesses.}

Three sections of the bill address these health reimbursement arrangements integrated with individual-market coverage, currently known as ICHRAs. The changes include providing a tax incentive for small businesses that start reimbursing employees for the cost of individual health insurance and relaxing some existing administrative rules. The budget bill also calls for ICHRAs to be rebranded as Custom Health Option and Individual Care Expense (CHOICE) Arrangements.

Section 110203 of the House budget bill creates a nonrefundable tax credit that would be available to small employers (those with fewer than 50 full-time equivalent employees) during the first two years they offer a CHOICE Arrangement to their employees. The tax credit would be $100 per employee per month for the first year and $50 per employee per month in the second year. Both amounts would be adjusted for inflation in years after 2026.

Although ICHRA utilization has increased significantly in recent years, ^{it still accounts for a very small segment of employer-sponsored health benefits. But the addition of a federal tax credit available to employers nationwide might incentivize more small employers to begin offering ICHRA benefits to their employees.}

Indiana began offering a two-year tax credit in 2024, to small employers that offer ICHRAs to their employees. ^{But while Indiana’s tax credit provides a maximum of $400 per employee in the first year, the federal tax credit in the House’s budget legislation would provide up to $1,200 per employee in the first year.}

If implemented, this would help to create a “no wrong door” environment for taking advantage of an employer’s offer to reimburse premiums, in situations where the employer also offers a way for the employee’s share of the premium to be paid on a pre-tax basis.

It’s unclear whether small employers would utilize this option however, as doing so would require the administrative burden of offering both a CHOICE Arrangement and a small-group health plan.

The No Surprises Act, which was signed into law by President Trump during his first term and took effect in 2022, aims to protect consumers from certain surprise medical bills. The law established processes to keep the patient out of the payment negotiations between the provider and the plan. In the event of an unsuccessful negotiation, providers and payers enter an independent dispute resolution (IDR) process in which a designated third-party arbitrator examines eligible evidence from both parties to decide on a final payment rate.

KFF’s analysis examines the implementation status of the IDR process and discusses some of the impacts on providers, payers, and ultimately, consumers, with some key findings, including that nearly two in three disputed services involved care that was furnished in an emergency room. The top 10 dispute-initiating parties are all providers or their billing consultants, and they submitted 72% of the out-of-network payment disputes from 2023-mid-2024. The top three parties accounted for 53% of payment disputes from the beginning of 2023 through mid-2024: TEAMHealth, SCP Health, and Radiology Partners, all of which are backed by private equity firms. While the No Surprises Act is protecting consumers from surprise bills, it is likely not reducing prices and spending.

The analysis is available through the Peterson-KFF Health System Tracker, an online information hub dedicated to monitoring and assessing the performance of the U.S. health system.

The 2025 federal budget reconciliation bill passed by the House aims to promote the use of health savings accounts (HSA) through a variety of changes to the HSA provisions included in the 2003 law that created HSAs. While these changes could provide more incentives for individuals to use HSAs, they would cost the federal government almost $45 billion over 10 years, according to an estimate from the Congressional Budget Office. This Policy Watch provides an overview of HSAs and examines key HSA-related provisions in the House-passed budget reconciliation bill and their costs to the federal budget.

What Are HSAs?

HSAs are tax-advantaged spending accounts designed to help enrollees in high-deductible plans (HDHPs) pay out-of-pocket medical costs. Individuals can contribute amounts and later make withdrawals to pay for unreimbursed qualified medical expenses (e.g., deductibles, copays, coinsurance, services not covered by insurance). There are annual contribution limits for individuals (for 2025, the contribution limit is $4,300 for individual coverage, $8,550 for a family). Employers are also eligible to make contributions to their employees’ HSAs, as well as family members on behalf of an individual with an HSA. HSAs are owned by the individual, not the employer. These accounts are characterized as “portable,” meaning they can be carried to a new job or retained upon retirement or loss of work.

A key feature of these accounts is that an individual must be enrolled in an HSA-eligible HDHP with a deductible of at least $1,650 for an individual or $3,300 for a family in 2025. HSA enrollees must pay all medical costs out-of-pocket until they reach the deductible, except for specified preventive services and certain insulin products, which insurance can start paying for before the deductible is met.

Also, an individual cannot have other health coverage in addition to the HDHP to be eligible for an HSA. So, receipt of medical services outside of the HDHP may jeopardize eligibility for an HSA. Additionally, once an individual is enrolled in Medicare, they can no longer contribute to an HSA (although they can still access funds in an existing HSA).

