A decade ago, Obamacare made it possible for Elizabeth and John to build a small business in the Hudson Valley: a fitness center for children and adults that now has 200 students. The husband-wife team was able to give up jobs that came with health insurance and buy “marketplace” insurance with subsidies from the Affordable Care Act. They later switched to the Essential Plan, a generous state program that offers free insurance to 1.7 million low- and middle-income New Yorkers.

Now, changes to the ACA — driven by Washington budget cuts — are expected to drive up John and Elizabeth’s health insurance costs by more than $10,000 a year.

They’re among the hundreds of thousands of New Yorkers who will face sharply higher premiums in 2026 due to the stalemate in Washington over federal subsidies, the tax and spending plan Republicans passed in July, and Hochul’s plan to minimize damage to the state budget while protecting low income, legal immigrants who will lose federal subsidies.

“I don’t like what’s going on in Washington, holding our health care hostage,” said Elizabeth, who, along with her husband, asked to be identified by their middle names to protect their privacy. “Small businesses rely on the affordability of insurance to keep going.”

Higher premiums are just the beginning of an expected widespread disruption to New York’s health care system over the next two years as Washington’s budget cuts take hold. Even more dramatic are the policy changes in store for January 2027, when work and extra eligibility requirements will kick in for the state’s 6.8 million Medicaid recipients.

The state Department of Health estimates these changes will result in 1.5 million people losing coverage.

“It would erase most of the progress we’ve made since 2010,” said Michael Kinnucan, director of health policy for the Fiscal Policy Institute, a liberal think tank.

New York state has been creative in using the complex regulations of the 2010 Affordable Care Act to offer free and low-cost health care to millions of its citizens and legal immigrants. In fact, 44% of New Yorkers are enrolled in state-sponsored coverage. Fewer than 5% of New Yorkers are uninsured, down from 12% in 2010.

Now, those gains are threatened by a series of changes to the ACA that Republicans passed in the One Big Beautiful Bill Act.

The debate is still raging in Washington over whether to extend Covid-era subsidies designed to keep health insurance costs low for some 24 million Americans. The government shut down for 43 days over Democrats’ demand to extend the subsidies beyond December 31 — and Republicans’ refusal to do so. Eight Democrats agreed on November 10 to vote with Republicans to reopen the government after Senate Majority Leader John Thune agreed to put the matter to a vote in mid-December. The outcome is uncertain.

But only 140,000 New Yorkers, or less than 1% of the state’s population, receive these subsidies to buy private insurance on the Obamacare marketplace. That’s because New York has been more generous than most states offering free or low-cost care through Medicaid and the Essential Plan. In New York, most people who would otherwise buy insurance on the marketplace get free insurance through these programs instead.

Whatever happens in Washington, 450,000 low and middle-income New Yorkers — including Elizabeth and John — will face sharply higher premiums or lose their health insurance entirely on July 1, 2026, as the state grapples with the budget cuts Republicans in Congress approved last July.

Elizabeth and John have always considered health insurance essential. Elizabeth has autoimmune and blood disorders that need regular monitoring and is at high risk for cancer.

John had long dreamed of being a personal trainer. He started with a few clients in 2010, but continued working his his full-time job as a newspaper photographer so he could keep his health insurance. That insurance was particularly important after their first child was born and Elizabeth was laid off from her full-time job.

“The business was successful and started to grow,” Elizabeth recalled. “But there was always that thing hanging out there: you need your corporate job for health insurance. Before ACA, it was much more difficult for a family business to get insurance. The premiums were high and the coverage was pretty lame.”

That changed in 2014, when the Affordable Care Act established marketplaces where individuals could shop for insurance. It also subsidized the cost of monthly premiums with tax credits — making insurance affordable for small businesses and self-employed people.

With the help of a broker, Elizabeth and John found a plan that worked for them. John could quit his job and devote his energies to his business full-time. Elizabeth could continue working part-time.

The monthly premiums for Obamacare were high at first — about $1,600 a month. But those costs decreased as the couple’s broker helped them shop for the best plan. Their premiums decreased further after Congress expanded the tax credits during the coronavirus epidemic in 2021.

