New Health Care Act Ties ACA Funding to Coverage Restrictions, Creates Restricted HSAs, and Bans Gender Care Coverage

The “Health Care Freedom for Patients Act of 2025” is a massive piece of legislation that shakes up several core areas of health coverage, from the Affordable Care Act (ACA) marketplace to Medicaid, and introduces significant restrictions on what services can be covered and who can receive them. If you buy insurance on the exchange, rely on public programs, or need specific types of care, this bill hits close to home.

The Carrot and the Stick: New HSAs with Strings Attached

Title I tries to make marketplace coverage more accessible for some, but it comes with major policy trade-offs. The bill creates a new “Exchange plan HSA” (effective 2026) specifically for people aged 18 to 64 enrolled in lower-tier Bronze or Catastrophic ACA plans who earn up to 700% of the federal poverty line. If you qualify, the government would contribute between $1,000 and $1,500 annually directly into your account (Sec. 102). That’s real money, and it’s tax-free.

The catch? These new accounts are highly restricted. Money cannot be rolled over from other HSAs or retirement accounts. Crucially, funds from an Exchange plan HSA cannot be used tax-free to pay for abortion (except in cases of rape, incest, or life endangerment) or for any “sex trait modification procedure or service” (Sec. 101). For everyday people, this means that while the government is helping fund routine healthcare costs, it is simultaneously limiting how you can use your own medical savings for specific, sensitive procedures.

Expanding Catastrophic Plans and Restricting CSR Funds

Another big change in Title I is expanding who can buy a Catastrophic health plan on the ACA marketplace. Currently, these low-premium, high-deductible plans are limited to people under 30 or those with hardship exemptions. This bill eliminates those restrictions starting in 2027, letting anyone buy them (Sec. 104). If you’re a healthy 40-year-old small business owner looking for the lowest possible premium, this gives you a new, cheaper option, though you’ll be on the hook for a massive deductible before coverage kicks in.

The bill also secures permanent funding for the ACA’s Cost-Sharing Reduction (CSR) payments starting in 2027 (Sec. 103). CSRs help lower out-of-pocket costs for lower-income enrollees. However, the bill explicitly states that this funding cannot be used for any qualified health plan that covers abortion, except for the narrow exceptions mentioned above (Sec. 103). This means that while the funding stability is good news for the insurance market, it forces a separation of funds that could pressure plans to drop abortion coverage altogether to remain eligible for the federal CSR money.

Medicaid: Penalties for States and Coverage Gaps for Immigrants

Title II focuses on public programs and introduces measures that could significantly impact states and vulnerable populations. First, the bill establishes a financial penalty for any state that uses state funds to help certain non-citizens (those who aren't “qualified aliens” or lawfully present children/pregnant women) purchase health insurance or receive comprehensive health coverage (Sec. 201). The penalty is a reduction in the state’s Federal Medical Assistance Percentage (FMAP) for Medicaid, which is a big deal. For states that have chosen to use their own money to cover these populations, this provision acts as a powerful federal financial deterrent.

Second, the bill tightens rules around verifying citizenship or immigration status for Medicaid and CHIP (Sec. 202, effective October 2026). Currently, states must provide coverage during a “reasonable opportunity” period while an individual gathers documentation or resolves data mismatches. This bill eliminates that federal requirement. While states are given the option to continue providing coverage during this verification period, the federal government will no longer provide matching funds for that coverage unless the individual’s status is confirmed by the end of the period. For families enrolling kids in CHIP, this change could mean a frustrating gap in coverage while they wait for paperwork to clear, unless their state opts to shoulder the full cost during that time.

Banning Coverage for Gender Transition Procedures

Title III introduces the most sweeping restrictions on medical services. Starting in 2027, it prohibits health plans sold on the ACA Exchanges from covering “gender transition procedures” as an Essential Health Benefit (EHB) (Sec. 301). This means that if you buy insurance on the marketplace, coverage for surgeries, hormone therapies (at higher than normal doses), and even certain cosmetic procedures related to gender transition would be explicitly excluded from the minimum coverage standard.

Furthermore, the bill prohibits federal Medicaid and CHIP funding for these same procedures (Sec. 302). The definitions used are extremely broad, covering everything from mastectomy and hysterectomy to specific hormone therapies and even chest implants, when performed for the purpose of intentionally changing the body to no longer correspond to the individual’s “sex” (defined biologically). While narrow exceptions exist for medically verifiable disorders of sex development or to treat complications from previous procedures, the clear intent is to remove federal support for gender-affirming care across both public and marketplace health plans.