Summary: The bill 1) provides for federal Health Savings Account (HSA) contributions for certain Exchange enrollees, 2) contains other reforms designed to lower premiums for Exchange enrollees, and 3) includes provisions regarding immigration and gender transition coverage contained in the House-passed version of last year’s budget reconciliation measure that were removed from the bill in the Senate.

Exchange HSAs: Adds language to Section 223 of the Internal Revenue Code (which governs HSAs) regarding new “Exchange plan HSAs.” Prohibits rollovers from Exchange HSAs, and applies any governmental HSA contribution to the total amount a household can contribute to an HSA ($4,400 for an individual and $8,750 for a family in 2026).

Classifies any Exchange plan HSA dollars used for abortion (unless the pregnancy is the result of rape or incest, or “the woman [is] in danger of death unless an abortion is performed”) or gender transition procedures (as defined in federal regulations) as not a “qualified medical expense.” Under current law, individuals may use HSA funds for purposes other than qualified medical expenses; however, such distributions are subject to income tax and a 20% penalty. (Most subsidy-eligible individuals have no income tax liability, which explains why the Congressional Budget Office classifies approximately 85% of the cost of Obamacare subsidies as government outlays for welfare spending, rather than revenue reductions for households with income tax liability.)

While applauding the way in which the legislation prevents taxpayer funds from being used to subsidize coverage of elective abortions and transgender procedures indirectly via health insurance, some conservatives may be concerned that the bill will see taxpayer funds subsidizing those procedures directly. Classifying such procedures as not a “qualified medical expense” does not prohibit account holders from using the taxpayer dollars placed in their accounts to fund elective abortions or transgender procedures; it merely requires them to rebate a 20% penalty back to the federal government should they decide to do so.

Exchange HSA Contributions: Requires the Department of Health and Human Services (HHS) to make payments to enrollees’ Exchange plan HSAs “as soon as administratively feasible.” Provides for annual payments of $1,000 for each enrollee aged 18-49, and $1,500 for each enrollee aged 50-64, enrolled in Bronze or Catastrophic (aka “Copper”) plans, and with income below 700 percent of the federal poverty level. (In 2025, the federal poverty level stands at $15,650 for a single individual, and $32,150 for a family of four, in the continental U.S.)

Payments will be made on a pro rata basis monthly for 2026 and 2027. Requires HHS to establish a process for an enrollee to elect to receive such payments, and gives the Department regulatory authority. Appropriates $10 billion for each of fiscal years 2026 and 2027, available until September 30, 2028, to carry out such program.

Cost-Sharing Reductions: Contains a permanent appropriation for cost-sharing reduction payments (CSRs) to insurers offering Exchange coverage, effective January 1, 2027. (This provision would NOT affect plan premiums or Exchange coverage for the 2026 plan year, as premiums and benefit structures have already been set.) Prohibits such payments from going to plans that cover abortion, except if such abortion is necessary to save the life of the mother, or the pregnancy is the result of rape or incest.

Conservatives would note that this provision, by appropriating funds not included in the 2010 health care law, technically implements Obamacare. However, some conservatives may support this provision, which will 1) lower premiums for Exchange coverage, 2) lower spending on federal subsidies for Exchange coverage and 3) protect life, by ensuring that cost-sharing subsidies do not go to plans that cover elective abortion.

Expanding Plan Options: Makes all Americans eligible for Catastrophic (aka “Copper”) insurance plans offered via Exchanges or in the individual insurance market, beginning January 1, 2027. Catastrophic policies “provide no benefits for any plan year until the individual has incurred cost-sharing expenses” equal to the annual out-of-pocket maximum ($10,600 for individuals and $21,200 for families in 2026), except for “coverage for at least three primary care visits.”

Medicaid and Undocumented Immigrants: Beginning in October 2027, reduces the federal Medicaid match for Obamacare’s expansion to able-bodied adults from 90 percent to 80 percent for any state that “provides any form of financial assistance from any state general fund…to or on behalf of an alien who is not a qualified alien and is not a child or pregnant woman who is lawfully residing in the United States and eligible for” Medicaid. This provision echoes language in Section 44111 of the House-passed budget reconciliation bill (H.R. 1, P.L. 119-21), which was stripped from the enacted law in the Senate, likely due to non-compliance with the Senate’s “Byrd rule” regarding extraneous material in budget reconciliation bills.

Medicaid for Individuals with Unverified Status: Beginning October 1, 2026, ends the requirement on states to cover Medicaid and SCHIP applicants being given a “reasonable opportunity period” to submit evidence regarding citizenship or immigration status; the federal coverage requirement will become a state option. Specifies that the federal government will not provide Medicaid or SCHIP matching funds for any states that provide coverage during such period “unless the citizenship or nationality of such individual or the satisfactory immigration status of such individual is verified by the end of such period.” This provision echoes language in Section 44110 of the House-passed budget reconciliation bill (H.R. 1, P.L. 119-21), which was stripped from the enacted law in the Senate, likely due to non-compliance with the Senate’s “Byrd rule” regarding extraneous material in budget reconciliation bills.

