Tax credits introduced under Obamacare to help low-income Americans afford healthcare face possible new restrictions to prevent fraud.
The Department of the Treasury and the Internal Revenue Service (IRS) have proposed the new regulations to reform the Premium Tax Credit (PTC), a refundable tax credit established under the Affordable Care Act (ACA) to help low- and medium-income families afford healthcare purchased through the Health Insurance Exchanges.
The proposed reforms are part of the Trump Administration's Working Families Tax Cuts, a major tax and economic legislation package signed into law in July 2025.
The IRS said the reforms will strengthen eligibility checks for the tax credits, boost the verification process, and "help ensure taxpayer-funded subsidies go only to eligible American taxpayers."
Treasury Secretary Scott Bessent said: "Hardworking American taxpayers should not be forced to subsidize health care for people who are ineligible under federal law.
"Under President Trump, this Administration is cracking down on fraud and corruption; holding bad actors accountable; lowering health care costs for Americans; and restoring integrity to our tax code and health care system."
...
What Would Change Under The New Rules
The rules would restrict the PTC to U.S. nationals, citizens, and certain non-citizens in the country lawfully. Some of the changes include the following:
Previously, certain migrants whose household income was below 100 percent of the federal poverty level could receive the tax credits if they were ineligible for Medicaid because of their immigration status. The new rules would remove this provision.
The new rules would also exclude the tax credits for certain family members in a household who are either not in the U.S. lawfully, or who do not meet the criteria of an "eligible alien." It would require households to remove the affected person's share of the premiums.
Starting in 2027, the regulations would also strengthen eligibility criteria. The health insurance marketplace would need to verify an individual's residence and eligibility to enroll; their status in the U.S. such as citizenship or lawful presence; their household income and family size; and whether they are eligible for other qualifying minimum essential health coverage.
The rules would also end the limits on repayment of excess advance tax credits. Previously, certain low-income taxpayers had limits on how much excess they had to repay. The new rules would remove the limits.
Accusations of 'Phantom' Enrollees
Vice President JD Vance said in September that the administration was removing more than 760,000 unverified enrollees from the ACA that it believes were signed up fraudulently. The Centers for Medicare & Medicaid Services (CMS) said the cancellations would result in around $2.2 billion in savings.
Vance said that the enrollees being canceled were a "a mix of both phantom people, but also real people who just don't meet the eligibility requirements."
Commenting on the rules, IRS CEO Frank J. Bisignano said: "The proposed rules protect eligible taxpayers while strengthening the integrity of the Premium Tax Credit.
"The enhanced verification measures are designed to curb improper claims, ensuring these vital tax benefits go strictly to the hardworking Americans who qualify for them."
CMS Administrator Dr Mehmet Oz added: "The Trump Administration’s whole-of-government approach to fighting fraud, waste, and abuse is built on the idea that an ounce of prevention is worth a pound of cure.
"Ensuring health programs serve only those who are eligible is one of the most effective ways to protect these programs and the taxpayers who support them."
Currently, an estimated 19.2 million Americans are enrolled in ACA Exchange plans, according to the Department of Health and Human Services. It added that the program experienced "unprecedented enrollment growth" from 2021 to 2024, and that nearly half of this was "suspected to be improper, phantom, or fraudulent."
What Happens Next
Individuals and interested parties such as insurers or healthcare organizations can submit written comments on the proposed rules to the Treasury and IRS by November 30.
A public telephone hearing on the proposals is scheduled to take place on December 8.
Contact Newsweek editors on this story: Ben Kelly and Paul Donnelley.