Too Poor for Affordable Health Insurance: CBO Breaks Down H.R.1 Marketplace Coverage Loss Impacts and Fraud Claims
The Congressional Budget Office (CBO) details coverage losses from H.R.1 and examines Marketplace fraud claims in non-expansion states.
Authors: Ellen Montz and Tara Straw
Editors: Patti Boozang and Amanda Eisenberg
tl;dr
The Congressional Budget Office (CBO) released the numbers underpinning its projection that 2.1 million individuals will go uninsured due to H.R.1’s Affordable Care Act (ACA) Marketplace provisions. About half of that coverage loss is the result of eliminating premium tax credit (PTC) eligibility for some categories of lawfully present noncitizens, and the other half is from making it more difficult for individuals to sign up for and maintain Marketplace coverage.
These losses are on top of CBO’s estimate that 4.2 million people will go uninsured if Congress does not act to extend Marketplace enhanced premium tax credits (ePTC) and that another 1.9 million will lose coverage through the implementation of CMS’ Marketplace Integrity and Affordability final rule. Together, that could raise the number of newly uninsured people by as many as 8 million.
In the report, CBO analyzes potential incidences of enrollment fraud and estimates that 2.3 million people earning less than 100% of the FPL ($15,060 for the 2025 PTC calculation) inappropriately projected their income to be above 100% of the FPL.
However, CBO gives short shrift to the fact that income projection is a feature of the ACA’s advance PTC and that income clairvoyance is an impossibility, particularly for individuals with low and unpredictable income.
The 80 Million Impact
Late last month, CBO released an explanation of its projected 2.1 million increase in the number of uninsured individuals due to the Marketplace provisions of H.R.1, the budget reconciliation law.
The Marketplaces allow people to enroll in private health insurance, and, if they meet certain criteria, qualify for financial assistance through a sliding scale, advanceable PTC and cost-sharing reduction to lower upfront costs for consumers and allow them to purchase and use insurance coverage. Big picture, H.R.1 drives up the number of uninsured people in two ways: eliminating PTC eligibility for many lawfully present noncitizens and putting into place policies that make it more difficult for eligible individuals to enroll in and keep Marketplace coverage.
For years, Marketplaces have filled a critical gap for lawfully present noncitizens who are ineligible for Medicaid due to their immigration status, such as lawful permanent residents (LPRs, or green card holders) in Medicaid’s five-year waiting period or refugees. Starting in 2026, H.R.1 ends PTC for noncitizens with income under 100% of the FPL who are ineligible for Medicaid due to their immigration status — effectively creating a coverage gap under the poverty level for the lowest income lawfully present noncitizens. Additionally, beginning in 2027, H.R.1 eliminates PTC eligibility for all noncitizens except those within three immigration statuses: LPRs, certain Cuban and Haitian entrants, and migrants from the Marshall Islands, Micronesia, and Palau under the Compacts of Free Association (COFA). In total, 1.2 million people will become uninsured from these provisions.
It will also be harder for Marketplace shoppers to enroll or maintain their coverage. By 2026, H.R.1 will end the year-round enrollment opportunity for low-income people earning under 150% of the FPL, resulting in an estimated 400,000 people going uninsured. In addition, for plan year 2028, H.R.1 ends the common insurance industry practice of automatic reenrollment in Marketplaces, a feature that allows continuity of coverage for nearly half of Marketplace enrollees (45%) today. Tied to this, the law ends the ability of people to receive advance PTC prior to eligibility verification, implicitly requiring applicants to pay the full gross premium during the verification process.
However, CBO — confusingly and with minimal justification — assumes that “their enrollment could be put on hold without requiring payments until the process is complete,” and that the Trump administration will issue guidance to that effect. Under this assumption, CBO estimates only 700,000 people will lose coverage as a result of these provisions — likely a gross underestimate; even if the administration makes good on CBO’s assumption, bigger coverage loss is highly likely because of the sheer volume of people who choose to automatically reenroll in coverage today.
All of this is compounded by the end of the ePTC in December, which has further lowered premiums to encourage more people who are healthier to enroll in affordable coverage.
Understanding “Marketplace Fraud” Related to PTC Eligibility
With Congress back in session, a key focus is whether to extend the ePTC. Expiration of ePTC would result in an average out-of-pocket premium increase of 75% for the roughly 20 million subsidized Marketplace enrollees. While bipartisan legislation extending the ePTC has been introduced, some oppose the extension, citing reported Marketplace fraud. The CBO report examines claims that individuals improperly receive PTC and, whether themselves or through their agents or brokers, intentionally or unintentionally misrepresent income in order to qualify for or maximize Marketplace subsidies.
