For over a decade, Covered California has been a leader among states in expanding access to comprehensive, affordable coverage. During the 2025 open enrollment period, Covered California reached a record breaking enrollment of 1.9 million enrollees. This success is now being derailed by the current federal administration. In June 2025, the Department of Health and Human Services (HHS) finalized a marketplace “integrity and affordability” rule (hereinafter referred to as the final rule) and on July 4, the federal reconciliation bill was signed into law, both of which dismantle important components of the federal and state-based marketplaces. Additionally, enhanced federal subsidies are set to expire at the end of 2025. The combination of these federal actions will have grave consequences for Covered California and more importantly, for all of the individuals and families who are enrolled in the marketplace. By the Congressional Budget Office’s own estimations, roughly 10 million individuals will lose health insurance, and Covered California projects this includes roughly 660,000 Californians who are enrolled in marketplace coverage.
Protections that Simplified Covered California Enrollment Have Been Stripped Away
Veiled as a guise for “eliminating fraud, waste and abuse,” the reconciliation bill and the final rule eliminate many protections that simplify Covered California enrollment. These policy changes are intended to make enrollment more difficult and cut people off coverage.
First, effective August 25, 2025 and through the 2026 plan year, Covered California cannot accept self-attestation of income when tax data is unavailable or when the data indicates their income is less than 100% FPL. This imposes an additional burden on individuals to collect and submit documentation confirming their income and a burden on Covered California to update their eligibility system. Second, as of August 25, 2025 and through 2026, the final rule eliminates the monthly special enrollment period (SEP) for individuals at or below 150% of the federal poverty line (FPL). Third, the final rule severely restricts the open enrollment period (OEP). Starting with the 2027 OEP, all marketplace OEPs must “begin no later than November 1” and “end no later than December 31,” and must not exceed 9 weeks in duration. California currently runs an OEP that is 3 months long, and the rule will restrict Covered California from operating a longer OEP. All of these changes will make it more challenging for individuals to enroll in Covered California.
Additionally, starting in 2026, the reconciliation bill eliminates the cap on advanced premium tax credits (APTCs) repayment. This means that most individuals up to 400% FPL will be responsible for repaying all excess APTCs they received, and may owe thousands of dollars at tax time, which will only further undercut enrollment.
Federal Changes Impose Onerous Administrative Complexities to Enroll in and Retain Coverage
The final rule and the reconciliation bill impose additional barriers individuals must overcome to retain coverage. First, the reconciliation bill eliminates the long-standing process of automatic re-enrollments. For the 2025 coverage year, 73 percent of renewing enrollees – about 1.2 million Californians – automatically renewed their coverage, so this change will drastically shift the mechanics of how individuals renew their coverage. Starting in plan year 2028, the reconciliation bill requires Covered California, and all other marketplaces, to impose pre-enrollment verifications of eligibility criteria (like household income, immigration status, and eligibility status), which will make it significantly more difficult for individuals to enroll in marketplace coverage. This effectively eliminates automatic renewals.
Second, effective August 25, 2025, the final rule imposes a past-due premium lock out. In practical terms, insurers are allowed to require payment of past due premiums from prior coverage within any timeframe as a condition of effectuating new coverage. The 2017 Marketplace Stabilization Rule only allowed a 12-month lookback (which was altogether eliminated in the 2023 Notice of Benefit and Payment Parameters Rule), so the final rule is a more punitive policy.
Third, for the 2026 plan year only, all marketplaces are required to deny APTCs to individuals who fail to file taxes and reconcile their financial assistance (i.e. “failure to reconcile”) for one year. This deviates from the more lenient Biden-era policy that required denying APTCs if the consumer did not file and reconcile for two consecutive years. To complicate matters, the reconciliation bill reinstates the shorter, one-year “failure to reconcile” period in 2028.
Still other individuals will have difficulty retaining coverage because of exclusions from receiving APTCs, which will make coverage prohibitively more expensive. Beginning in 2026, the reconciliation bill bars anyone who enrolls in a plan outside of a qualifying life event SEP from receiving APTCs. The reconciliation bill also prevents anyone who has been terminated from Medicaid for failing to meet work reporting requirements from receiving APTCs through the marketplace. Collectively, these changes will make enrollment more cumbersome for individuals and will restrict access to coverage and care.
Immigrants and People Seeking Gender-Affirming Care Are Penalized by Recent Federal Law and Rule Changes
One of the swiftest changes in the final rule makes Deferred Action for Childhood Arrivals (DACA) recipients ineligible for marketplace coverage as of August 25, 2025. In California, this means that roughly 2,300 DACA recipients will lose marketplace coverage as of September 1 and Covered California is already actively sending notices to individuals to alert them.
The reconciliation bill also makes deep cuts to immigrant eligibility for marketplace coverage. Today, lawfully present immigrants are eligible for marketplace coverage and financial assistance. Beginning in 2027, the reconciliation bill severely limits the number of lawfully present immigrants that qualify for premium tax credits and cost-sharing. Over 90% of lawfully present immigrants – including people with work and student visas, refugees, asylees, victims of trafficking, and survivors of domestic violence – will lose financial assistance and thus, will likely not obtain coverage because it will no longer be affordable without these subsidies. On average, these Californians would see a premium increase of $650 per month. In California, roughly 112,600 Covered California enrollees would lose financial assistance due to this change alone. Additionally, beginning in 2026, the reconciliation bill prohibits lawfully present non-citizens with incomes under 100% FPL who are ineligible from Medicaid from qualifying for APTCs.
Separately, beginning in 2026, the final rule would not allow states to include specified “sex trait modification” procedures (which could include many gender-affirming care services) as an essential health benefit 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. As a result, California may have to pay the cost of covering these services for Covered California enrollees in order to align with California’s health equity principles. California and several other states have sued to prevent the final rule from going into effect.
Congress is Likely to Let Enhanced Subsidies Laps
In addition to all of these harmful provisions in the final rule and reconciliation bill, the enhanced federal subsidies are set to expire at the end of 2025 unless Congress takes action to extend them. There is no indication that Congress intends to take that action, which means that premiums will go up substantially for the 2026 plan year and many individuals may be priced out of enrolling in Covered California coverage. A recent analysis suggests the average person will be paying 75% more for their premium. These premium spikes are unavoidable but Republican Congress members are more focused on slashing public benefits programs to fund the extension of tax breaks for the wealthy than ensuring continued health insurance coverage for the average person who lives in the United States.
California Advocates Will Continue to Protect Coverage and Access to Care
There is no denying that the picture is bleak. Covered California is required to comply with these harmful and punitive changes that will undoubtedly have a negative impact on Covered California cost and coverage, and on the marketplace’s stability. Despite these changes, advocates are working hard to protect the coverage that we can. Through engagement with Covered California, educating individuals, and supporting advocates who are working directly with impacted California enrollees, we can try to lessen the extent of the harm.
