The U.S. Department of Health and Human Services recently released guidance expanding eligibility for Affordable Care Act (ACA) catastrophic health insurance plans. The change, announced in a September 4 news release, will increase access to high-deductible, low-premium plans at time when federal officials project substantial increases in 2026 marketplace plan premiums.
Catastrophic health insurance is intended to protect against worst-case scenarios such as major illnesses or serious injuries. Premiums are low, but most services are covered only after a high annual deductible is met, leaving enrollees to pay for much of their care out-of-pocket. Catastrophic plans offered through ACA marketplaces are required to cover the 10 essential health benefits as defined by the ACA, but only after meeting deductibles that could be as high as $10,600 in 2026. However, catastrophic plans are required to cover three primary care visits annually, certain preventive care services, and a list of other specific services before the deductible is met. Catastrophic plans are not eligible for ACA subsidies.
Enrollment in catastrophic plans is limited to individuals who are under age 30 or who receive a hardship or affordability exemption from an ACA marketplace. Under current rules, hardship exemptions may be granted for certain life events, such as bankruptcy, homelessness, or natural disasters. These exemptions are meant to be temporary and may last as little as three months. An affordability exemption may be requested if the lowest-premium marketplace plan available to an individual exceeds 7.97% of the individual’s household income. Both exemptions can last up to a maximum of one calendar year before reapplication is required.
The new guidance, effective November 1, 2025, expands eligibility for hardship exemptions to include adults who are ineligible for ACA subsidies because their annual household income exceeds 400% of the federal poverty level, which is $62,600 for an individual in 2025. In a fact sheet also released September 4, the Centers for Medicare and Medicaid Services (CMS) announced plans to further expand eligibility to adults who are ineligible for cost-sharing reductions because their annual household income exceeds 250% of the federal poverty level, or $39,125 for an individual in 2025. No timeline was provided for this additional expansion.
The immediate impact of these changes will likely be minimal in Arkansas. Following enrollment declines between 2017 and 2019, all catastrophic plans in Arkansas were discontinued in 2020. The discontinuation of these plans was likely influenced by federal changes to ACA policy in 2019 which led to bronze plans — the non-catastrophic marketplace plans with the lowest premiums — often having lower premiums than catastrophic plans. One catastrophic plan became available in Arkansas in 2022, but it drew only 12 enrollees before being discontinued the following year. Arkansas currently is among 10 states without catastrophic plans. Nationwide, enrollment in catastrophic plans has halved since 2017 and remains modest.
CMS also said in the fact sheet that it will implement a new online application process for hardship and affordability exemptions and an expedited review process for paper applications.
Addressing the rationale for the changes, CMS stated in the fact sheet, “Health insurance premiums are projected to rise substantially for the 2026 plan year across the individual market, representing one of the most significant increases in recent years. The impact of significant rate increases may result in a hardship in obtaining coverage under a QHP (qualified health plan), especially for consumers whose income disqualifies them to receive APTC (advance premium tax credits) or CSRs (cost-sharing reductions) to lower their out-of-pocket costs.”
With Arkansas insurers proposing to increase individual marketplace premiums in Arkansas by an average of 36.1% in 2026, some Arkansans may no longer be able to afford their current marketplace plans and be forced to seek lower-cost alternatives. Between the eligibility expansion, streamlining of the application process, and anticipated reductions in non-catastrophic plan enrollment due to premium increases, insurers may be motivated to reintroduce catastrophic plans in Arkansas.