By 2023, they were paying about $600 a month with a $2,000 annual deductible for a “silver” plan — not the cheapest “bronze” plan, not the priciest “gold” plan. It seemed to be better and cheaper coverage than they had with insurance from their employers.

Then, in 2024, their broker informed them they were eligible for insurance with no monthly premiums and no deductibles under the state’s Essential Plan.

The ACA gave states big financial incentives to enroll more people in Medicaid — not just the very poor, but those nearing poverty as well, including many people in low-wage jobs. This expansion now covers more than 2 million of New York’s 6.8 million Medicaid recipients, whose incomes go up to 138% of the poverty level: $21,597 for a single person or $36,777 for a family of three.

The ACA allowed New York to create its own plan, known as the Essential Plan, with federal dollars that otherwise would help pay for marketplace insurance.

The Essential Plan covers students who work part-time in retail sales, non-unionized construction workers, house cleaners, people who work irregular hours, and people who piece together several part-time jobs. It also covers 725,000 legal immigrants who don’t qualify for Medicaid under federal rules that limit enrollment to permanent residents who’ve had a green card for at least five years.

Curiously, the Essential Plan has generated a budget surplus. That’s because the state was able to provide care for less per person than the equivalent amount the federal government was giving in tax subsidies for private insurance.

It costs less to treat younger and healthier people than older and sicker people. And, if you offer insurance for free or almost free, lots of young and healthy people sign up. The federal government’s subsidies were based on the cost of private insurance for an older, sicker population, so the state had money left over.

Faced with a surplus, the state expanded eligibility for the Essential Plan in 2024 to people making up to 250% of poverty, or $39,125 a year for a single person and $94,125 for a family of five. Elizabeth and John, who have three children, learned that they qualified for the state’s plan — no monthly premiums and no deductibles.

“I have to say, if the Essential Plan is what Medicare- or Medicaid-for-all looks like for Americans, then we should all do it right now,” Elizabeth said. “Nobody should blink an eye.”

At her doctor’s recommendation, Elizabeth had her fallopian tubes removed to reduce her high risk of ovarian cancer. “I probably wouldn’t have done it if it had cost me $3,000, right? I paid a couple of hundred bucks, which I think in the long-term saves a lot of people a lot of trouble. If I don’t get cancer, I don’t cost the system millions of dollars.”

But Elizabeth and John’s good luck with low-cost health insurance is about to come to an end. In July, Hochul plans to scale back eligibility for the Essential Plan to make up for the money the state is losing in federal reimbursements. The couple will then go back to the Obamacare marketplace to shop for insurance — and they’ll likely pay much higher rates than they paid in 2023.

The Republicans’ budget bill, passed in July, put new restrictions on who is eligible for federal subsidies on the ACA marketplace — money that the state uses to fund the Essential Plan. Contrary to Republican claims, undocumented immigrants have never been eligible. But the new law also bans legal, permanent residents who have had their green cards for less than five years. That includes most of the 725,000 legal immigrants covered by the Essential Plan.

This puts New York state in a bind. Under a 2001 state court order, New York is obliged to offer health insurance to low-income legal immigrants. Without federal funding, the state would have to pick up the entire tab for their care.

Hochul came up with a plan to preserve coverage for the poorest people in the Essential Plan — including nearly all of the legal immigrants — by rolling back eligibility for those who gained coverage in 2024. That includes middle-class families like Elizabeth’s and John’s.

In September, Hochul proposed reducing the income limit for the state’s free plan from 250% to 200% of poverty, $31,300 for a single person or $53,300 for a family of three. Families who lost coverage on the Essential Plan would be eligible to buy insurance on the marketplace, but the costs would be much higher.

Hochul’s plan, which must be approved by the federal government, would allow the state to use $8.9 billion in federal funds now held in a trust fund. This money has accumulated because the federal funding formula generated more money than the costs of the Essential Plan.

Elizabeth doesn’t know exactly what her family’s premiums will cost when they return to the marketplace in July, but the state’s online calculator suggests families in her income range will pay premiums of about $900 a month for a silver plan — or $10,800 a year — with a deductible of $2,400. That’s about a 50% increase over what they paid in 2024 and a giant increase over their nearly-free insurance under the Essential Plan.

“We’ll cross the bridge when we come to it,” she said with a sigh when asked how she would manage. “That’s all you can do.”