Affordable Care Improvement Bill

At a Glance

  • Makes premium subsidies permanent with no income cliff -- caps costs at 8.5% of income
  • Cuts deductibles and out-of-pocket maximums in half over three years
  • Creates a public insurance option available in every state and county
  • Closes the Medicaid coverage gap in the ten non-expansion states
  • Expands Medicare drug price negotiation to all high-spend drugs with no numerical cap
Affordable Care Improvement Bill

No American should have to choose between seeing a doctor and paying rent. Yet that is the reality for millions of families who technically have health insurance but cannot afford to use it. A family paying $15,000 a year in premiums only to face a $7,000 deductible before coverage begins is not insured in any meaningful sense—they are paying for the illusion of protection while skipping medications, postponing surgeries, and praying that no one gets seriously sick. The Affordable Care Act expanded coverage to millions who had none, but it left deep structural problems that a decade of experience has made impossible to ignore.

The ACA's subsidy structure was designed with a cliff: families earning above 400 percent of the federal poverty level received no help at all, regardless of how crushing premiums became[1]. A household earning $65,000 could face marketplace premiums exceeding $20,000 with no assistance. Temporary fixes have papered over this flaw, but families cannot plan their lives around year-to-year legislative patches. Meanwhile, in the ten states that refused to expand Medicaid[2], roughly 1.5 to 2 million adults fall into a coverage gap—earning too much for traditional Medicaid, too little for marketplace subsidies, and left with nothing. These are working Americans, many of them parents, punished by geography for a political decision their state government made over a decade ago.

Beneath the coverage problems lies a cost crisis. American healthcare is the most expensive in the world, and nothing in the ACA addressed why. Pharmaceutical companies set prices without meaningful negotiation. Hospital consolidation has created local monopolies that charge whatever the market will bear. Administrative complexity consumes roughly 30 percent of every healthcare dollar. Until these cost drivers are confronted, every expansion of coverage requires larger subsidies, and every family's premiums creep higher regardless of what Washington does at the margins.

This legislation fixes what the ACA left broken. Premium subsidies become permanent with no income cliff—no family pays more than 8.5 percent of income for benchmark coverage. Deductibles and out-of-pocket maximums are cut in half over three years. A federal program closes the Medicaid gap in non-expansion states. A public insurance option, reimbursing providers at Medicare-plus-10-percent rates, enters every market in every state—guaranteeing that no American lives in a county with only one insurer and no competitive pressure on price. Medicare drug price negotiation is expanded to cover all high-spend drugs with no arbitrary cap—matching the standard practice in Canada, the United Kingdom, Germany, and France. And the family coverage loophole—which currently blocks an estimated 5 million Americans from subsidies because their employer offers "affordable" individual coverage while family coverage costs 30 percent of household income[3]—is permanently closed. The goal is simple: health insurance that people can actually afford to buy and actually afford to use.

Problems the Bill Aims to Solve

Premiums That Price Out Middle-Income Families. The original ACA subsidy structure created a cliff at 400% of the federal poverty level[1], above which households received no assistance regardless of how burdensome premiums became relative to income. Families earning $60,000-$100,000 annually often face marketplace premiums of $15,000-$25,000 per year with no financial help, forcing them to choose between unaffordable coverage and going uninsured. While temporary measures have extended subsidies, the lack of a permanent fix leaves millions in financial limbo, uncertain whether assistance will continue from year to year.

High Deductibles That Render Insurance Unusable. The proliferation of high-deductible plans means many Americans with insurance cannot actually afford to use it. A family with a $7,000 deductible may skip necessary care, delay treatment, or face medical debt despite paying thousands annually in premiums. This "underinsurance" problem affects millions of Americans who technically have coverage but face cost barriers to accessing care. Insurance that doesn't provide financial protection when people get sick fails its fundamental purpose.