Health savings accounts are unique in offering a “triple-tax advantage”: contributions are tax deductible, growth of funds via investment is tax-free and account balances roll over, and withdrawals are tax-free if they are used for qualified medical expenses (e.g., doctor visits, prescription drugs, medical equipment) incurred after the HSA is established.

How Have HSAs Been Used?

According to the KFF 2024 Employer Health Benefits Survey, 22% of firms offering health benefits offered a high-deductible health plan (HDHP) paired with an HSA to their employees. Larger firms offering health benefits are much more likely than smaller firms to offer an HSA-qualified HDHP (50% for offering firms with 200 or more workers compared to 21% for firms with 3-199 workers). In addition to the contributions that enrollees can make to their HSA, employers are also permitted to contribute to covered workers’ HSAs. Among firms that contribute, the average employer contribution is $842 for single coverage and $1,539 for family coverage.

HSA-qualified HDHPs are also offered on the Affordable Care Act (ACA) Marketplace; however, the share of total health plans offered on the Marketplace that are HSA-eligible HDHPs has decreased from 7% in 2017 to 3% in 2023, and total enrollment in these plans has fallen from 8% in 2017 to 5% in 2022. Even though the deductibles of most HDHPs offered on the ACA Marketplace well exceed the minimum deductible requirements for HSAs, some HDHPs sold on the Marketplace cover services before the deductible in addition to the specific health services that the IRS permits for HSA-eligible plans. The drop in HSA availability on the Marketplace could also be because the Centers for Medicare and Medicaid Services (CMS) limits insurers on the exchange to offering no more than two non-standardized plans for each standardized plan they offer in a metal level for a given product/network type (e.g., HMO, PPO).

There are disparities in HSA contributions and balances across race and income groups. Research has found that higher-income individuals are more likely than those with lower incomes to be enrolled in an HSA. One explanation for this difference could be that those with higher incomes have more means to pay for out-of-pocket expenses for medical care received pre-deductible. Additionally, the tax advantages of HSAs may be particularly attractive to higher-income individuals, who may have more disposable income to maximize contributions than individuals with lower-incomes, who may not be able to afford to contribute to an HSA. Because they are in a higher tax bracket, the reduction of taxable income by making HSA contributions is also of greater value to a higher-income family than to a family with a household income in a lower tax bracket (or that earns too little to file a federal tax return). For instance, a married couple with a household income of $600,000 saves 35 cents for every dollar they contribute to their HSA, while a married couple making a combined $80,000 saves 22 cents per dollar contributed to their HSA.

Research also finds that HSA enrollment is skewed more towards White HDHP enrollees than their Black and Hispanic counterparts, which might be exacerbating existing racial income disparities and financial barriers to health care. In an analysis conducted by the Employee Benefits Research Institute (EBRI) in 2022, accountholders living in disproportionately Black or Hispanic zip codes had, on average, lower HSA balances and lower contributions than accountholders living in disproportionately White zip codes.

Investing HSA balances provides a unique, untaxed wealth-building vehicle for those who are aware of this option and have the means to do so. Despite the appeal of the tax-free investment option though, only 9% of HSA holders in 2024 invested a portion of their funds, according to a Devenir report. However, investments made up a more substantial portion of HSA assets that same year, representing a little over two-fifths of total assets. Separately, EBRI found that disproportionately White and Asian zip codes, as well as zip codes with a higher median household income, had a higher propensity to invest HSA funds in 2022.

How Have Standards for HSAs Changed in Recent Years?

The first Trump administration was a proponent of expanding access to HSAs. In 2019, an Executive Order and subsequent guidance expanded the list of services allowed to be covered pre-deductible by HSA-qualified HDHPs to include preventive services that help maintain health status for those with certain chronic conditions. This definition was further expanded in IRS guidance from 2024. Congress in COVID-relief legislation permitted telehealth services to be covered by HDHPs pre-deductible up until the end of last year. In the Inflation Reduction Act, Congress changed the HSA law to allow individuals to access certain insulin products pre-deductible.

How Would the House-Passed Budget Reconciliation Bill Expand HSAs?

If passed by the Senate and signed into law, key changes to HSAs would include:

Making gym memberships a qualified medical expense that individuals can pay for with their HSA. The reconciliation bill would allow HSA distributions to pay for certain sports and fitness expenses, such as gym memberships and participation/instruction in physical activities. Annual HSA distributions for these expenses would be capped at $500 for single taxpayers and $1,000 for joint or head of household filers. This is the costliest provision in the budget reconciliation bill: $10.5 billion from 2025 to 2034.

