A sweeping set of regulatory proposals is poised to fundamentally reshape health plan offerings on the Affordable Care Act (ACA) marketplace, introducing a significant strategic shift toward what is known as “catastrophic coverage.” While the administration presents these changes as a way to prioritize patients and taxpayers by reducing premiums and increasing consumer choice, health policy experts are sounding the alarm. They warn that the core provisions could expose consumers to substantially higher financial risks, leading to potentially devastating out-of-pocket expenses and a decline in overall insurance coverage. This proposal arrives at a critical juncture, as healthcare affordability remains a paramount political issue following the expiration of enhanced ACA subsidies, which contributed to a decline of over one million enrollees for the current year. The proposed rule, now in a public comment period, addresses a wide array of standards that impact benefit packages, cost-sharing structures, and provider networks, all of which are critical factors that insurers consider when setting their premiums for the upcoming year.
The Proposal’s Foundation: Expanding High-Risk Plans
Defining the “New” Catastrophic Plan
The central pillar of the administration’s proposal is a dramatic increase in the annual out-of-pocket maximums for catastrophic plans, a move intended to make these high-deductible options a more prominent feature of the ACA marketplace. Under this new rule, the financial ceiling for an individual would surge to $15,600, with the limit for a family rising to an astonishing $27,600. This represents a substantial hike from the current maximums of $10,600 for individuals and $21,200 for families. For a policyholder, this means they would be responsible for nearly all medical costs—excluding three primary care visits and standard preventive care—until this exceptionally high threshold is met. This structure effectively transforms the insurance plan into a safety net for only the most extreme medical emergencies, leaving individuals and families to cover thousands of dollars in expenses for moderate illnesses, chronic condition management, or unexpected injuries before their coverage provides significant financial relief.
The stated rationale behind raising the out-of-pocket maximums so significantly is to create a clearer market distinction between catastrophic plans and “bronze” plans, the next tier of coverage available on the marketplace. The proposal argues that when premiums for these two plan types are similar, consumers may not perceive a meaningful difference, potentially leading them to choose a bronze plan even if a catastrophic plan is better suited to their needs. By making the cost-sharing for catastrophic plans much higher, the administration believes that healthier consumers, who are generally the best candidates for such plans, will be more motivated to select them over bronze alternatives. However, this strategy faces a significant hurdle that may curb consumer interest: federal ACA subsidies, which help lower monthly payments for millions of Americans, cannot be applied to the premiums of catastrophic plans. This limitation means that even with a lower sticker price, these plans may not be the most affordable option for many, especially those who rely on subsidies to make their coverage viable.
Widening the Net of Eligibility
In tandem with raising the financial stakes, the rule seeks to broaden the pool of consumers eligible for catastrophic plans, moving them from a niche product to a more mainstream option. Previously, these plans were primarily limited to individuals under the age of 30 or those who could obtain a specific hardship exemption. The new regulations would cement and expand this eligibility to include anyone with an income below the federal poverty line—currently $15,650 for an individual—as well as those earning more than 2.5 times that amount who have lost access to the ACA’s cost-sharing reduction subsidies. This expansion targets two very different demographics: the most financially vulnerable, who may have no other affordable coverage options, and middle-income earners who no longer qualify for assistance that helps lower their deductibles and copayments. By opening the door to these groups, the proposal signals a fundamental shift in how catastrophic coverage is viewed within the healthcare landscape.
Furthermore, the proposal aims to make these high-deductible plans a standard option in every state, a significant expansion of their geographic footprint. Currently, catastrophic coverage is only available in 36 states and the District of Columbia, leaving consumers in over a dozen states without access to this type of plan. By mandating nationwide availability, the administration is not just increasing choice but actively promoting a model of health insurance that prioritizes low upfront premiums at the expense of comprehensive, first-dollar coverage. This move could fundamentally alter the insurance markets in states where these plans have not previously been sold, potentially siphoning off younger, healthier enrollees from the traditional risk pools of bronze, silver, and gold plans. This could, in turn, drive up premiums for more comprehensive plans, creating a more fragmented and potentially less stable insurance marketplace across the country.
