Treasury and the IRS have proposed regulations that would limit the premium tax credit, the federal subsidy that lowers Marketplace health insurance premiums, to U.S. citizens, U.S. nationals and certain lawfully present noncitizens beginning in 2027. The rules were announced Oct. 14 and are not final. They would write into the tax regulations changes Congress made in 2025, and they add new checks on advance payments of the credit.
Under the proposal, lawfully present noncitizens who do not meet the statutory definition of an “eligible alien” would be left out of the credit for tax years beginning after Dec. 31, 2026. Because the Marketplace plan year and the tax year line up, that makes 2027 the first year affected, and open enrollment for 2027 coverage is the point at which households would see it.
Who the proposed premium tax credit rule would cut out
The proposed rule says enrollment eligibility requires that a person be “a U.S. citizen, a national of the U.S., or an alien lawfully present in the U.S.,” according to the proposed rule text filed with the Federal Register. The credit itself is narrower. For tax years beginning after Dec. 31, 2026, lawfully present people who are not “eligible aliens” under section 36B(e)(2)(B) of the tax code are excluded from the calculation, as are people not lawfully present.
The document also addresses an earlier change. For tax years after Dec. 31, 2025, a lawfully present noncitizen with income below 100% of the federal poverty level who is ineligible for Medicaid because of immigration status no longer qualifies for the credit. The rule text does not list every category of lawfully present noncitizen, so the statutory definition controls who counts.
Marketplace households and the question of their own status
The people with something to check are Marketplace enrollees whose immigration status is anything other than citizen or national, and families that include such a member. They need to confirm whether each person on the application meets the “eligible alien” definition before they rely on the credit for 2027. Anyone who is a citizen or national keeps eligibility under the proposal, though the new verification steps would still apply to the application.
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The IRS announcement, news release IR-2026-121, frames the proposal as protection for the program. Treasury Secretary Scott Bessent is quoted saying “hardworking American taxpayers should not be forced to subsidize health care for people who are ineligible.”
Advance payment checks reach the Exchange in 2028
The release says the rules add new verification criteria for advance payments of the credit, the portion paid straight to insurers each month. The rule text gives the timing: those verification requirements apply to tax years beginning after Dec. 31, 2027, a year after the eligibility limit. IRS Chief Executive Officer Frank J. Bisignano said in the release that “the enhanced verification measures are designed to curb improper claims.”
For enrollees who receive advance payments, the Exchange would have to verify the household income and family size of the taxpayer expected to file a return, that the person has no other minimum essential coverage beyond individual market coverage, and, for lawfully present noncitizens, that the person is an eligible alien. A month for which advance payments are made would not count as a coverage month if the Exchange fails to check the prior-year reconciliation requirement, which is the tax-return step that squares advance payments against the final credit.
Verification would be waived for enrollments through certain special enrollment periods tied to changes in family size, such as births, adoptions and marriage. The release adds that the Department of Health and Human Services will issue parallel proposed regulations on Exchange procedures for the verification requirements, so the day-to-day mechanics at HealthCare.gov and state exchanges are not yet written.
What the 760,000 removed enrollees figure measures
The IRS release also cites figures from the Centers for Medicare & Medicaid Services, which administers the federal Marketplace. CMS Administrator Dr. Mehmet Oz is quoted saying that “ensuring health programs serve only those who are eligible is one of the most effective ways to protect these programs.”
According to the same IRS release, CMS removed more than 760,000 unverified “phantom” enrollees from Affordable Care Act rolls, which it says produced $2.2 billion in savings. The release also says nearly 1 million Americans were each sent $500 after being overcharged under the Biden Administration. These are CMS numbers repeated by the IRS, and they describe past enforcement actions, not the effect of the proposed rule.
The December hearing and the comment window
A proposed rule can change before it is finalized, and the public gets a chance to weigh in. The Federal Register filing shows document 2026-21056, a 60-page proposed rule filed Oct. 14 and scheduled for publication Oct. 15. Written or electronic comments are due 45 days after publication.
A telephone public hearing is scheduled for Dec. 8 at 10 a.m. Eastern. Requests to attend must be received by 5 p.m. Eastern on Dec. 4, and the hearing is cancelled if no speaker outlines arrive by the comment deadline. Comments and hearing requests go to the IRS Publications and Regulations Section, which prefers email at publichearings@irs.gov; questions about the regulations themselves go to Mia Romano at (202) 317-4718, according to the filing.
Only the official Federal Register edition gives legal notice, and the open question for Marketplace households is whether the final version keeps the 2027 start date and the same reading of “eligible alien.”
Will losing a Marketplace subsidy leave a gap in coverage costs?
A household that loses the premium tax credit in 2027 faces the full premium, and many people who are eligible for other help never apply for it. For people 65 and older, the credit is not the only program that lowers health costs.
Claim Every Benefit is a 10-page guide to nine programs most people who qualify never apply for. It covers Medicare Savings Programs, where a state pays the $2,434.80-a-year Part B premium, and Extra Help for prescriptions, along with the 2026 limits, one line per program.
Get the Medicare Savings Program and Extra Help limits, with an application tracker →
This article was produced with AI assistance and edited for accuracy against the sources linked above.
David M. Keller is a finance writer based in Columbus, Ohio, covering personal finance and consumer-focused economic topics. He earned his degree in journalism from Ohio University and began his career reporting on local business and economic trends for a regional media outlet. Since then, he has contributed to a variety of online publications, focusing on clear, practical coverage of topics such as cost of living, debt, and everyday financial decision-making.
