CMS Moves to Tighten ACA Subsidies

The Centers for Medicare & Medicaid Services (CMS) is proposing stricter verification requirements for consumers seeking financial assistance through Affordable Care Act marketplaces, a move the Trump administration says will reduce fraud and ensure taxpayer-funded subsidies go only to eligible enrollees. 

Under the proposed rule, individuals seeking premium tax credits or cost-sharing reductions would have to verify eligibility before receiving financial assistance beginning with the 2028 plan year. Currently, many consumers can receive subsidies while exchanges work to verify information such as income, household size, residency and citizenship status. CMS Administrator Dr. Mehmet Oz said,

Federal subsidies should only go to eligible Americans, not to fraudsters gaming the system. Implementing the Working Families Tax Cuts legislation will protect taxpayer dollars and restore trust in the Exchanges by verifying eligibility before that money leaves the building.

The proposal implements provisions included in the Working Families Tax Cuts law and follows broader Trump administration efforts to tighten ACA marketplace oversight. Healthcare Dive stated the administration has previously frozen new broker registrations, removed hundreds of thousands of allegedly unauthorized enrollments and adopted stricter eligibility reviews in an effort officials say is aimed at combating fraud. Under the proposed regulation, exchanges would be required to verify applicants’ income, family size, residency, immigration or citizenship status and eligibility for other health coverage before subsidies are activated. Enrollees could still purchase coverage while verification is pending, but financial assistance would not begin until eligibility is confirmed. Consumers ultimately deemed eligible could receive retroactive assistance covering the verification period as detailed in Modern Healthcare.

CMS is also proposing annual re-verification requirements. Consumers who fail to return to the marketplace and confirm eligibility information each year would be automatically re-enrolled in coverage but without financial assistance until their eligibility is re-established. To facilitate the process, CMS would create a new pre-open enrollment verification window beginning Aug. 1 each year. The agency said the earlier timeline would give consumers additional time to submit documentation and resolve discrepancies before coverage renewals and open enrollment begin. The first such verification period would occur in 2027 for 2028 coverage.

The proposal could have significant implications for Arizona consumers who purchase coverage through HealthCare.gov. Thousands of Arizonans rely on premium tax credits to reduce monthly insurance costs, and applicants would face the same pre-enrollment verification requirements as other consumers using the federally facilitated marketplace if the rule is finalized. The administration argues the changes are necessary to protect public dollars. Treasury Secretary Scott Bessent said the proposal would close eligibility loopholes and help ensure subsidies are reserved for people who qualify under federal law.

However, the rule could also reduce marketplace enrollment. CMS estimates approximately 332,500 fewer people annually would enroll in ACA plans as a result of the new requirements, including roughly 237,000 fewer enrollees in federal exchanges and about 95,000 fewer in state-based marketplaces. The proposal arrives as ACA enrollment has already declined following the expiration of enhanced federal subsidies at the end of 2025. Marketplace enrollment in June 2026 was down by more than 4.6 million people, or about 18%, compared with a year earlier. Stakeholders will have 30 days to submit comments after publication of the proposed rule in the Federal Register.