One Big Beautiful Bill: What It Did to Health Insurance in 2026

2026-06-04 • 9 min read

The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, cut $1.1 trillion from Medicaid and ACA funding, let enhanced premium tax credits expire, and requires Medicaid eligibility checks every 6 months. Here is exactly what changed, who is affected in 2026, and what small businesses can do right now.

Quick Answer (as of June 2026): The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, made three changes that directly raised health insurance costs in 2026. It let the enhanced ACA premium tax credits expire on December 31, 2025. It now requires states to check Medicaid eligibility every 6 months instead of annually. And it added upfront income verification for marketplace enrollment, ending automatic re-enrollment. The Congressional Budget Office (CBO) projects 15 million Americans will lose health coverage by 2034 as a result of these combined changes.

What Is the One Big Beautiful Bill Act?

The One Big Beautiful Bill Act (OBBBA) is a federal budget reconciliation law signed by President Trump on July 4, 2025. It is the largest single change to U.S. health coverage rules since the Affordable Care Act (ACA) passed in 2010.

The law includes $1.1 trillion in reductions to Medicaid and ACA marketplace funding over 10 years, per the Congressional Budget Office (CBO). Those reductions are not a lump-sum cut. They are delivered through three specific policy changes, each of which removes a different layer of coverage support from American workers and families.

What Did the OBBBA Do to ACA Marketplace Premiums?

The OBBBA did not directly raise premiums. What it did was allow the enhanced ACA premium tax credits to expire on December 31, 2025, without renewing them.

Those enhanced credits were created by the Inflation Reduction Act in 2021 and extended through 2025. For households earning up to 400% of the federal poverty level (FPL), the credits reduced net monthly marketplace premiums by $200 to $600 per month. For lower-income enrollees, the credits often brought premiums to $0.

When the credits expired, those reductions disappeared overnight.

The U.S. average ACA benchmark Silver plan premium reached $752 per month in 2026, up 21% year-over-year, according to 2026 marketplace rate filings. State-level increases were much steeper: Arkansas rose 67%, Texas rose 35%, and Florida rose 33%. The full state breakdown is available in the 2026 health insurance premium increase guide on Summit Health Benefits.

A single adult earning $45,000 per year who paid $80 to $150 per month in 2025 under the enhanced credits may now owe $450 to $600 per month for the same plan in 2026.

What Did the OBBBA Do to Medicaid?

The OBBBA requires states to check Medicaid eligibility for expansion enrollees every 6 months. Before the law, annual redeterminations were the standard.

This matters because Medicaid redeterminations generate paperwork deadlines. When an enrollee misses a notice, fails to respond in time, or has income that slightly exceeds the limit, the state terminates coverage. More frequent checks mean more coverage terminations, including for people who are still eligible.

The CBO projects the 6-month redetermination requirement alone will cause approximately 700,000 people to lose Medicaid coverage by 2034.

Why this affects you right now in June 2026: Medicaid enrollees who first enrolled in January 2026 are reaching their first 6-month redetermination window this month. If your employees or their family members received a Medicaid renewal notice in May or June 2026, this provision is the direct cause.

Losing Medicaid qualifies as a life event that opens a 60-day Special Enrollment Period (SEP) on the ACA marketplace, per Centers for Medicare and Medicaid Services (CMS) rules. The COBRA 2026 guide on Summit Health Benefits covers bridge options while a longer-term plan is secured.

What Did the OBBBA Do to ACA Marketplace Enrollment?

The OBBBA added pre-enrollment income verification for marketplace plans receiving premium tax credits. Previously, many enrollees could attest to their income and get coverage right away, with a year-end reconciliation if the estimate was off.

The new requirement means applicants must submit income documentation before coverage begins. The law also ended automatic re-enrollment for subsidized marketplace plans.

Enrollees who had marketplace coverage in 2025 and did not complete the new verification process for 2026 lost their coverage as of January 1, 2026. Many did not realize automatic re-enrollment was no longer in effect.

How Does the OBBBA Affect Small Business Health Insurance?

Employer-sponsored group health plans are not directly cut by the OBBBA, but small businesses are being hit from two angles at once in 2026.

