On February 9, the Centers for Medicare and Medicaid Services released its latest proposed Notice of Benefit and Parameters (NBPP). The NBPP is released annually, establishing rules with significant implications for states’ insurance markets as state regulators, issuers, and Marketplace leaders prepare for the upcoming plan year. This proposed rule is no exception, outlining many changes related to eligibility and verifications, plan design and management, program integrity, and a new state Marketplace model, most of which are proposed to take effect January 2027.
If finalized as proposed, CMS estimates that health insurance Marketplace enrollment will decrease by 1.2–2 million individuals, and health insurance premiums will increase by 2–3 percent.
Comments on this proposed rule must be submitted by March 13, 2026. Below, we highlight several provisions of interest to state leaders, as they may affect their insurance markets and consumers.
Timing for implementing certain provisions may be challenging, as states and issuers are already preparing for the upcoming benefit year.
With less than eight months until the start of the next open enrollment period, planning for the 2027 benefit year had already begun. This proposed rule now adds new, and in some cases unanticipated, proposals that could have a significant impact on states’ and issuers’ plans for next year.
Even if finalized quickly, states will have limited time to enact policies, adjust contracts, or secure the resources necessary to properly implement the rule’s many proposed changes. Issuers and regulators will have only months to consider how the proposals could impact plan design, risk mix, competition, and costs, or, if they wish, design new plan offerings ahead of summer plan filing deadlines.
The proposed rule would change Essential Health Benefit definitions, potentially shifting costs of recent state-mandated benefits to states.
Federal law requires states to defray the costs of state-mandated benefits considered “in addition to” federally required Essential Health Benefits (EHB). In a 2024 regulation, CMS allowed state-mandated benefits included in the state’s benchmark plan to count as federal EHB, exempting them from defrayal. The proposed rule would reverse this policy, meaning states could be responsible for the costs of mandated benefits previously categorized as federal EHB.
While some states would revert to defrayal practices put in place prior to the 2024 rule change, states that have recently updated their benchmark plans — incorporating state-mandates to cover services such as hearing aids, reproductive care, nutritional counseling, metabolic treatments, and cancer screenings — will have to examine whether those benefits still could qualify as federal EHB or require defrayal.
The proposed change has broader implications, as benefits that lose their federal EHB status will no longer be subject to federal consumer protections, such as cost-sharing limits and non-discrimination protections. In addition, issuers would have to exclude the costs of these benefits from their calculation of premium tax credit (PTC) rebates, leading to lower PTCs for consumers.
The rule introduces new insurance plan options, with more details needed to understand implementation and implications for markets and consumers.
The proposed rule outlines three novel insurance plan options, each designed to increase access to lower-premium plans in which consumers bear a greater responsibility for their health care spending, often through a higher risk of out-of-pocket costs. It will be difficult for states to fully assess how these options might affect their markets and consumers without additional details, and CMS has asked many questions for commenters to help construct future direction.
Proposed Insurance Plan Options
The proposed rule outlines new insurance plan options or changes that could be available to states and issuers at their option. These include:
A multi-year catastrophic plan that would allow a person to enroll for up to 10 years and give issuers the option to distribute annual cost-sharing limits (e.g., deductibles and co-pays) across or even within years.
A bronze plan with no cap on cost-sharing. This plan could only be offered by an issuer that also offers a bronze plan that retains the federally mandated cap on consumer cost-sharing.
A non-network plan, in which a health plan would set a reference rate for the services it covers, with an assurance that an adequate number of providers in a service area would accept that rate as the full cost of those services. Plan enrollees would then be responsible for finding and negotiating with providers around the insurer’s set rate.
Limits on catastrophic plan benefits, so that catastrophic plans cannot offer benefits beyond the minimum benefits outlined under federal regulation, until an enrollee spends 130 percent of the maximum annual cost-sharing limit.
The rule would enable Issuers to offer these options as early as next year, though discretion is ultimately left to issuers and state regulators to pursue or allow these plans.
CMS proposes stricter eligibility verification standards that are estimated to impose additional costs on Marketplaces and consumers.
The proposed rule would tighten Marketplace eligibility processes and eliminate attestation as an acceptable form of verification for some SEPs, households reporting income >100 percent FPL, households with federal data indicating income below 100 percent FPL, and households lacking current federal income data. The changes are estimated to cost hundreds of millions of dollars for the federal government, states, and consumers to implement. CMS estimates these changes will reduce federal spending on Advance Premium Tax Credits (APTCs) by ~$5.2 billion in 2027, likely reflecting lower enrollment.
CMS notes that the potential negative costs, burdens, and coverage impact of these policies are outweighed by potential long-term program integrity savings and by the protection they will offer consumers from tax liability, especially given recent changes under the One Big Beautiful Bill Act (OBBBA) that removed the cap limiting tax liability for certain populations, including low-income households, who inaccurately assessed their eligibility for APTCs.
Other Considerations for States
Some changes would offer new flexibilities and authorities for states. Most prominently, the rule proposes a new Marketplace model for states interested in transitioning to a State-based Marketplace (SBM): the Enhanced Direct Enrollment SBM model. Using this option, states can pursue a SBM operated primarily via web brokers under contract with the state. States also no longer have to operate as a hybrid SBM on the federal platform for one year prior to transitioning to a full SBM.
The rule proposes to grant states greater authority to review the network adequacy and Essential Community Provider standards of their health plans. In FFM states, the rule proposes eliminating federal standard plan design mandates on issuers, deferring to states and issuers who wish to implement their own standard plan design options modeled to reflect state goals and priorities.
Other changes could impose greater restrictions on states’ regulatory authority. For example, proposals to increase data collection and to impose a new definition for a federal “actuarially justified” cost-sharing reduction (CSR) load factor could limit the varied approaches states have adopted to account for CSR payments responsive to their markets and impact on premium calculations.
The proposed rule also signals that CMS is exploring setting new Medical Loss Ratio (MLR) standards in states, even if not requested by a state. Current federal standards require that Marketplace issuers spend 80 percent of premium dollars on care.
Finally, the proposed rule requires all states to adopt a recent hardship exemption that expands eligibility for catastrophic plans to anyone outside of the 100-250 percent income range. States that processed their own hardship exemptions were formerly exempt from this guidance.