Allowing individuals to qualify for an HSA even if they are covered by a direct primary care arrangement or an on-site employee clinic. Direct primary care (DPC) is a different model of primary care delivery in which patients pay a periodic fee to a practice that covers unlimited primary care services (e.g., vaccines, lab work, office visits, consultive services) without cost-sharing. DPC does not usually cover specialized and other services and is therefore not generally considered comprehensive coverage. Some HDHP enrollees and others choose to add DPC to meet their primary care needs. The budget reconciliation bill stipulates that DPCs that meet specific requirements will not be treated as a health plan. In addition, the legislation would also treat dollars used to pay DPC fees as an HSA-specific qualified medical expense. This would allow HSA holders to add it on as a complement to their HDHP and use their HSA funds to pay DPC membership fees, with the caveat that these fees cannot exceed $150 monthly ($1,800 annually) in order to not be considered a health plan. This provision is projected to cost about $2.8 billion from 2025 to 2034.

On-site employee sponsored health clinics are health care facilities on an employer’s premises (or facilities used primarily for the same employer) that provide free or reduced cost services to employees. Current law makes an individual ineligible to use an HSA if they have access to an on-site employee clinic that provides significant health benefits (i.e., providing care for all medical needs for free or waiving copays and deductibles) in addition to disregarded coverage and preventive services. The budget reconciliation bill proposes to not treat on-site employee clinics offering qualified items and services as health plans for purposes of determining HSA eligibility if the services provided at the clinic meet certain parameters. This provision is projected to cost about $2.4 billion from 2025 to 2034.

Increasing the amount certain individuals can contribute to their HSAs in a year and allowing contributions that the law currently restricts. For example:

• The annual contribution limit to a health savings account for an individual would increase by $4,300 for individuals with self-only coverage and by $8,550 for family coverage, which doubles the 2025 basic limits on annual contributions. This increase would phase out at certain income levels ($75,000 to $100,000 of adjusted gross income; for joint filers with family coverage, $150,000 to $200,000 of adjusted gross income). This provision is projected to cost about $8.4 billion from 2025 to 2034.
• Individuals who are age 65 or older and enrolled only in Medicare Part A (not Part B) would be allowed to still make HSA contributions. This provision is projected to cost about $7.4 billion from 2025 to 2034. Other tax code changes would also apply to these individuals.

Treating Marketplace bronze plans and catastrophic plans as a high-deductible plan that can be paired with an HSA. To increase accessibility of HSAs in the individual market, bronze plans and catastrophic plans would be treated as HDHPs. Bronze plans have the highest cost-sharing and lowest premiums among metal-tier plans, while catastrophic plans have lower premiums than bronze plans and deductibles are equal to the ACA annual limit on out-of-pocket costs ($9,200 for individual coverage in 2025 and $10,150 in 2026). This provision is projected to cost about $3.6 billion from 2025 to 2034.

How Much Would the HSA-related Provisions of the House Budget Reconciliation Bill Cost the Federal Government?

If passed by the Senate and signed into law, HSA tax deductions would cost the federal government almost $14.8 billion in lost revenue in fiscal year (FY) 2025, and if eligibility and regulations governing the accounts remained the same, they would cost an estimated $180.9 billion from 2025 to 2034. The House-passed budget reconciliation bill contains ten reforms that broaden the range of HSA-eligible qualified medical expenses, loosen restrictions on individual contributions, and increase access to HSAs. According to the Congressional Budget Office’s estimated revenue effects for this bill, these expansions would increase the total projected cost of HSAs by approximately $44.3 billion over the next ten years (Figure 1).

Looking Forward

Efforts to expand HSAs would mean new large government expenditures, at a time when proposed tax cuts and significant changes to Medicaid and ACA programs will leave more people without coverage. Congress arguably created HSAs in 2003 to be paired with HDHPs as a tool to pay for current health care costs and to incentivize price shopping for anticipated health services. Today, expansions to HSAs appear to focus less on cost-conscious shopping, as federal rules have added more pre-deductible coverage of certain items and services and expand the items that can be treated as medical services, but only for consumers with health savings accounts. Proposals aimed at promoting “choice and control” would allow more individuals to use funds in an HSA to pay directly for certain services. Although some pre-deductible items and services are aimed at managing specific chronic illnesses, these provisions do not reach all consumers who could benefit from other types of specialized items and services, which often come at a high cost, to manage and treat their chronic condition.