Angle 1: Group plan premium increases. The median small group health insurance premium increase in 2026 is 11%, based on analysis of 318 small group insurers by the Peterson-KFF Health System Tracker. Some insurers are proposing increases above 20%. Total average employer health benefit cost is projected to exceed $18,500 per employee in 2026, according to Mercer's National Survey of Employer-Sponsored Health Plans. That is the steepest employer cost increase since 2010.

Angle 2: More employees now need employer coverage. Workers who previously relied on subsidized marketplace plans or Medicaid now face unaffordable costs or coverage loss. Those employees are turning to their employers for group coverage, often for the first time. Small businesses that never offered benefits are now getting direct requests.

Metric	2026 Figure	Source
Median small group premium increase	+11%	Peterson-KFF
Average employer cost per employee	$18,500+	Mercer
Employers making cost-cutting changes	59%	Mercer
Projected coverage loss by 2034	15 million people	CBO

How Can Small Businesses Offset the 2026 Premium Increase?

The fastest legal way to lower effective health insurance cost without changing coverage is a Section 125 cafeteria plan.

What is a Section 125 cafeteria plan? A Section 125 cafeteria plan, authorized under IRS Code Section 125, allows employees to pay their share of health insurance premiums with pre-tax dollars. Pre-tax here means the contributions avoid federal income tax and FICA (Federal Insurance Contributions Act) payroll tax, which runs at 7.65% on both the employer side and the employee side.

What does the employer actually save?

For a business with 10 employees, each contributing $400 per month toward health premiums:

Total monthly pre-tax employee contributions: $4,000
Employer FICA avoided at 7.65%: $306 per month
Annual employer savings: $3,672

Summit Health Benefits typically projects $91 to $136 in monthly FICA recapture per enrolled employee before its $35 per-employee-per-month administration fee. Most employers recover more in FICA savings than the fee costs.

The Section 125 cafeteria plan guide and FICA tax savings explainer on Summit Health Benefits walk through the full math and IRS compliance requirements.

Summit Health Benefits manages the entire Section 125 plan. The $35 per-enrolled-employee-per-month fee covers the IRS plan document, annual nondiscrimination testing, payroll integration, W-2 reconciliation, and employee enrollment. No setup fee. No long-term contract. Get a written savings projection within 48 hours.

What Are the Best Alternative Coverage Options in 2026?

For small businesses reconsidering their benefit structure entirely, two alternatives work well for teams under 50 employees.

ICHRA (Individual Coverage HRA): An ICHRA lets an employer give each employee a fixed monthly tax-free allowance to buy their own ACA-compliant marketplace plan. The employer's cost is exactly the allowance amount set, with no carrier renewals, no rate surprises, and no group-level claims exposure. ICHRA allowances are exempt from income tax and payroll tax under IRS rules. The ICHRA employer guide on Summit Health Benefits covers eligibility, minimum amounts, and setup.

Supplemental benefits through Section 125: Hospital indemnity, critical illness, and accident coverage run through a Section 125 plan can provide meaningful employee protection at 30 to 60 percent less than full major medical premiums. This is a common structure for businesses where employees have coverage through a spouse but want voluntary benefits. More detail is in the small business health insurance alternatives guide and the zero-cost employee benefits guide.

For employer teams looking for flexible supplemental or membership-based benefits, WoW Health offers plans designed for small businesses. The WoW Health blog also covers benefit options, coverage comparisons, and cost-saving strategies for employers navigating 2026 changes.

Explore WoW Health for Employers

What Should Employees Do Right Now?

Three situations require action in the next 30 to 60 days.

Lost marketplace coverage or can no longer afford 2026 premiums: Contact HealthCare.gov or your state marketplace to check whether a Special Enrollment Period applies based on a change in income, household size, or loss of other coverage.

Received a Medicaid redetermination notice: Respond immediately with all documentation the notice requests. If coverage has already been terminated, a 60-day SEP on the ACA marketplace applies from the termination date, per CMS rules. Contact your state Medicaid office or visit medicaid.gov for your state's redetermination process.

Employer does not offer benefits: Ask whether a Section 125 plan is in place. Every dollar paid toward health insurance without a Section 125 plan is taxed at the full FICA plus income tax rate. A Section 125 plan costs the employer nothing net in most cases, and it increases employee take-home pay by $70 to $110 per month.