The Medicaid Coverage Gap. When the Supreme Court made Medicaid expansion optional, it created an unintended gap affecting millions of low-income adults in non-expansion states. These individuals earn too much to qualify for traditional Medicaid but too little to qualify for marketplace subsidies, which begin at 100% of the federal poverty level. In the ten states that have not expanded Medicaid[2], approximately 1.5 to 2 million adults fall into this coverage gap with no affordable options—punished for living in states whose governments rejected federal funding.

Uncontrolled Healthcare Costs Driving Premiums Higher. The ACA expanded coverage but included few mechanisms to control the underlying costs that make American healthcare the most expensive in the world. Pharmaceutical companies set prices without negotiation. Hospital consolidation has eliminated competition in many markets, enabling monopoly pricing. Administrative complexity consumes roughly 30% of healthcare spending. Without addressing these cost drivers, any coverage expansion becomes increasingly unaffordable over time, requiring ever-larger subsidies to maintain access.

Lack of Competition in Insurance Markets. Many Americans, particularly in rural areas, have access to only one insurance company on the marketplace, eliminating competitive pressure on pricing and service quality. Insurers have withdrawn from unprofitable markets, leaving consumers with take-it-or-leave-it options. The absence of a public insurance option means no entity exists whose mission is providing coverage rather than generating shareholder returns, and no competitor can anchor markets where private insurers refuse to participate.

Family Coverage Affordability Loophole. Under current rules, employer-sponsored coverage is deemed "affordable" based solely on the cost of employee-only coverage, ignoring family premium costs. A worker offered individual coverage at 8% of income meets the affordability threshold even if adding a spouse and children would cost 30% of household income. These families are then barred from marketplace subsidies despite facing genuinely unaffordable options, a glitch affecting an estimated 5 million Americans[3].

Narrow Networks Restricting Access to Care. To control costs within the ACA's framework, insurers have increasingly offered plans with severely restricted provider networks. Patients discover their doctors, specialists, or nearby hospitals are out-of-network, forcing them to travel long distances or pay dramatically higher out-of-pocket costs. Network adequacy standards have proven insufficient to ensure meaningful access, particularly for specialty care, mental health services, and rural residents.

Complexity That Discourages Enrollment. The marketplace enrollment process, subsidy calculations, plan comparisons, and tax reconciliation requirements remain confusing for many consumers. Eligible individuals fail to enroll because they don't understand their options or find the process too burdensome. The system's complexity also generates billing errors, surprise coverage denials, and end-of-year tax complications that undermine public confidence in the entire structure.

Exclusion of Immigrant Populations. Current law prohibits undocumented immigrants from purchasing marketplace coverage even using their own money without subsidies. This exclusion pushes millions toward emergency room care as their only option, increasing uncompensated care costs that are ultimately shifted to insured patients and taxpayers. Public health suffers when any population lacks access to preventive care and early treatment.

Affordable Care Improvement Act

120th Congress, 2nd Session

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

Sec. 1. SHORT TITLE.

This Act may be cited as the "Affordable Care Improvement Act."

Sec. 2. DEFINITIONS.

For purposes of this Act—

  1. (1) SECRETARY.—The term "Secretary" means the Secretary of Health and Human Services, unless otherwise specified.
  2. (2) EXCHANGE.—The term "Exchange" means a Health Insurance Exchange established under title I of the Patient Protection and Affordable Care Act (42 U.S.C. 18031 et seq.).
  3. (3) PUBLIC OPTION.—The term "public option" means the public health insurance option established under Section 6 of this Act.
  4. (4) ESSENTIAL HEALTH BENEFITS.—The term "essential health benefits" has the meaning given that term in section 1302(b) of the Patient Protection and Affordable Care Act (42 U.S.C. 18022(b)).
  5. (5) FEDERAL POVERTY LEVEL.—The term "Federal poverty level" means the poverty guidelines published annually by the Department of Health and Human Services under section 673(2) of the Community Services Block Grant Act (42 U.S.C. 9902(2)).

Sec. 3. PERMANENT PREMIUM TAX CREDITS.

