Trump administration pushes stopgap to ACA subsidy cliff

Driving the news: The Centers for Medicare and Medicaid Services last week announced that it's making catastrophic health insurance plans available starting next year to people who don't qualify for ACA premium tax credits or cost-sharing reductions.

• The new options could help both working-class people and those with incomes below the federal poverty level who lose their ACA subsidies.
• CMS administrator Mehmet Oz said the change is in line with the administration's "commitment to lowering costs, strengthening program integrity, and ensuring every American has a pathway to coverage that fits their needs without burdening taxpayers."
• A significant shift in enrollment from traditional ACA marketplace coverage to these catastrophic plans could also save the federal government money, since they wouldn't be subsidized. The Trump administration hasn't explicitly made such a connection.

Context: Catastrophic health plans are meant to provide coverage in times of emergency and for limited preventive care. They have low monthly premiums, but high deductibles that could expose patients to significant out-of-pocket costs — the annual deductible for 2026 will be $10,600.

• Catastrophic plans also have to cover three primary care visits each year before enrollees hit their deductible.
• The plans are already available to ACA marketplace enrollees under age 30, or those who qualify based on economic or other hardship. Some 54,100 people enrolled for this year.

Zoom in: Expanding the availability of the plans could provide a backstop for some of the roughly 4.2 million people who congressional budget analysts expect will go without health insurance over a decade if the enhanced ACA subsidies expire at the end of this year.

• There's some bipartisan interest in Congress for limited extension of enhanced ACA premium subsidies, but passage would be difficult considering the cost would be an estimated $335 billion over a decade.
• Without an extension, marketplace premiums will increase by an average of more than 75%, per KFF.

The Biden administration made a similar move before the 2024 elections, when it announced it would subsidize premiums for Medicare prescription drug coverage after pricing reforms Congress passed were projected to increase seniors' costs.

• Republicans criticized the move as an election-year stunt, although the Trump administration is keeping a version of the program for 2026 Medicare coverage.

The other side: "It's not clear to me that it's going to actually solve anyone's problems," said Adrianna McIntyre, assistant professor of health policy and politics at Harvard.

• Catastrophic health plans' 2026 premiums are generally priced to account for a risk pool of healthy young adults, she noted. They may have low premiums this year, but if sicker people in need of more care decide to enroll, premiums could surge in future years.
• Another problem: Not every state currently offers catastrophic plans on their ACA marketplaces.
• CMS told Axios that it does not have estimates available on how many people may enroll in catastrophic coverage.

The bottom line: CMS's expansion of catastrophic coverage eligibility won't solve all the problems that could arise if the enhanced premium subsidies expire, said Sam Melamed, CEO of supplemental health benefits provider NCD.

• But it could be politically savvy, because it shows that the Trump administration "tried to do some things within the bounds of what they can do," Melamed said.