The Big Beautiful Bill’s Impact on Healthcare and Health Insurance

The One Big Beautiful Bill Act (OBBBA) is a sweeping legislative package combining tax cuts, border and immigration provisions, and major changes to health and social programs.

While much public attention has focused on tax components and budget cuts its implications for health insurance and related programs are as much about what it didn’t include as what it did.

Like with all things, there are some silver linings if we look closely at the situation.

Overview of Health Insurance and Related Program Impacts

  • Reduces federal funding for Medicaid, with estimates of hundreds of billions of dollars in cuts over the next decade.
  • Implements stricter eligibility and administrative requirements for state departments managing Medicaid, including more frequent re-verification testing and a new emphasis on “community engagement” or work requirements.
  • Makes changes to ACA marketplaces where individuals and families can buy private insurance, including subsidy (tax credit) changes.
  • Makes changes to the tax code defining Qualified Medical Expenses and what is considered a Qualified High Deductible Health Plan for purposes of contributing to a Health Savings Account.
  • DID NOT extend the Enhanced Premium Tax Credits that were implemented as part of the American Rescue Plan Act of 2021 and the Inflation Reduction Act of 2022.

Medicaid Changes.

The OBBB cut the Medicaid budget by roughly $1 trillion dollars over the next decade, while simultaneously increasing the administrative burden for state offices managing Medicaid. One way administration for states is changing is by requiring eligibility re-verifications every 6 months, rather than once a year. Enrollment in Medicaid will come with more complex documentation requirements for individuals and families as well as work or community engagement requirements. Some exceptions to the work requirements exist including for pregnant women, adults over 65 and disabled veterans.
The bill also imposes a 5 year waiting period for Medicaid enrollment for Green Card Holders regardless of their status, reduces retroactive coverage for recipients of Medicaid from 3 months to 1 month, and eliminates funds for Medicaid expansion to individuals and families between 100% and 138% of the federal poverty level.
Some individuals who lose Medicaid coverage may be eligible to purchase private insurance through an ACA marketplace and may apply for a hardship exemption to purchase catastrophic coverage if they don’t qualify for subsidies.

Health Insurance Marketplaces Updates

The OBBB eliminated repayment caps for individuals who received excess tax credits throughout the year. Previously, if individuals understated their income on the application, they were not required to pay back 100% of the tax credits they received that they did not qualify for. It also eliminated the 150% federal poverty level year round special enrollment period. This special enrollment period allowed anyone who stated their income to be below 150% of the federal poverty level to enroll or change plans mid-year. These changes are designed to reduce fraud and adverse selection.

The bill also requires documentation of income, loss of coverage, and more before enrollment can take effect for individuals seeking coverage during a Special Enrollment Period. These changes can put additional burden on consumers who have legitimate loss of coverage scenarios, but unfortunately, we were seeing an increase in fraud in some markets which has the impact of increased costs for all.

Starting in 2026, all bronze and catastrophic plans purchased through an ACA marketplace will be considered “qualified” for purposes of contributing to a Health Savings Account.

Qualifying High Deductible Health Plans are now permanently able to provide telehealth services with no cost sharing without compromising their “qualified” status and enrollees ability to contribute to an HSA. This provision makes permanent changes that were rolled out initially in the CARES Act.

Tax Code Changes That Impact Healthcare Costs for Consumers

As stated previously, all bronze and catastrophic plans are now HSA qualified. This means that a consumer enrolled in a bronze or catastrophic plan through an approved marketplace will be able to contribute to an HSA, regardless of the deductible and cost sharing of that plan, so long as they otherwise qualify. This should help individuals and families save for their healthcare expenses while also reducing their tax burden.
Direct primary care (DPC) membership costs are now considered a “qualified medical expense”. This will allow individuals to use funds from an HSA or FSA to pay for direct primary care memberships or to track these costs as a qualified expense for other tax purposes. DPC membership fees will be capped as a Qualified Medical Expense at $150 and $300 a month for individuals and families respectively.
Employers can now also offer DPC arrangements to employees alongside a high deductible health plan without the DPC contract being considered “disqualifying coverage”.

Provisions NOT Included in the OBBB

The OBBB did NOT extend the Enhanced Premium Tax Credits that were first rolled out in 2021 and extended by the Inflation Reduction Act in 2022. Prior to the Enhanced Tax Credits, individuals and families making up to 400% of the federal poverty level could get help paying for their health insurance if they did not have an affordable offer of coverage through an employer. If they made $1 more than 400% of the FPL, they would have to pay all of the tax credits back. Sometimes this amounted to thousands of dollars for families.
The Tax Credits work like a sliding scale; The more money you make, the less you qualify for. The 400% income limit was previously referred to as the income cliff, because despite qualifying for significant help up to that income, above it the help completely falls away. The Enhanced Tax Credits extended the sliding scale beyond the 400% income threshold. It still is a sliding scale in that the more money an individual or family makes, the less they qualify for.
Insurance premiums, and the cost of healthcare, continue to increase every year. The premium costs for a basic health insurance plan, for a family of four, range from $1,200 to $1,800 a month. This does not include cost sharing (copays, deductibles, coinsurance), which amounts to several thousand more each year for many families.
Because insurance companies are expecting many families and individuals to drop their coverage when they premium costs go up as much as 400% in 2026, they are projected significantly higher claims costs on average. This is because they expect only those who have complex and expensive medical needs and those below 400% of the Federal Poverty Level to keep their coverage. This leaves more expenses and a smaller pool of funds. This has resulted in significant rate increases, as much as 30%, exasperating the problem even further.
Between a smaller, sicker risk pool and less tax credits, the individual marketplace will not be affordable for many families if the Enhanced Tax Credits are not extended. Some families will be able to get coverage through their employer. Small family run businesses may be able to apply for a small group plan depending on the market they are in.
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For more terminology used in health insurance plans, check out our glossary!
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