  1. (1) Section 36B of the Internal Revenue Code is amended to make the premium tax credit permanent and eliminate the income cap, effective for taxable years beginning after the December 31 immediately preceding the date of enactment.
  2. (2) The applicable percentage of household income for the benchmark plan shall not exceed 8.5 percent for any household at any income level.
  3. (3) The credit shall be available on a sliding scale to all households above 100 percent of the Federal poverty level with no upper threshold.
  4. (4) RETROACTIVE NOTIFICATION.—The Secretary of the Treasury shall, not later than 90 days after enactment, (A) notify households eligible for retroactive credits under this section; (B) issue guidance permitting amended returns or prospective credit adjustments in lieu of amended returns; and (C) coordinate with Exchanges to update advance credit payments within 60 days of enactment.

Sec. 4. REDUCTION OF DEDUCTIBLES AND OUT-OF-POCKET MAXIMUMS.

  1. (1) The Secretary of Health and Human Services shall establish reduced limits phased in as follows:
    1. (a) For the first complete plan year beginning after the date of enactment, reduced by not less than 20 percent from 2025 levels.
    2. (b) For the second complete plan year, reduced by not less than 35 percent from 2025 levels.
    3. (c) For the third complete plan year and thereafter, reduced by not less than 50 percent from 2025 levels.
  2. (2) PREMIUM OFFSET MECHANISM.—The Secretary, in consultation with the Secretary of the Treasury, shall promulgate regulations not later than 180 days before each applicable plan year to adjust premium tax credit benchmark calculations under section 36B of the Internal Revenue Code to reflect actuarial value changes resulting from the cost-sharing reductions required under subsection (1). Such adjustments shall ensure that net premiums paid by enrolled households do not increase as a result of insurer repricing in response to this section.
  3. (3) MARKET STABILIZATION.—To prevent insurer market exit resulting from mandatory benefit expansions under this section, the Secretary shall establish a reinsurance program under which the Federal Government shall reimburse Exchange issuers for 80 percent of allowable claims costs for any enrollee whose annual claims exceed $100,000, funded through an assessment on health insurance issuers proportional to market share. The Secretary shall also establish risk adjustment corridors for the first four plan years following enactment, limiting net issuer losses attributable to cost-sharing reductions to not more than 3 percent of premium revenue in any plan year.

Sec. 5. CLOSING THE MEDICAID COVERAGE GAP.

  1. (1) There is established a Federal program to provide coverage to adults under 65 in non-expansion States with household income not exceeding 138 percent of the Federal poverty level.
  2. (2) Benefits shall be equivalent to the ACA essential health benefits package.
  3. (3) COST-SHARING LIMITS.—Enrollees below 100 percent FPL shall have no premiums, deductibles, or copayments. For enrollees between 100 and 138 percent FPL, cost-sharing shall not exceed: (A) premiums of not more than 2 percent of household income; (B) an annual deductible of not more than $250 per individual; and (C) an annual out-of-pocket maximum of not more than $1,000 per individual.
  4. (4) The Federal Government shall bear 100 percent of costs for 3 years, declining to 90 percent thereafter.
  5. (5) ADMINISTRATION.—The Secretary shall administer enrollment directly through Federal Exchange infrastructure in any State that does not establish a State-based administration plan approved by the Secretary within 12 months of enactment. States electing to administer the program shall receive an administrative matching payment of 75 percent of documented administrative costs.
  6. (6) MEDICAID TRANSITION.—Upon any non-expansion State's subsequent election to expand Medicaid under section 1902(a)(10)(A)(i)(VIII) of the Social Security Act, enrollment in the Federal gap program shall be suspended for new enrollees and existing enrollees transitioned to State Medicaid within 90 days. The Secretary shall issue transition guidance not later than 180 days after enactment.

Sec. 6. PUBLIC INSURANCE OPTION.

