Congress Ends Enhanced ACA Tax Credits, Boosting Alternative Health Plans

Congress decided late last year not to extend enhanced marketplace tax credits for Affordable Care Act plans. The change has increased interest in alternative coverage options that carry lower monthly premiums but lack federal standards for comprehensive benefits.

Melanie Miller, a 59-year-old retired teacher who moved from Ohio to Michigan, saw her ACA premium rise to $914 a month. She switched to two plans costing $341 a month total that cover routine care and pay fixed amounts for hospital stays. Miller said she feels vulnerable because the plans do not meet ACA requirements.

One plan pays a flat $2,000 for hospital stays, far below the average $30,000 cost.

Alternative plans include short-term policies that often exclude preexisting conditions and fixed-indemnity plans that pay set amounts regardless of total costs. Healthcare sharing ministries pool member funds but are not required to pay claims. These options are not considered insurance under federal or state law.

They are not required to cover essential health benefits or provide appeal rights for denied claims.

The Trump administration stopped enforcing prior rules limiting the length and marketing of short-term plans. Several states including Florida, Arizona, and Indiana now allow short-term plans to be renewed for up to three years. Kansas lawmakers overrode a veto to pass a March bill offering tax breaks for enrollment in healthcare sharing ministries.

California and Massachusetts maintain stricter rules that limit or ban short-term policies. A 2023 study found that only half of participants understood that a sample short-term plan did not cover prescription drugs after reading its summary and disclosure.

Jade Ramsey, who lives in Arizona, enrolled in a fixed-indemnity style plan in 2021 after declining employer coverage. She incurred a $143,823 hospital bill for leukemia treatment that the plan denied as a preexisting condition. Ramsey's bills went to collections and her credit score declined.

She later qualified for Medicaid. Brian Blase, president of Paragon Health Institute, said people should be able to choose how they finance healthcare. Paragon supported ending the enhanced tax credits. Robert Godfrey of Clearwater, Florida, switched from an $879 monthly ACA premium to a $320 monthly membership with Zion HealthShare.

The plan reported more than 75,000 members in February, a 50 percent increase since last June. A KFF survey found that 5 percent of people on the exchanges last year switched to private nonmarketplace coverage. Marketplace enrollment declined about 20 percent from 2025.