Frequently Asked Questions

What is the One Big Beautiful Bill Act and when was it signed?

The One Big Beautiful Bill Act (OBBBA) is a federal budget reconciliation law signed by President Trump on July 4, 2025. It includes $1.1 trillion in reductions to Medicaid and ACA marketplace funding over 10 years, per the Congressional Budget Office. The law ended the enhanced ACA premium tax credits that had kept marketplace costs low since 2021, added 6-month Medicaid redeterminations, and introduced pre-enrollment income verification for marketplace plans.

Did the One Big Beautiful Bill cut ACA health insurance subsidies?

The OBBBA did not directly eliminate ACA premium tax credits. The enhanced credits created by the Inflation Reduction Act in 2021 were set to expire on December 31, 2025, and the OBBBA did not renew them. As a result, marketplace enrollees who had received those credits saw their net monthly premiums rise significantly in 2026. The U.S. average ACA Silver plan premium rose 21% year-over-year to $752 per month, per 2026 marketplace rate data.

Why are people getting Medicaid redetermination notices in June 2026?

The OBBBA requires states to check Medicaid eligibility for expansion enrollees every 6 months, down from the prior annual requirement. People who enrolled in Medicaid in January 2026 are reaching their first 6-month redetermination window in June and July 2026. If an enrollee misses the notice or fails to respond in time, coverage is terminated even when the person remains eligible. The Congressional Budget Office estimates this provision will cause approximately 700,000 people to lose Medicaid coverage by 2034.

How does the OBBBA affect small business health insurance premiums?

Employer-sponsored group plans are not directly cut by the OBBBA. However, the median small group premium increase in 2026 is 11%, with some insurers above 20%, per the Peterson-KFF Health System Tracker. Total employer health benefit cost is projected to exceed $18,500 per employee in 2026, per Mercer, making it the steepest increase since 2010. Small businesses are also seeing more employees request employer coverage for the first time, as marketplace and Medicaid options became less accessible in 2026.

What is a Section 125 cafeteria plan and how does it lower 2026 health costs?

A Section 125 cafeteria plan, authorized under IRS Code Section 125, allows employees to pay their share of health insurance premiums with pre-tax dollars. Those contributions avoid FICA payroll tax (7.65%) for both the employer and the employee. For a business with 10 employees each contributing $400 per month, the employer saves roughly $3,672 per year in FICA without changing coverage. Summit Health Benefits administers Section 125 plans for $35 per enrolled employee per month, with most employers recovering $91 to $136 per employee per month in FICA savings before the fee.

If an employee loses Medicaid in 2026, what are their health insurance options?

Losing Medicaid coverage qualifies as a life event that opens a 60-day Special Enrollment Period (SEP) on the ACA marketplace, per Centers for Medicare and Medicaid Services (CMS) rules. The employee has 60 days from the termination date to enroll in a marketplace plan. If employer-sponsored coverage is available, that is typically the fastest path. An ICHRA gives the employee tax-free funds from their employer to buy their own plan. COBRA can also bridge a short gap if the employee had prior employer-sponsored group coverage.

How many people will lose health insurance because of the One Big Beautiful Bill?

The Congressional Budget Office (CBO) projects approximately 15 million Americans will become uninsured by 2034 as a result of the OBBBA's combined health coverage changes. That number includes losses from the ACA enhanced subsidy expiration, the 6-month Medicaid redetermination requirement, the new pre-enrollment income verification rules, and other provisions. The 15 million figure is a cumulative 10-year projection, not an immediate count. Early effects are visible in 2026 marketplace premium increases and the current wave of Medicaid redetermination notices.

Sources: Congressional Budget Office score of the One Big Beautiful Bill Act (July 2025). Peterson-KFF Health System Tracker, "How Much and Why Premiums Are Going Up for Small Businesses in 2026." Mercer National Survey of Employer-Sponsored Health Plans 2026. Centers for Medicare and Medicaid Services (CMS) 2026 marketplace rate filings. FICA savings math based on the 7.65% combined employer FICA rate applied to pre-tax employee premium contributions under IRS Section 125. State premium data cross-referenced with Summit Health Benefits 2026 premium increase by state.