  1. (1) The Secretary shall establish a public health insurance option offered on all Exchanges beginning with plan year 2029, or as early as plan year 2028 in any rating area where the Secretary certifies that network adequacy standards have been met.
  2. (2) The public option shall offer essential health benefits, participate in every rating area in every State, and reimburse providers at Medicare rates plus not more than 10 percent. In rural areas or federally designated health professional shortage areas under section 332 of the Public Health Service Act, reimbursement rates shall be Medicare rates plus not more than 15 percent.
  3. (3) PROVIDER PARTICIPATION.—Any Medicare-enrolled provider is eligible to voluntarily participate in the public option. The Secretary shall offer participating providers: (A) priority consideration for innovation payment model bonuses under the Center for Medicare and Medicaid Innovation; (B) streamlined billing and reduced administrative burden; and (C) enhanced care coordination payments. Participation is voluntary; no provider shall be required to participate in the public option as a condition of Medicare enrollment or participation.
  4. (4) STARTUP FUNDING.—There are authorized to be appropriated $15,000,000,000 for fiscal years 2027 through 2030 to establish claims reserves, administrative infrastructure, and provider network development. Beginning in fiscal year 2031, the program shall be self-sustaining through premiums, tax credits, and a permanent reinsurance assessment on commercial Exchange issuers.
  5. (5) ACCESS MONITORING.—Beginning in the first plan year of operation, the Secretary shall publish an annual report assessing provider-to-enrollee ratios, appointment wait times, and geographic access by rating area. In any rating area where access metrics fall below network adequacy standards for two consecutive years, the Secretary shall increase public option reimbursement rates by up to 5 percent per year until standards are met, and may designate additional financial incentives for provider participation in that area.

Sec. 7. MEDICARE DRUG PRICE NEGOTIATION EXPANSION.

  1. (1) All drugs that meet the high-spend threshold established under part E of title XVIII of the Social Security Act shall be subject to the price negotiation program, with no cap on the total number of drugs subject to negotiation. The Secretary shall negotiate prices for all qualifying drugs identified under the drug selection process, prioritizing by Medicare spending from highest to lowest. Negotiated prices for the first cohort under this section shall be effective January 1 of the second calendar year after enactment, with additional cohorts added annually thereafter.
  2. (2) TRANSITIONAL PRICING.—For any qualifying drug not yet subject to a negotiated price under this section, the most recent price negotiated under part E of title XVIII of the Social Security Act shall serve as a ceiling price for Exchange plans and the public option until a price is negotiated under this section.
  3. (3) Negotiated prices shall be available to Exchange plans and the public option.
  4. (4) MANUFACTURER COMPLIANCE.—A manufacturer that refuses to negotiate shall be subject to an excise tax of 95 percent of gross U.S. revenues from the applicable drug, to the extent such tax is upheld as constitutional. If any Federal court issues a final non-appealable ruling that the excise tax mechanism is unconstitutional as applied, the Secretary shall, within 180 days, promulgate alternative compliance regulations including: (A) mandatory public disclosure of refused negotiation offers; (B) exclusion from Federal procurement and formulary programs; and (C) civil monetary penalties of not less than $1,000,000 per day of continued non-compliance.
  5. (5) DRUG ACCESS MONITORING.—The Secretary shall monitor for pharmaceutical product withdrawals, delayed launches, or restricted distribution attributable to negotiated pricing. If the Secretary determines that a negotiated price has caused a clinically significant reduction in access to a drug with no adequate therapeutic alternative, the Secretary may adjust the negotiated price upward by not more than 25 percent for a period not to exceed 2 years while pursuing alternative sourcing or biosimilar development.

Sec. 8. HOSPITAL MARKET CONSOLIDATION.

