After failed Senate votes late last year and no subsequent bipartisan agreement, the enhanced premium tax credits expired as of January 1. Some states, particularly those operating State-Based Marketplaces (SBMs), have been preparing for this possibility for months and are moving to blunt the impact on consumers by implementing their own state-funded subsidies and implementing other programs aimed at stabilizing the cost of unsubsidized premiums.
State-Specific Subsidies
SBMs have the flexibility under the Affordable Care Act to offer additional state-based subsidies on top of federal premium tax credits to further lower monthly premium payments for Marketplace enrollees. A few SBMs have enacted their own supplemental premium subsidies to maintain affordability and enrollment now that the enhanced premium tax credits have lapsed.
New Mexico has advanced two measures that would backfill the lost enhanced premium tax credits in their entirety for all consumers in 2026. BeWell, New Mexico’s Health Insurance Marketplace, will backfill all of the lost federal tax credits for enrollees with annual incomes up to 400% FPL. Additionally, for enrollees making above 400% of poverty, New Mexico financial assistance will cap premium payments for a benchmark plan at 8.5% of their household income, mirroring the structure of the enhanced premium tax credits.
Other states have moved to fully backfill the expired tax credits for a portion of enrollees. Maryland, for example, adopted a single-year state premium assistance program that replaces 100% of the lost federal subsidy for enrollees below 200% of the federal poverty level (FPL) ($31,300 for an individual signing up for coverage in 2026) and partial replacement of the lost enhanced tax credit for those with incomes above 200% up to 400% FPL. However, there is no additional state assistance to replace tax credits lost by people with annual incomes above 400% FPL, who are now completely ineligible for any tax credits with the reinstatement of the “subsidy cliff.”
California is allocating funds to fully replace the premium tax credits for enrollees making up to 150% FPL and partially replace the lost credits for those with incomes between 150% and 165% FPL in 2026. With California receiving about $2 billion annually in enhanced premium tax credits, only a small share of the federal tax credits will be backfilled by these state-specific subsidies. Like in Maryland, California also does not have any additional state assistance to replace enhanced premium tax credits for people with annual incomes above 400% who have lost eligibility for any federal premium assistance since January 1.
Some states, like Colorado and Washington, have also retooled or created state-specific subsidy programs to provide an additional flat dollar amount to enrollees. However, in many cases, these dollar amounts fall short of entirely backfilling lost federal tax credits. In Colorado, a maximum dollar amount of $80 per month for an individual enrollee (and an additional $29 for each subsequent family member) is provided to households making between 100% to 400% of poverty. This plan will backfill about 40% of the lost federal assistance. Washington is retooling their existing Cascade Care Savings program, setting new fixed dollar maximums for 2026 to provide some relief to consumers ($55 per member per month for those receiving federal tax credits and $250 per member per month for those not receiving subsidies).
Prior to the creation and expiration of the enhanced tax credits, some SBMs already had additional state assistance in place on top of federal premium tax credits. States such as New York, Connecticut, Vermont, Massachusetts, and New Jersey all have state-specific subsidies that are not directly related to the expiration of the enhanced premium tax credits and will remain in place whether or not they are extended. Additionally, New York and Oregon operate a basic health plan or similar program that provides coverage to certain low-income residents who would otherwise be eligible for Marketplace plans, offering lower premiums and cost sharing regardless of changes to federal tax credit policy.
Reinsurance Programs
Several states also operate Section 1332 reinsurance programs that reduce unsubsidized premiums by reimbursing insurers for a share of high-cost claims. These programs do not replace lost federal subsidies, but they help stabilize the unsubsidized premiums some consumers will face the full cost of in 2026. Specifically, these are individuals and families with annual incomes over 400% FPL who will be entirely locked out of eligibility for financial assistance with the reinstatement of the “subsidy cliff” and face some of the largest increases in premium payments.
Maryland’s reinsurance program, in place since 2019 and extended through 2028, has lowered premiums by as much as 35% relative to what they would have been, according to state findings, and is expected to continue softening premium growth when enhanced premium tax credits expire. Colorado, New Jersey, Georgia, and Oregon operate similar programs. Colorado and New Jersey say that these programs have reduced statewide unsubsidized premiums by roughly 20% and provide even greater relief in rural rating areas. In Georgia and Oregon, their reinsurance programs have reduced the cost of unsubsidized premiums by at least 10%.
Enrollment Assistance
On top of state-based subsidies and reinsurance programs, some states may also increase outreach to help consumers shop for lower-cost options. But navigator programs have faced repeated federal funding cuts, limiting the ability of states, particularly those without robust state-based outreach budgets, to rely on enrollment assistance as a tool for mitigating affordability challenges.
Limited Relief
A small subset of states (and just a portion of those that operate SBMs) have moved to blunt the impact of the enhanced premium tax credits expiration on enrollees. While expanded state subsidies and reinsurance programs may soften the impact of the enhanced premium tax credit expiration for some consumers, they are unlikely to substantially alter the projected coverage losses. Collectively, these efforts from a small handful of states represent only a small fraction of the roughly $35 billion it would take to extend the enhanced premium tax credits each year, underscoring that state-level actions can mitigate, but not replace, the role of federal policy in sustaining ACA Marketplace coverage.
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