States get creative as exchange subsidies expiration looms
By Bridget Early / December 5, 2025
States are taking matters into their own hands as health insurance exchange customers confront huge rate hikes and shrinking federal aid.
Congress continues to debate whether to extend the enhanced health insurance exchange subsidies that expire at the end of the year. But with enrollees facing net premiums that more than doubled on average for 2026, some states are devoting what resources they have to help.
Initiatives include state-funded premium “wraparound” subsidies, reinsurance programs, new benefit designs and intensified consumer outreach.
These states are striving to reduce the coverage losses and risk pool deterioration expected because of skyrocketing premiums. The open enrollment period began Nov. 1 and ends Jan. 15 in most states.
“You‘re seeing particular interest across states that say, ‘We’re going to try and scrape back as much as humanly possible,’” said Ellen Montz, a managing director at the law and lobbying firm Manatt, Phelps & Phillips.
But there’s only so much they can do, said Montz, who administered the exchanges as director of the Centers for Medicare and Medicaid Services’ Center for Consumer Information and Insurance Oversight under President Joe Biden. “It is very, very difficult — if not insurmountable — in the short term for a state to fill that gap,” she said.
Premium support
Some states are focusing on premium support, including funneling new funding into premium “wraparound” assistance or repurposing programs originally intended to reduce out-of-pocket costs.
The New Mexico Legislature increased the budget for its Health Care Affordability Fund from $70 million to $87 million in a special session in October. The program is targeted to households that earn more than 400% of the federal poverty level, or $62,600 for a single person, and won’t qualify for any federal assistance if the enhanced subsidies lapse.
That program constrained rate hikes in New Mexico, which is seeing enrollment grow slightly during the ongoing sign-up campaign, said Bruce Gilbert, CEO of BeWell, the state’s insurance marketplace.
California, Colorado, Connecticut, Maryland, Massachusetts, New Jersey, New York, Vermont and Washington also have premium support programs on the books. Each of those states operates its own exchange.
Reinsurance
Most states have reinsurance programs in place to underwrite the costs of the highest medical claims, thereby freeing insurers from raising premiums to compensate. Under the present circumstances, some states are beefing them up.
Colorado set aside extra funding for its reinsurance program in August, which the state projected would bring down Connect for Health Colorado exchange premiums 21% from what they would have been otherwise. The additional resources are available only in 2026.
Others are setting up new reinsurance programs. For example, Oklahoma is seeking federal approval for one, said Insurance Commissioner Glen Mulready (R). Oklahoma uses the federal marketplace.
Education and outreach
Other states are emphasizing public education about premium increases, subsidies and the importance of shopping around.
Covered California began readying for this scenario more than a year ago, Executive Director Jessica Altman said. The state-based exchange devised a multifaceted, targeted communications strategy, she said.
In addition to the standard renewal notices, Covered California delivered special messages in July warning that the enhanced subsidies may expire, which included personalized information about cost differences. This not only raised awareness but gave consumers a head start on weighing their options, Altman said.
“Part of our role in this moment is to empower our enrollees with the best information that we can provide them, and that means giving them very direct and specific and tailored information,” Altman said.
Alternative coverage options
Washington created a new type of its Cascade Select “public option” plan called “Vital Gold” on the Washington Healthplanfinder exchange for 2026. These policies cover more services than Silver or standard Gold plans, but have lower out-of-pocket costs.
More states might consider setting up a Basic Health Program, Montz said. The Affordable Care Act of 2010 authorized states to establish these plans for people who don’t qualify for Medicaid and earn up to twice the poverty level, or $31,300 for a single person in the contiguous U.S. and higher in Alaska and Hawaii.
Minnesota, New York, Oregon and the District of Columbia are the only jurisdictions that have adopted the Basic Health Program. Each has a state-run exchange, although Oregon uses the federal enrollment platform.
In addition to the standard renewal notices, Covered California delivered special messages in July warning that the enhanced subsidies may expire, which included personalized information about cost differences. This not only raised awareness but gave consumers a head start on weighing their options, Altman said.
“Part of our role in this moment is to empower our enrollees with the best information that we can provide them, and that means giving them very direct and specific and tailored information,” Altman said.
Alternative coverage options
Washington created a new type of its Cascade Select “public option” plan called “Vital Gold” on the Washington Healthplanfinder exchange for 2026. These policies cover more services than Silver or standard Gold plans, but have lower out-of-pocket costs.
More states might consider setting up a Basic Health Program, Montz said. The Affordable Care Act of 2010 authorized states to establish these plans for people who don’t qualify for Medicaid and earn up to twice the poverty level, or $31,300 for a single person in the contiguous U.S. and higher in Alaska and Hawaii.
Minnesota, New York, Oregon and the District of Columbia are the only jurisdictions that have adopted the Basic Health Program. Each has a state-run exchange, although Oregon uses the federal enrollment platform.