CMS proposed on October 23 to require every Marketplace to verify household income, family size, citizenship or eligible noncitizen status, residency and enrollment in other qualifying coverage before paying any advance premium tax credit or cost-sharing reduction, starting with plan year 2028. The agency's own impact analysis puts the cost at 332,500 fewer enrollees a year, $7.6 billion less APTC and a 0.4% increase in average premiums.
The rule, CMS-9873-P, implements section 71303 of the Working Families Tax Cuts law, Public Law 119-21, signed in July 2025. It is scheduled for Federal Register publication on October 27 with a 30-day comment period, and follows Treasury's companion premium tax credit regulations of October 14. "Federal subsidies should only go to eligible Americans, not to fraudsters gaming the system," CMS Administrator Mehmet Oz said in the release.
The proposal arrives as the 2027 open enrollment opens on November 1 on a market that CMS counted at 19.2 million effectuated enrollees in February 2026, down from 21.8 million a year earlier, a drop HHS attributed to the removal of improper enrollees rather than affordability, as the site reported in July.
Key Takeaways
- CMS's 2028 baseline is 16,915,000 enrollees, 11,840,500 on the federal platform and 5,074,500 in state Exchanges, already reduced for the law's effect on improper enrollment; the rule removes 237,500 and 95,000 more.
- CMS expects 5 million enrollees a year, 3.5 million federal and 1.5 million state, to generate a data-matching issue and receive APTC for 1.5 fewer months on average.
- At an average APTC of $655 a month, the enrollment loss saves $2.6 billion a year and the withheld months $5 billion, for $7.6 billion.
- CMS assumes those who leave have claims at 80% of the pool average, which lifts the remaining pool's claims from $721.09 to $723.98 per member per month, a 0.4% or $2.89 increase.
- Enrollees who do not return to the Exchange each year would be re-enrolled without financial assistance, and a pre-open-enrollment verification window would open every August 1, first on August 1, 2027.
What the rule requires
Under current rules an applicant whose information does not match federal data sources gets a data-matching issue, or DMI, and 90 or 95 days to resolve it, during which APTC and CSRs are paid. The proposal ends that. Exchanges would no longer provide financial assistance during an inconsistency period for income and family size, citizenship or eligible noncitizen status, other qualifying coverage or residency, per the fact sheet. Consumers could enroll in a full-price plan while verification is pending, or select a contingent plan that is released to the issuer only once eligibility is determined, with APTC applied retroactively once verified.
Automatic re-enrollment with subsidies would end. Current enrollees would be re-enrolled with financial assistance only if they return to the Exchange each year to confirm eligibility and have it re-verified; otherwise they would be re-enrolled without it. All Exchanges would have to offer a voluntary pre-open-enrollment verification period from August 1 each year, and could send the annual open enrollment notice before it. Verification is waived for births, adoptions, marriages and the loss of a dependent, and CMS seeks comment on strengthening family size and residency checks and on which data sources to use.
Treasury's proposed regulations, REG-101576-26, carry the tax side: a plan is not a qualified health plan for premium tax credit purposes if the Exchange lacks a pre-enrollment verification process, and a month is not a coverage month unless the Exchange has verified the required information, for taxable years beginning after December 31, 2027, per the Journal of Accountancy. Treasury and the IRS estimate about 3.7 million 2028 returns will include repayment of excess APTC under the law's repeal of the repayment caps.
CMS's arithmetic
The regulatory impact analysis starts from the enrollment projections in the 2027 payment notice, 91 FR 29,526, which already account for the law's expected reduction in improper enrollments. What the rule adds, in CMS's words, is "the expected decrease in enrollment due to the additional barriers to enrollment for properly enrolled consumers." The analysis states that "it is unlikely that many consumers would be able to afford to enroll in a full-price QHP while they complete the verification process."
| CMS-9873-P regulatory impact analysis, annual from plan year 2028 | Federal platform | State Exchanges | All |
|---|---|---|---|
| Baseline enrollment | 11,840,500 | 5,074,500 | 16,915,000 |
| Enrollment decrease from administrative barriers | 237,500 | 95,000 | 332,500 |
| Enrollees generating a data-matching issue | 3,500,000 | 1,500,000 | 5,000,000 |
| APTC not paid, enrollment decrease (12 months x $655) | $1.9B | $0.7B | $2.6B |
| APTC not paid, 1.5 fewer months for DMI enrollees | $3.5B | $1.5B | $5.0B |
| Total APTC decrease | $5.4B | $2.2B | $7.6B |
| Premium increase from exiting enrollees | 0.4%, $2.89 PMPM |
Source: CMS-9873-P, section on regulatory impact, as posted for Federal Register public inspection on October 23, 2026. Average premium $838.48 PMPM; claims assumed at 86% of premium, $721.09.
The premium estimate rests on one assumption. CMS writes that "applicants who choose not to enroll due to verification-related barriers are likely to be younger and healthier than those remaining in the risk pool," and sets their claims at 80% of the average, $576.87 against $721.09. Removing 332,500 members at that level from a pool of 16,915,000 lifts the remaining 16,582,500 to $723.98, a 0.4% rise. The rule asks for comment on secondary effects, naming shifts to Medicaid and uncompensated care.
The benefits side counts an "annual gross net benefit of $3.81 billion" from interrupted coverage, defined as one-half of the APTC forgone by consumers who do not enroll, against annualized monetized costs of $4,256 million at a 7% discount rate.
Actuaries filing 2027 rates have been working with larger selection effects. Preliminary filings split a 14% median increase into 10% medical trend and a 4-point subsidy-loss morbidity load, per KFF's July review the site covered at the time, after a 2.9 million enrollment decline. CMS's 0.4% applies to a population deterred by paperwork rather than priced out, and the 80% relative claims factor is where the two frames differ; the rule's own estimate of five million DMIs a year is nearly 30% of its baseline.
Partial-year members and the risk pool
The contingent plan selection changes when members arrive. A consumer who selects a plan during open enrollment and resolves the DMI by the 15th of a month gets coverage from the first of that month; after the 15th, from the first of the next. CMS's 1.5-month average is the gap between the old start date and the new one. Federally facilitated Exchanges and state Exchanges on the federal platform would apply existing prospective and retroactive binder payment rules to the new scenarios, with state-based Exchanges able to opt in.
For an issuer that is a block of members whose effective dates spread across the first quarter rather than clustering on January 1, with retroactive APTC for those verified late and no APTC at all for those who took a full-price plan and are verified only to a later month. The HHS risk adjustment model carries enrollment-duration factors for adults with partial-year coverage, so the later starts flow into transfers; the pricing question is whether the members who clear verification in March differ from those who cleared it in January.
State-based Exchange transitions move with the calendar: applications are due 15 months before the pre-open-enrollment verification period rather than 15 months before open enrollment. Comments on CMS-9873-P are due 30 days after the October 27 publication, in late November, and the first verification window opens August 1, 2027, for 2028 coverage.