Introducing New Structures and Increased Flexibility
A “Novel” Approach: The Multiyear Plan
In what the proposal itself describes as a “novel” approach, the administration is soliciting feedback on the concept of multiyear catastrophic plans, a significant departure from the annual enrollment cycle that currently defines the ACA marketplace. This innovative idea could allow a consumer to remain enrolled in the same high-deductible plan for a period of up to ten years, offering a degree of stability and predictability that is currently absent. The structure of these long-term policies is still under development, but the proposal suggests they could involve variable out-of-pocket maximums over the duration of the contract. For instance, a plan might start with a higher out-of-pocket limit in the initial years and then gradually decrease that limit over time, rewarding consumers for their long-term commitment. The specifics of how these multiyear contracts would be priced, regulated, and integrated into the broader insurance market are still being analyzed, representing a bold but uncertain experiment in health plan design.
The introduction of multiyear plans, while intriguing, has also created a wave of uncertainty among health policy experts and industry consultants, who are carefully dissecting the potential ramifications. The details of how insurers would manage risk and set premiums over a decade-long period remain a major question, as do the consumer protections that would be needed to prevent individuals from being locked into a plan that no longer meets their healthcare needs as their life circumstances change. A key concern is how such plans would affect the annual risk pool, as locking in healthy enrollees for extended periods could destabilize the market for those who need more comprehensive, traditional plans. Health policy consultants note that the full impact is difficult to predict without more concrete details, but the concept represents a fundamental rethinking of the relationship between an insurer and a policyholder, shifting it from a yearly transaction to a long-term commitment.
Loosening the Rules for Other Plans
The proposed regulations would also grant insurers significantly more flexibility in the design of bronze-level plans, which have seen a surge in popularity as consumers seek lower-premium options. Enrollment in bronze plans has nearly doubled since 2018, reaching 5.4 million people last year, a trend that accelerated after enhanced federal subsidies expired. In response, the new rule would permit insurers to offer bronze plans with cost-sharing requirements that exceed the levels currently allowed by the ACA. This would be permitted on the condition that the same insurer also offers other bronze plans that adhere to the standard, lower cost-sharing limits. This change effectively creates a new sub-tier of “high-deductible bronze” plans, giving consumers another option for reducing their monthly payments but simultaneously increasing their financial exposure when they need to access medical care. It reflects a broader regulatory trend of prioritizing upfront affordability over backend protection.
Perhaps one of the most concerning provisions for consumer advocates is a rule that would allow plans without an established provider network to be sold on the ACA marketplace. In this model, an insurer would not have pre-negotiated contracts with specific doctors and hospitals that guarantee set payment rates. Instead, the plan would simply pay a fixed amount for medical services, often pegged to a percentage of what Medicare pays. While the rule stipulates that insurers must ensure access to providers willing to accept this payment as final, it creates a significant risk of “balance billing.” This occurs when a policyholder receives care from a provider who does not accept the insurer’s payment in full and then bills the patient directly for the remaining, often substantial, difference. This provision could leave enrollees with unexpected and potentially catastrophic medical bills, undermining a core principle of the ACA, which was designed to protect consumers from such financial shocks.
The Real-World Consequences for Consumers
A Trade-Off That Favors the Healthy
The overarching trend identified by policy experts was a regulatory push that favored lower upfront premium costs at the expense of significantly higher potential backend costs for consumers who needed to use their health insurance. The consensus among these experts was one of apprehension, viewing the proposals as a mechanism to shift a greater financial burden onto patients, which could undermine the ACA’s goal of providing comprehensive and affordable coverage. The changes were seen as creating a system that would primarily benefit healthy individuals who rarely need medical services, as they could enjoy lower monthly payments while gambling on their continued good health. However, for anyone who experienced a significant illness, injury, or the onset of a chronic condition, the high deductibles and cost-sharing could lead to insurmountable medical bills. The potential consequence was that while some might save money, many others could face financial ruin, with some analyses suggesting the proposal could lead to as many as 2 million people dropping their insurance coverage altogether.
A Niche Solution for Specific Groups
A more nuanced perspective was offered by insurance brokers who interacted directly with consumers. It was suggested that a wider array of options could appeal to specific segments of the market that were often underserved by the current system. For wealthier individuals who did not qualify for subsidies, a low-premium catastrophic plan was viewed as an attractive option, as it would protect them from financially ruinous events like a major cardiac incident, while they could comfortably afford to cover the high out-of-pocket costs for more routine care. Similarly, for individuals below the poverty line in the 10 states that had not expanded Medicaid, who often lacked any affordable coverage options, a catastrophic plan offered a crucial safety net. It provided some preventive care and, most importantly, a cap on total financial exposure in a medical emergency. However, it was emphasized that the success of such an approach hinged entirely on proper disclosure, ensuring that consumers fully understood the immense financial risks they were undertaking when selecting such a plan.