While CBO notes they “[have] no direct knowledge of the intentions of enrollees or other acting on their behalf,” they use the presence of an unusual concentration of enrollees reporting income just above the poverty level in administrative data to estimate that 2.3 million enrollees “improperly claimed the premium tax credit via intentional overstatement of income.” CBO notes that this concentration predominantly occurs in states that have not expanded Medicaid (“coverage gap” states) where low-income adults are not eligible for any affordable coverage until their income rises above the poverty level, when PTC eligibility starts. This coverage gap means that in the 10 states that have not expanded Medicaid, a taxpayer making $15,060 in 2025 is eligible for subsidized, affordable Marketplace coverage but an adult making $15,059 has no affordable coverage option and is more likely to go uninsured. (An individual in an expansion state would be eligible for Medicaid with income up to about $21,600.)
CBO cites estimates from the Joint Committee on Taxation that 39% of people who reported income below 150% of the FPL ended the year with income under 100% of the FPL, making them technically ineligible for PTCs. It is true that there is an incentive to report income over 100% of the FPL in states that have not expanded Medicaid: affordable health coverage. If you are a working person without health coverage and your income is below the 100% mark, you are deemed “too poor” to get financial help from the government to purchase your coverage. It is also reasonable to understand how an individual might project income above 100% of the FPL and end up below that level at the end of the year. In fact, the expectation of income fluctuation is a feature, not a flaw, of the ACA’s advance PTC mechanics. To help people afford up-front premiums and cost-sharing, the Marketplace’s advance PTC was designed to be calculated based on projected income, bolstered by income verification procedures up front and “reconciliation” of the advance credit on the tax return at the end of the year.
Changes to projected income, especially among people with low incomes, are not unexpected — in fact, they are typical and well-documented. For millions of low-income people, minor income fluctuations are common and can mean the difference between eligibility and uninsurance. For example, a person living in a non-expansion state who earns the federal minimum wage of $7.25 per hour and anticipates working 40 hours per week for all of 2025 can expect to earn $15,080 — just above the 100% of the FPL threshold. When the Marketplace verifies that income — either electronically based on IRS or other reliable income data or manually with reasonable enrollee-submitted information — the person will be determined eligible for advance PTC. However, a change in shift hours or missing even a single day of work during the course of their coverage year would put their income under 100% of the FPL, making them ineligible (i.e., too poor) for PTC for the year. The ACA and its regulations rightly protect them from being retroactively stripped of their advance PTC in this case.
This isn’t an isolated example. More than half of households (56%) earning less than $25,000 a year (or ~160% of the FPL) reported experiencing month-to-month income fluctuation that the employee has little control over. In a study conducted by the Brookings Institution, two-thirds of schedule changes were driven by the employer. In other words, for most low-income workers, volatility in work hours is not voluntary.
This dynamic is concentrated in non-expansion state Marketplaces because that is the only place for these folks to go for affordable health coverage. In the 41 expansion states, they would be enrolled in Medicaid, and their coverage would be preserved rather than stripped away if their income fluctuates below their anticipated earnings for the year. If this all seems rather irrational, it’s because it is.
The ACA was designed to create a continuum of affordable coverable nationwide, with all states adopting the Medicaid expansion and Marketplaces implementing the subsidy for people with incomes above Medicaid levels. When the 2012 Supreme Court decision in National Federation of Independent Business v. Sebelius made expansion optional for states, the “coverage gap” in non-expansion states was born, and with it, the consequences and quirks of a structure (the ACA) missing its cornerstone (Medicaid expansion.)
The Bottom Line
According to CBO estimates, the combination of H.R.1, CMS’ Marketplace Integrity and Affordability final rule, and the expiration of the ePTC could increase the number of uninsured by as many as 8 million. Many of the lowest-income noncitizens in the country will have their coverage stripped away and other people will experience new red tape that leaves them uninsured. However, over half of this projected increase can be avoided if Congress acts to extend the ePTC. While legitimate fraud should and can be rooted out of the Marketplaces, the finding that very low-income people often miss the mark in projecting their incomes when seeking PTC to make health coverage isn’t a surprise and isn’t fraud. Policy solutions that include dramatically reducing PTC, resulting in premium increases for millions, isn’t the answer. And there is still time for Congress to intervene.