CMS Guidance Expands Access to Catastrophic Health Insurance Ahead of 2026 Enrollment

What CMS announced

The Centers for Medicare & Medicaid Services (CMS) released guidance on Thursday that expands access to catastrophic health insurance. Catastrophic plans are designed as low-premium, high-deductible coverage that primarily protects plan holders from incurring very high medical bills during serious illnesses or injuries.

The guidance changes how some people can qualify to buy catastrophic coverage through Affordable Care Act (ACA) exchanges. Previously, these plans were generally available only to people under 30 or to those who obtained a hardship exemption. Under the new approach, CMS is making it easier for certain people who become newly ineligible for advanced premium tax credits and cost-sharing reductions (CSRs) to apply for and receive a hardship exemption.

When the change takes effect and who it may affect

CMS says the expanded access begins on Nov. 1, 2025, which marks the start of the 2026 open enrollment season. From that point, CMS will expand access to people who earn over 250% of the federal poverty level (FPL) and are only ineligible for CSRs, rather than being ineligible for both types of ACA financial assistance.

Premium tax credits and CSRs are forms of help that reduce what people pay for health coverage. Premium tax credits lower monthly insurance bills, while CSRs reduce out-of-pocket costs such as copays and deductibles. The guidance focuses on people who may face higher costs when they no longer qualify for these forms of support.

Updates to the hardship exemption process

Alongside eligibility changes, CMS is also introducing new administrative steps intended to streamline the hardship exemption process. The agency plans an online application process that automatically evaluates hardship eligibility using projected annual household income data. It is also introducing an expedited review process for hardship applicants who use the existing paper application.

CMS did not respond immediately to a request for further details on the new guidance. However, in its fact sheet, the agency linked the changes to rising health insurance premiums. CMS warned that without broader access to catastrophic plans, marketplace shoppers without subsidies could be priced out of coverage.

Why the guidance is arriving now

The announcement comes amid expectations of higher marketplace premiums in 2026. Earlier this month, a KFF-Peterson analysis of proposed insurer rates found that ACA Marketplace insurers are raising premiums by about 20% in 2026. The analysis attributed the increases to several factors, including rising health care costs and the looming expiration of enhanced premium tax credits.

Those enhanced credits were introduced by the American Rescue Plan and extended by the Inflation Reduction Act. They increased subsidy amounts and expanded eligibility to households with higher incomes. The credits are scheduled to expire at the end of this year unless Congress takes action.

CMS’s latest guidance also follows other recent Trump administration-led changes aimed at addressing expectedly high health insurance prices this year. One of the most notable changes referenced is the recently passed “One Big Beautiful Bill,” which introduced stringent ACA and Medicaid enrollment requirements and made catastrophic health plan holders eligible for health savings accounts (HSAs). HSAs are tax-deferred savings vehicles that allow eligible plan holders to set aside money for medical expenses, and they have long been subject to strict IRS eligibility rules.

How catastrophic plans work in practice

Catastrophic health plans are positioned as the lowest-premium option among ACA health plan categories, but they come with trade-offs. They typically have the highest deductibles and out-of-pocket maximums. That means a plan holder could pay thousands of dollars for medical care before coverage begins paying for many services.

These plans also have limitations on certain types of care before the deductible is met. For example, catastrophic health insurance covers only three primary care visits until you meet your deductible.

Even with these constraints, catastrophic plans can still provide meaningful protection compared with having no insurance. They cover the ACA’s 10 essential health benefits, which include emergency services, hospitalization, and preventative care.

Who may consider a catastrophic plan

Catastrophic coverage may appeal to people who want lower monthly premiums and who do not anticipate needing frequent medical care. The content describing these plans suggests they can be an affordable option for young or healthy applicants, particularly those who are primarily seeking protection against major medical expenses rather than routine care costs.

At the same time, the high deductible and out-of-pocket maximums mean that the plan can become expensive if a person needs substantial care. The structure is most protective in scenarios involving serious illness or injury, where the risk is a very large bill, but it may be less comfortable for people who expect regular doctor visits, ongoing prescriptions, or recurring medical needs that could require significant spending before the deductible is met.

Key points to weigh during open enrollment

• Eligibility rules are changing: Starting Nov. 1, 2025, CMS will expand access for people earning over 250% of FPL who are only ineligible for CSRs, making it easier for some to obtain the hardship exemption needed to buy catastrophic coverage.

• Financial assistance affects the decision: Premium tax credits and CSRs can lower both monthly premiums and out-of-pocket costs. Losing eligibility for either can change which plan type is most affordable.

• Lower premiums come with higher risk at the point of care: Catastrophic plans generally have the highest deductibles and out-of-pocket limits, meaning significant costs may be paid before coverage begins for many services.

• Benefits are still comprehensive in scope: These plans cover the ACA’s essential health benefits, including emergency services, hospitalization, and preventative care.

• Primary care access is limited before the deductible: Catastrophic coverage includes only three primary care visits until the deductible is met.

• Administrative changes may simplify applying: CMS plans an online application that automatically evaluates hardship eligibility using projected annual household income data, plus an expedited review process for paper applications.

What to watch next

As 2026 open enrollment approaches, the practical impact of CMS’s guidance will depend on how the updated hardship exemption process works for applicants and how premium changes affect the broader marketplace. CMS has tied the policy shift to concerns that people without subsidies could be priced out of coverage as premiums rise. With proposed 2026 premium increases and the scheduled expiration of enhanced premium tax credits at the end of the year unless Congress acts, catastrophic plans may become a more prominent option for some shoppers navigating higher costs.