Gender Transition Procedures: Beginning in January 2027, prohibits any state from including gender transition procedures (as defined in the bill) as an essential health benefit. This provision would codify one element of a Marketplace Integrity rule that the Trump Administration finalized in June 2025. This provision also echoes language in Section 44201 of the House-passed budget reconciliation bill (H.R. 1, P.L. 119-21), which was stripped from the enacted law in the Senate, likely due to non-compliance with the Senate’s “Byrd rule” regarding extraneous material in budget reconciliation bills.

Prohibits federal funding under the Medicaid and State Children’s Health Insurance Program (SCHIP) from being used to cover specified gender transition procedures (as defined in the bill). This provision echoes language in Section 44125 of the House-passed budget reconciliation bill (H.R. 1, P.L. 119-21), which was stripped from the enacted law in the Senate, likely due to non-compliance with the Senate’s “Byrd rule” regarding extraneous material in budget reconciliation bills. By contrast, H.R. 498, which the House passed on December 18, 2025, prohibits federal Medicaid and SCHIP funds from being used to cover gender transition procedures “to individuals under 18 years of age.”

Background on Cost-Sharing Reductions: Section 1402 of the Patient Protection and Affordable Care Act (also known as Obamacare, P.L. 111-148) requires insurers to reduce cost-sharing (i.e., co-payments, co-insurance, and deductibles) for certain individuals enrolled in qualified health plans. Such reductions would convert the value of a silver plan, which ordinarily covers 70% of an average enrollee’s health expenses (i.e., the plan’s actuarial value), to a 94% actuarial value for households with incomes from 100-150% of the federal poverty level, an 87% actuarial value for households with incomes from 150-200% of poverty, and a 73% actuarial value for households with incomes from 200-250% of poverty. (In 2025, the federal poverty level stands at $15,650 for a single individual, and $32,150 for a family of four, in the continental U.S.)

However, the law as enacted included no appropriation of funds to reimburse insurers for reducing the cost-sharing as required by law. Notwithstanding the lack of an explicit appropriation, the Obama Administration paid cost-sharing reductions to insurers, citing authority provided by the Exchange premium subsidies. However, the premium subsidies (which DO have an explicit appropriation in law) are contained in a different section of law than the cost-sharing reductions (the Internal Revenue Code vs. the Public Health Service Act), under the jurisdiction of an entirely different Cabinet Department (Treasury vs. HHS).

In July 2014, the House of Representatives authorized a suit, filed that November, to among other things block the CSR payments. In September 2015, Judge Rosemary Collyer of the District Court for the District of Columbia ruled that the House did not have standing to question the Obama Administration’s implementation of statutory text, but did have standing on constitutional grounds to challenge the spending of monies (i.e., CSR payments) not authorized by law. Subsequently, in May 2016 Judge Collyer rejected the Obama Administration’s justification for making the CSR payments absent an explicit appropriation, granting summary judgment for the House, although she stayed her ruling pending appeal.

While the Court of Appeals for the D.C. Circuit was still considering the appeal the Obama Administration had filed, the Trump Administration, following the collapse of efforts to “repeal-and-replace” Obamacare, in October 2017 ended the CSR payments. (The House’s lawsuit was subsequently settled in December 2017.) As a result, beginning with the 2018 plan year, insurers in most states built the cost of their CSR requirements into silver plan premiums, a practice known as “silver loading.”

Because Obamacare ties premium subsidy amounts to the value of the second-lowest cost silver plan in a given rating area, “silver loading” increases both silver plan premiums and the value of federal Exchange subsidies that enrollees receive—including enrollees in households with incomes above 250% of poverty, who do not qualify for cost-sharing reductions. (Some states permit or require insurers to sell silver plans without “silver loading” off of the Exchanges, so people who do not qualify for subsidies can buy plans with the higher CSR costs left out of their premiums.) For this reason, including an explicit CSR appropriation would end the higher premiums, and higher federal spending on premium subsidies, caused by the “silver loading” scheme.

Cost: A Congressional Budget Office (CBO) score of the bill as a whole is not available. However, CBO has previously analyzed several of the bill’s components that were included in prior legislation.

In its analysis of the House-passed budget reconciliation bill, released in June 2025, CBO estimated that:

• Reducing the federal Medicaid match rate for able-bodied adults from 90 percent to 80 in states that cover undocumented immigrants with state funds would save $11 billion over ten years.
• Prohibiting federal Medicaid matching funds for individuals without verified citizenship or immigration status would save $844 million over ten years.
• Ending federal Medicaid and SCHIP matching funds for coverage of gender transition procedures would save $2.6 billion over ten years. (CBO did not provide a specific estimate for the savings associated with prohibiting the coverage of gender transition procedures as an essential health benefit in Exchange plans.)

In December, CBO indicated that the appropriation of cost-sharing reduction payments (CSRs) would reduce the federal deficit by a net of $36.7 billion, with a modest increase (300,000) in the number of uninsured. As explained above, directly appropriating funds for CSRs would largely end the practice of “silver loading,” reducing benchmark plan premiums, and subsidy spending tied to the size of those benchmark premiums. The budget office however noted one caveat to this analysis:

CBO expects that enacting section 202 would end silver loading in the states where roughly 75 percent of marketplace enrollees reside. Because some states mandate coverage of certain abortion services, and marketplace plans still must offer cost-sharing reductions, CBO projects that the other 25 percent of enrollees would live in states where silver loading would continue, consistent with current conditions.