  1. (1) The FTC shall conduct a comprehensive review of hospital market consolidation and its effects on prices, quality, and access, completed within 18 months of enactment, and shall publish findings and recommended rulemaking in the Federal Register.
  2. (2) ENHANCED MERGER REVIEW.—The FTC shall establish an ongoing hospital merger review program for markets exceeding competitive concentration thresholds. For any proposed hospital merger in a market with a Herfindahl-Hirschman Index above 2,500, the FTC shall require: (A) a detailed competitive impact analysis; (B) demonstration that the merger produces patient care or efficiency benefits not achievable through other means; and (C) behavioral or structural remedies, including divestiture of specific service lines or facilities, where anti-competitive effects cannot be mitigated.
  3. (3) PRICING TRANSPARENCY ENFORCEMENT.—The FTC is authorized to bring enforcement actions under section 5 of the Federal Trade Commission Act against hospital systems charging prices exceeding 250 percent of Medicare rates in markets where a single system controls more than 50 percent of inpatient capacity, unless the system demonstrates that such prices reflect documented cost differences or accredited quality distinctions.
  4. (4) There are authorized to be appropriated $50,000,000 for the FTC to carry out activities under this section for fiscal years 2027 through 2030.

Sec. 9. FAMILY AFFORDABILITY CORRECTION.

  1. (1) Section 36B(c)(2)(C) of the Internal Revenue Code is amended to assess affordability of employer coverage based on the employee's required contribution for family coverage rather than self-only coverage. This statutory amendment codifies and makes permanent the standard implemented by the Department of the Treasury and the Internal Revenue Service in T.D. 9963 (October 2022), ensuring the family affordability standard has permanent statutory authority and cannot be reversed by future administrative action.
  2. (2) For any taxable year during which T.D. 9963 was in effect prior to enactment, this amendment shall be treated as having been in effect for that period, and no retroactive tax liability shall arise for individuals or employers who relied on the regulatory standard.

Sec. 10. NETWORK ADEQUACY STANDARDS.

  1. (1) The Secretary shall promulgate minimum network adequacy standards including maximum travel time and distance, maximum appointment wait times (14 days primary care, 30 days specialty, 48 hours urgent), and minimum provider-to-enrollee ratios.
  2. (2) Non-compliant plans shall be subject to corrective action, civil penalties up to $100 per affected enrollee per day, and decertification for persistent violations.

Sec. 11. SIMPLIFIED ENROLLMENT.

  1. (1) The Secretary shall implement automatic eligibility verification using Federal and State data, a standardized application not exceeding 3 pages, and year-round enrollment for qualifying life events.
  2. (2) ADMINISTRATIVE COST REDUCTION.
    1. (a) BASELINE.—Not later than 180 days after enactment, the Secretary shall establish a baseline measurement of Exchange plan administrative costs as a percentage of total premium revenue, using audited issuer financial data from plan year 2025.
    2. (b) TARGET.—Exchange issuers shall reduce administrative costs as a percentage of premium revenue by not less than 15 percent from the established baseline over the 5 plan years following enactment.
    3. (c) REPORTING.—Each Exchange issuer shall submit an annual administrative cost report to the Secretary no later than June 30 of each year. The Secretary shall publish aggregate and issuer-level results publicly.
    4. (d) ENFORCEMENT.—Issuers failing to demonstrate measurable progress toward the reduction target for two consecutive years shall be subject to a corrective action plan. Issuers non-compliant for a third consecutive year shall be subject to civil monetary penalties of not more than $500,000 per plan year.

Sec. 12. EFFECTIVE DATE.

  1. (1) This Act shall take effect on the date of enactment.
  2. (2) Premium tax credits apply to taxable years beginning after the December 31 immediately preceding the date of enactment.
  3. (3) The public option shall be available beginning plan year 2029, or plan year 2028 in rating areas where network adequacy is certified pursuant to Section 6(1).
  4. (4) The Medicaid gap program shall begin enrollment not later than 18 months after the date of enactment.

Sources

  1. Congressional Research Service, "Health Insurance Premium Tax Credit and Cost-Sharing Reductions," Report R44425. https://www.congress.gov/crs-product/R44425
  2. Medicaid.gov, "Status of State Medicaid Expansion Decisions." https://www.medicaid.gov/medicaid/program-information/downloads/medicaid-expansion-state-map.pdf
  3. Centers for Medicare & Medicaid Services, "Fixing the Family Glitch." https://www.cms.gov/files/document/family-glitch.pdf