President Donald Trump’s proposal to redirect Affordable Care Act subsidy funds into direct payments to consumers has drawn sharp criticism from health policy researchers and enrollment analysts who say the plan would do little to offset rising premiums. ACA marketplace enrollment has already dropped by approximately 800,000 to about 22.8 million as enhanced premium tax credits expire and costs climb. With millions more projected to lose coverage in 2026, the administration’s preferred alternatives, including expanded access to catastrophic insurance plans, face growing skepticism that they can fill the gap.
Enrollment Drops as Subsidies Fade
The decline in ACA sign-ups is not abstract. Federal data from the 2026 snapshot show weakening enrollment across both Healthcare.gov states and state-based marketplaces. The roughly 800,000-person drop to about 22.8 million, reported by the Associated Press, tracks directly to the expiration of enhanced premium tax credits that had kept monthly costs manageable for lower- and middle-income households since 2021.
Those enhanced credits, originally expanded under the American Rescue Plan and extended through subsequent legislation, capped what enrollees paid as a share of income. Without them, consumers face the full gap between their required contribution and the benchmark silver plan premium. The Congressional Research Service has compiled projections showing that benchmark premiums will jump significantly in 2026 once the credits lapse, and the CBO projects a corresponding rise in the number of uninsured Americans. For a family earning just above the subsidy threshold, that translates into hundreds of additional dollars per month, a price increase steep enough to push many out of the marketplace entirely.
Trump’s Direct-Payment Pitch Meets Reality
The White House has framed the president’s response as a consumer-first alternative. Under what the administration calls the Great Healthcare Plan, Trump is calling on Congress to redirect money currently flowing to insurers through ACA subsidies and instead send it directly to individuals. As The Washington Post reported, Trump stated the goal is to “send [it] directly to the people” so they can purchase their own coverage. The proposal ties explicitly to the looming expiration of enhanced subsidies and the premium increases that follow.
Yet the mechanics of that redirection remain vague. No official cost model or fiscal impact assessment has accompanied the proposal, and Congress has not introduced legislation to implement it. The practical question is whether a lump payment to consumers, potentially smaller than the per-person value of the current tax credit structure, would actually cover the cost of a standard marketplace plan. Critics have labeled the concept a “small check” that falls well short of what families need when premiums are climbing by double-digit percentages in many states. Without a concrete legislative vehicle, the plan functions more as a messaging strategy than a policy solution, leaving millions of enrollees uncertain about what coverage they can afford next year.
Catastrophic Plans Offer Little Relief
Alongside the direct-payment idea, the administration has moved on a regulatory track. The Centers for Medicare and Medicaid Services expanded hardship exemption guidance to allow more consumers to purchase catastrophic plans for the 2026 plan year. Catastrophic plans carry lower premiums but impose high deductibles and cover very little before that threshold is met. They were previously limited mostly to people under 30 or those who qualified for narrow hardship exemptions.
A peer-reviewed study published in Health Affairs Scholar tested whether this expansion would actually improve affordability. The researchers conducted a county-level analysis of catastrophic plan availability and found that expanded eligibility generally does not improve premium affordability compared with subsidized bronze options, with only limited exceptions. For most consumers who currently receive tax credits, a bronze plan with subsidies still costs less out of pocket than a catastrophic plan without them. The expansion, in other words, helps a narrow slice of the market while doing nothing for the millions whose subsidies are disappearing. This finding directly challenges the administration’s framing of catastrophic coverage as a meaningful affordability tool.
Millions Projected to Lose Coverage
The scale of potential harm is not speculative. The Urban Institute, using its HIPSM microsimulation model, projects that 4.8 million people will lose coverage in 2026 if enhanced premium tax credits expire. That estimate includes breakdowns by income band and state, with low-income households bearing the heaviest losses. The modeling provides a second, methodologically distinct projection set beyond CBO estimates, and both point in the same direction, a sharp increase in the uninsured population concentrated among people who can least absorb the cost.
CMS has also finalized the Marketplace Integrity rule, which includes temporary provisions through plan year 2026 and open enrollment timing changes beginning in plan year 2027. But these adjustments address enrollment mechanics and program integrity rather than the core affordability problem. Tightening verification rules or shifting enrollment windows does not put money back in the pockets of consumers who just lost their subsidies. The gap between administrative fine-tuning and the financial reality facing households underscores how little current policy proposals do to prevent coverage losses.
Limited Safety Nets and Policy Choices Ahead
Some of those who lose marketplace coverage may try to fall back on other programs, but those avenues are constrained. Public insurance options like Medicare coverage are generally limited to older adults and certain people with disabilities, while income-based programs such as Medicaid enrollment depend on strict eligibility thresholds that vary by state. For working-age adults who earn too much to qualify for Medicaid but not enough to afford unsubsidized marketplace plans, there is often no realistic alternative to going uninsured. Safety net providers can offer some uncompensated care, yet they cannot replicate the financial protection of comprehensive insurance.
Policy analysts warn that the coming coverage losses are the result of deliberate choices rather than unavoidable budget math. The same federal dollars currently flowing through the ACA’s subsidy structure could, in theory, be maintained or reconfigured to preserve broad affordability, but only if Congress acts. Instead, the administration’s emphasis on one-time payments and catastrophic plans shifts more financial risk onto individual households. As premiums rise and subsidies recede, the central question is whether lawmakers will prioritize stable, income-based assistance or continue to pursue thinner, less protective alternatives that leave millions exposed to both medical and economic shocks.
More From The Daily Overview
*This article was researched with the help of AI, with human editors creating the final content.
Cole Whitaker focuses on the fundamentals of money management, helping readers make smarter decisions around income, spending, saving, and long-term financial stability. His writing emphasizes clarity, discipline, and practical systems that work in real life. At The Daily Overview, Cole breaks down personal finance topics into straightforward guidance readers can apply immediately.
