The U.S. Treasury Department and Internal Revenue Service have proposed new regulations tightening eligibility and verification requirements for federal health insurance tax credits, with provisions affecting 2027 coverage and additional verification requirements scheduled for 2028.
The October 14 announcement outlines changes to the Premium Tax Credit (PTC), which helps eligible households pay for health insurance purchased through Affordable Care Act marketplaces. The proposed regulations, published in the Federal Register on October 15 under rulemaking REG-101576-26, implement provisions of the 2025 tax legislation commonly known as the One Big Beautiful Bill Act.
The changes would clarify which households qualify for subsidies, what information marketplaces must verify and how advance tax credit payments are reconciled. The regulations are not final, although several underlying statutory changes already have effective dates.
Who Qualifies in 2027
Beginning with the 2027 tax year, the law narrows eligibility for the Premium Tax Credit to U.S. citizens, U.S. nationals and specified categories of lawfully present noncitizens. The proposed regulations explain how that restriction affects households containing individuals with different immigration classifications.
Under the proposal, premiums attributable to family members who do not meet the relevant eligibility requirements would be excluded from the amounts used to calculate the household’s allowable credit.
That distinction matters for mixed-status households. An eligible family member could still qualify for assistance, but the credit calculation would exclude the premium costs associated with an ineligible member.
The proposal would also change how marketplaces report those premium amounts on Form 1095-A, which taxpayers use when completing Form 8962 to reconcile advance subsidies with their final tax credits.
Separately, legislation effective for tax years beginning in 2026 removed the previous limits on repayment of excess advance premium tax credits. Consequently, taxpayers whose advance payments exceed their allowable credit generally must repay the full excess amount.
Stricter Marketplace Verification
The proposed regulations also establish how marketplaces would verify eligibility for coverage and advance premium tax credit payments. The requirements include verification of residency, citizenship or lawful-presence status, household income, family size and other information relevant to subsidy eligibility.
However, the principal new coverage-month verification requirements apply to tax years beginning after December 31, 2027, rather than automatically applying to every enrollee in 2027. For 2028 coverage, exchanges must provide a pre-enrollment verification process that applicants can use beginning no later than August 1, 2027.
The $22 Million Verification Delay: Reconstructing the Estimate
Treasury and IRS estimate that a proposed newborn-related verification waiver could prevent approximately $22 million in advance premium tax credits from being delayed under an alternative rule. The calculation below reproduces the estimate using the agencies’ assumptions.
Investozora multiplied the agencies’ estimated 50,000 newborns by the approximately $222 average monthly advance credit and the assumed two-month delay. The resulting $22.2 million reconstructs the agencies’ approximately $22 million estimate.
The scenario concerns potential timing delays if newborn-related verification were required without the proposed waiver. It does not measure actual delayed payments, permanent benefit losses, fraud, or federal fiscal savings. Because the inputs are approximate, the reconstructed amount should not be interpreted as a more precise forecast than the agencies’ rounded estimate.
Original calculation presentation
The regulations also address situations in which households report changes in income after enrollment. Under the proposed approach, exchanges could maintain a previously verified advance payment amount while reviewing information supporting a requested increase.
An important exception concerns qualifying changes in family size, including births, adoptions, marriage and certain losses of dependents. The proposal would permit verification waivers in specified special enrollment circumstances to reduce interruptions in financial assistance.
Treasury and the IRS estimate that approximately 50,000 families with newborns could benefit from the waiver. Using marketplace reporting data, the agencies estimate that without the exception, approximately $22 million in advance premium tax credits could be delayed for affected households.
What Happens Next
The October proposal also clarifies how premium tax credit eligibility interacts with Medicaid community engagement requirements. Under the proposed framework, an individual who is ineligible for Medicaid solely because of failure to satisfy those requirements generally cannot obtain premium tax credits on that basis alone.
Eligibility may change if the individual subsequently becomes ineligible for Medicaid for another qualifying reason. Treasury Secretary Scott Bessent characterized the regulations as an effort to prevent subsidies from reaching ineligible recipients. That is the administration’s stated policy rationale, not an independent finding that all disputed claims involved fraud.
The proposal does not itself establish how many additional people will lose subsidies or how much federal spending will ultimately change. Operational details and related administrative costs are also expected to be addressed through separate Department of Health and Human Services regulations.
Public comments on the Treasury and IRS proposal are due November 30, 2026. A telephone hearing is scheduled for December 8, subject to the agency’s hearing procedures. For marketplace households, the immediate distinction is between eligibility changes already established by statute and additional administrative requirements still moving through the federal rulemaking process.
