The Trump Administration has proposed changes to the Affordable Care Act (ACA) Marketplace that would expand the role of “catastrophic” health plans beginning in plan year 2027. Framed as an effort to increase consumer choice and lower monthly premiums, the proposal would allow broader use of catastrophic coverage and allow plan terms to last up to ten consecutive years. While catastrophic plans have lower premiums, they also have higher deductibles and cost sharing. As a result, although monthly costs may decline, enrollees’ costs can increase substantially when care is needed – limiting access to care. This policy discussion is unfolding alongside the expiration of the enhanced ACA premium tax credits, which are estimated to result in 5 million Americans losing coverage due to higher net premiums. Expanding access to catastrophic plans has been framed as a mechanism to offset those premium increases.  

What are catastrophic plans? 

Under current ACA rules, catastrophic plans are available primarily to individuals under age 30 or those who qualify for a hardship or affordability exemption. These plans must cover preventive services without cost sharing and at least three primary care visits before the deductible applies. However, most other services are subject to a deductible that is typically set at or near the ACA’s maximum annual out-of-pocket limit. 

For 2026, the maximum out-of-pocket limit for Marketplace plans is $10,600 for an individual and $21,200 for a family. Because catastrophic plans are designed around these upper limits, enrollees may be responsible for thousands of dollars in costs before comprehensive coverage begins. This design creates a distinct tradeoff: lower monthly premiums in exchange for high costs at the point of care. 

What does the Trump Administration propose? 

The proposal is included in CMS’ 2027 Notice of Benefit and Payment Parameters. Among other Marketplace reforms, the rule would: 

  • Expand the visibility and availability of catastrophic plan options. 
  • Permit multi-year catastrophic plan terms of up to ten consecutive years. 
  • Introduce additional flexibility in plan design aimed at lowering premiums. 

Why is making insurance affordable so tricky? 

Making premium prices affordable is not the same as making a person’s total health care affordable. While catastrophic plans may offer lower monthly payments compared to bronze, silver, or gold options, the deductible structure means enrollees must pay nearly the full cost of most non-preventive services until the annual limit is reached. 

Research on high-deductible health plans (which operate similarly) provides insight into how these tradeoffs work: 

  • Studies have found that families enrolled in high-deductible plans experience significantly higher out-of-pocket spending compared to those in traditional coverage, particularly among lower-income households and individuals with chronic conditions. 
  • Evidence published in peer-reviewed journals indicates that higher cost sharing is associated with delayed or forgone care, especially for individuals with ongoing health needs. 
  • Analyses of Marketplace coverage show that consumers often select high-deductible options because of lower premiums but face substantial financial exposure once healthcare utilization increases. 

What might happen next? 

If the proposed policies are finalized, the changes will take place in January 2027 – meaning that it won’t fix the affordability issue individuals trying to purchase health insurance are having with the expiration of the enhanced subsidies.   

Expanding catastrophic coverage could influence future Marketplace dynamics in several ways. 

First, healthier individuals may be more likely to select lower-premium catastrophic plans, potentially affecting the risk mix across other metal tiers. Second, the introduction of multi-year catastrophic terms raises questions about how cost sharing may evolve over time and how consumers will assess long-term affordability.