The Trump Administration has taken aggressive federal action to gut the Medicaid program and Marketplace coverage across the country. There are numerous provisions from the Marketplace Final Rule and H.R.1, the so-called “One Big Beautiful Bill Act” (OBBBA) that drastically erode over a decade of progress to expand access to health coverage and improve health care affordability through Marketplace coverage. In California, consumers who rely on Covered California for health insurance coverage are starting to feel the harm. Californians are paying the price for these harmful federal changes. This blog outlines the 2026 changes to Covered California that should be on the radar of advocates and consumers alike.
Congress Failed to Extend Federal Enhanced Premium Subsidies Past 2025
Congress failed to extend federal enhanced premium subsidies (ePTCs), which reduced premiums for low and moderate-income families. These subsidies expired at the end of 2025, and no action has been taken by Congress to restore them. In large part due to this federal inaction, Covered California’s 2026 open enrollment period (OEP) saw a 32% decline in new enrollments, and a marked shift from Silver to Bronze plans. This means consumers will pay higher out-of-pocket costs when accessing medical care; in some cases, consumers will pay double. Premiums have also jumped a startling 97% on average for Covered California consumers, forcing Californians on a budget to make challenging decisions between health care, housing, and food.
Covered California Coverage is Restricted For Lawfully Present Immigrants
Effective January 1, 2026, OBBBA eliminated premium tax credits (PTCs) for lawfully present immigrants with incomes below 100% FPL who are ineligible for Medicaid due to immigration status. Although these individuals can still enroll in Marketplace coverage, the lack of financial assistance will likely make coverage prohibitively expensive. Relatedly, in August 2025, the Centers for Medicare & Medicaid Services (CMS) Marketplace Final Rule rescinded Marketplace coverage altogether for DACA recipients, continuing the administration’s attack on immigrants.
The Cap on APTC Recoupment is Gone
Beginning in tax year 2026, OBBBA eliminated the cap on advanced premium tax credit (APTC) recoupments. Individuals whose actual income exceeds their projected income will have to repay all excess APTCs from PY 2026 when filing their 2026 taxes. The one exception is that individuals with income below 100% FPL still do not have to pay back excess APTCs. Prior to OBBBA, a repayment cap applied to individuals under 400% FPL. Individuals will need to report income changes to the Marketplace now to avoid excess APTCs. Although 2026 taxes aren’t filed until 2027, consumers should take action now to ensure their income is up-to-date with Covered California.
Gender Affirming Care Coverage Is Stripped This Year
In PY 2026, the Marketplace Final Rule also bans coverage of gender-affirming care (GAC) as an Essential Health Benefit (EHB) in individual and small group market plans and excludes these services from annual and lifetime limits and cost sharing protections in all plans, including large group plans. In California, however, health insurance companies are still required to provide GAC to enrollees pursuant to California state nondiscrimination requirements. While due to the federal rule APTCs cannot be applied to premiums for GAC, a recently enacted law in California requires the Department of Managed Health Care, subject to appropriation from the Legislature, to defray the cost of GAC services, which would protect consumers from increased premiums that would have likely resulted from implementation of the federal rule.
Financial Assistance Is No Longer Available for People Who Enroll Through an Income-Based Special Enrollment Period
Effective January 1, 2026, OBBBA eliminated premium tax credit (PTC) eligibility for people who enroll through an income-based special enrollment period (SEP) outside of open enrollment. This change is a continuation of the Marketplace Final Rule’s elimination of the 150% FPL SEP as of August 2025 and through plan year (PY) 2026. OBBBA’s permanent prohibition on extending PTCs to individuals who enroll through this SEP will effectively eliminate the 150% FPL SEP, further restricting pathways to enroll in Covered California coverage.
The Extent of the Harm to the Covered California Marketplace Is Still Unfolding
The full impact of these federal changes on Covered California is still unknown. But one thing is clear: It is anticipated that many more individuals will drop Covered California coverage in the months to come. The eligibility restrictions coupled with crippling cost hikes leave some Californians in a perilous situation or newly uninsured.
While the punitive provisions in OBBBA and the Marketplace Final Rule are designed to drop individuals from coverage, advocates, navigators, enrollment assisters and promotoras should be prepared to help consumers weather this storm. In August 2025, federal litigation temporarily stopped seven provisions from the Marketplace Final Rule from taking effect. NHeLP will continue to provide updates on Marketplace changes.
