1.7 million Texans could lose health coverage under expiring tax credits, ACA changes in GOP megabill

WASHINGTON — Up to 1.7 million Texans are expected to lose their health insurance through coming changes to the Affordable Care Act marketplace under Republicans' tax and spending megabill, according to an analysis by health policy experts — a serious blow to a state health care system already strained by the highest uninsured rate in the nation.

Nearly 4 million Texans signed up for ACA health plans this year, a high-water mark in the marketplace's 12-year history. But between the looming expiration of Biden-era enhanced premium tax credits — which lower out-of-pocket costs for people with marketplace coverage — and changes in the recently passed GOP megabill, the state's uninsured population is expected to spike.

The effects could reverberate across the health care landscape, with higher premiums, more financial strain on hospitals and destabilized insurance marketplaces, experts said.

Because Texas never expanded Medicaid to people earning above the federal poverty level — as 40 other states have done — the ACA marketplace has been an enormous driver of coverage, particularly among lower-income people. Texas' uninsured rate fell from 23.7% in 2010 to 17.4% by 2023, with ACA enrollment contributing significantly.

Of the state's nearly 4 million enrollees this year, close to 2.5 million earn between 100% and 150% of the federal poverty level, or $32,150 to $48,225 for a family of four. That means the ACA has helped fill the gap for people who would be eligible for Medicaid in expansion states, where adults who earn up to 138% of the federal poverty level are eligible.

The vast majority of Medicaid recipients in Texas are children. Low-income adults can only qualify if they or their child have a documented disability, are pregnant or over 65, or are a parent with a monthly income of less than $300 for a family of four.

The impending changes could represent the biggest source of coverage loss since the passage of the Affordable Care Act, said Cynthia Cox, director of the Program on the ACA at KFF, a nonprofit health policy organization that has projected the state-by-state effect of Trump's megabill.

"I think back to the Great Recession, when a lot of people lost their jobs and thus lost their job-based health insurance coverage," Cox said. "This is going to be more than that."

Making it harder to enroll

Much of the attention around the Republican tax and spending bill has focused on cuts to Medicaid, especially the imposition of work requirements. But Texas is insulated from those changes owing to its status as a non-expansion state, and Medicaid coverage loss — while projected by KFF to be about 200,000 — is muted compared to other states.

The ACA is another story.

For one, the bill adds new layers of bureaucracy that make it harder to enroll in coverage through the marketplace, with an end to automatic renewal and more income documentation requirements. It also shortens the open enrollment period to just one month and ends year-round enrollment for people earning under 150% of the federal poverty level in 2026. And it prevents certain lawfully present immigrants — including DACA recipients, asylees, people with Temporary Protected Status and refugees — from acquiring insurance through the ACA marketplace.

The changes will affect most Texans who receive marketplace coverage, 95% of whom claimed a sliding-scale premium subsidy — a monthly tax credit designed to make premiums more affordable based on income — in 2025. Over 1.4 million enrollees — or 36% — automatically renewed their plans, according to the Centers for Medicare and Medicaid.

Republicans say the changes will eliminate waste, fraud and abuse in the ACA marketplace and help reduce untenable federal spending levels. More frequent documentation and verification processes, they contend, will ensure that taxpayers are only funding health care costs for those who are truly eligible.

"Under the Trump Administration, we will no longer tolerate waste, fraud, and abuse at the expense of our most vulnerable citizens," Health and Human Services Secretary Robert F. Kennedy Jr. said in a statement about ending duplicative enrollment in multiple federal health insurance programs. "With the passage of the One Big Beautiful Bill, we now have the tools to strengthen these vital programs for generations to come."

But health care researchers argue the cumulative effect will worsen health outcomes.

"The whole bill is just designed to dismantle these health programs by getting people to disenroll in them, which then makes the entire system less functional," said Lynn Cowles, the health and food justice director at Every Texan, a left-leaning think tank. "Because the risk level in each enrollment group is higher."

KFF projects that ACA changes in the bill will lead to 560,000 Texans losing coverage.

End of enhanced premium tax credits

Most of the expected coverage loss will come not from a provision in the bill, but rather what was left out.

ACA enrollment in Texas has skyrocketed since 2021 because of a federal expansion of premium tax credits, a monthly subsidy to insurers that lowers the cost of premiums based on expected income. That year, Congress extended eligibility for tax credits to some middle-income people earning just over 400% of the federal poverty level — the standard cutoff to qualify for the subsidies — in a bid to eliminate the so-called subsidy cliff for those barely above the cutoff. Lawmakers also capped premiums based on income, driving down monthly costs for the lowest-income people who claim the tax credits. ACA enrollees earning less than 150% of the poverty threshold — between $15,650 and $23,475 for individuals in Texas — pay little to no monthly premium.

The policy was created by the American Rescue Plan Act in 2021 and renewed in the 2022 Inflation Reduction Act. Both bills passed with only Democratic votes.

For states like Texas that never expanded Medicaid, the enhanced premium tax credits have been a lifeline for lower-income people who do not qualify for Medicaid. Fifty-eight percent of Texas enrollees have a monthly cost of under $10.

"Since these enhanced premium tax credits have become available, the number of people nationally getting ACA marketplace coverage has more than doubled," Cox said. "But a lot of that growth is concentrated in Texas and a handful of other states, and it's really these low-income people that are driving that growth."

But the enhanced premium tax credits are set to expire at the end of the 2025 — and premiums could skyrocket. This is especially true for lower-income enrollees. The Center for Budget and Policy Priorities, a nonpartisan think tank, projects that someone earning $22,000 a year would see their monthly premium rise from $0 to $63 per month, for example.

KFF projects more than 1.1 million Texans could lose coverage if the tax credits expire. Congress could still strike a deal to extend them — which some GOP senators have expressed openness to — but doing so is unlikely in Republican-controlled Washington.

For those earning over 400% of the poverty level who have claimed tax credits for the past four years — many of them small-business owners, rural Texans or people approaching retirement age — premiums will increase by threefold in some cases, according to the Center on Budget and Policy Priorities. Using 2024 data, KFF projected that the average premium in Texas will rise by 115%, or $456 per year, for people who use tax credits to get insurance through the ACA.

"There's some people — in particular, those who make more than four times the poverty level — who are going to be hit by a double whammy where they're not only losing their financial assistance, they're also going to have to pay this potentially double-digit premium increase," Cox said. "For those folks, we're probably expecting a lot of them to be priced out."

When premiums become prohibitively expensive, people — especially those who are healthy — tend to drop their coverage, heightening risk for insurance companies and further driving up premiums for enrollees who do not receive coverage through the ACA marketplace. And when the marketplace as a whole contracts, insurers face further cost pressure, which they pass on to enrollees.

Blue Cross Blue Shield of Texas, the state's largest insurer, has requested a rate increase of 21% next year for ACA-compliant individual plans, according to a copy of their rate filing shared with The Texas Tribune. A spokesperson for the company said it was a preliminary rate hike but confirmed rate increases are being driven by federal changes to the ACA market and tax credit expiration.