ACA subsidy cliff may trigger higher health insurance premiums

Millions of Americans are bracing for a sharp rise in health insurance premiums next year as the end of increased subsidies leads to a “cliff” on aid, and they’re worried about financial stress tied to those extra costs.

Ashley Thompson of Austin, Texas, said she and her husband are considering dropping their health insurance next year and insuring just their two children to help manage their finances.

Premiums for the family’s current health plan Affordable Care Act marketplace Without enhanced federal subsidies, which expire at the end of the year, it could triple to about $3,553 a month in 2026 from $1,200 this year, according to market estimates.

That expense, at almost $43,000 a year, accounts for roughly a third or more of household income, and that’s before using insurance, said Thompson, 49, a ceramic artist and physical trainer.

“Obviously it’s very scary,” he said.

Thompson and his family are among 22 million Americans who receive enhanced subsidies that make health premiums cheaper. Overall, this group makes up 92% of the 24 million people enrolled in the ACA marketplace plan.

Increased premium subsidies are at the epicenter of the worldwide political fight. The federal government shutdown is now the longest in U.S. history.

More than half of ACA marketplace enrollees, 57%, live in Republican congressional districts, according to a recent report from KFF analysis. This year, nearly 80% of all premium tax credits, or $115 billion, went to ACA marketplace enrollees in states won by President Trump in last year’s KFF election. to create.

political experts They stated that it was affordable It’s an important issue that propelled Democrats like New York City Mayor-elect Zohran Mamdani to victory in Tuesday’s election.

Without increased subsidies, the average buyer’s annual insurance premium would rise 114% from $888 in 2025 to $1,904 in 2026, according to KFF, a nonpartisan health policy research group.

“On average, to keep the same plans, people who get subsidies now will see their premium payments double next year,” said Cynthia Cox, vice president and manager of KFF’s Affordable Care Act program.

Some, such as Americans whose income exceeds a certain threshold, will pay much more. They will not be able to benefit from any premium assistance due to the so-called “subsidy gap”.

Take, for example, a 60-year-old couple earning $85,000 a year, which is just above the threshold: Their annual premiums will rise by an average of close to $23,000 in 2026. based on To KFF.

Congressional Budget Office predictions If increased subsidies are eliminated, approximately 4 million more people will join the uninsured segment in the next decade.

That probably won’t happen right away, Cox said. More than a million people could drop their coverage next year if they decide their premiums are unaffordable, he said.

Others may choose to purchase lower-tier plans with smaller upfront premiums, he said. These plans often have much higher deductibles, meaning households face a hefty bill if they need to use their insurance, Cox said.

In later years, some of these enrollees will likely drop coverage if they become frustrated with the system and high costs, Cox said.

Other enrollees like Beth Keenan say they plan to keep their current health plans and cover higher costs by cutting other expenses.

Keenan, 62, an early retiree who lives in Pittsburgh, uses his ACA marketplace insurance plan as a bridge to Medicare benefits at 65.

He pays $589 a month in premiums after factoring in the $302 monthly federal subsidy, also known as the premium tax credit. If enhanced subsidies expire, Keenan’s estimated net bonus would rise 81% to $1,065, according to estimates from the state marketplace.

Keenan’s annual pension and Social Security income (about $80,000 total) would be too high to qualify for benefits.

“You get tax credits for private planes,” said Keenan, who retired at age 60 from a job as district court administrator he held for three decades. “Why shouldn’t I get a tax break?”

Keenan said he expects an extra $500 a month or so won’t cause financial hardship. But that amount would likely force him to cut back on some lifestyle expenses, such as travel, he said.

Uncertainty about the future availability of subsidies is frustrating, he said, especially knowing insurers could raise premiums again for 2027.

Insurers increased premiums by an average of 26% for 2026; for example: based on This further increases the loss of increased subsidies to KFF.

“I know what I’m doing [for] “Next year, but I have a year after that before Medicare benefits start,” Keenan said. “Are premiums increasing? [another] 20%? So where else do you get insurance?”

This threshold varies depending on household size. His $62,600 For example, in 2026, it is $128,600 for a one-person household and $128,600 for a four-person household.

Since 2021, increased subsidies are available to households earning more than this. Annual premiums were also capped at 8.5% of household income.

If the increased subsidies expire, this income cap will disappear and those earning $1 above the 400% poverty line will not be eligible for the premium tax credit. This will affect approximately 1 in 10 ACA marketplace plan enrollees, according to KFF.

Matthew Espinoza, 46, is right on the threshold of that income threshold.

The San Francisco resident, who works as a fitness instructor and restaurant server, expects her income to be around $60,000 to $65,000 next year, depending on how many hours she works.

Espinoza, herself a full-time nursing student, said her reduced income would make a big financial difference if the increased subsidies were eliminated.

He’s paying $324 a month in subsidized ACA insurance premiums this year.

If his annual income is $60,000, those subsidized premiums would rise to about $461 per month in 2026, according to estimates through the state marketplace Covered California. But with an income of $65,000, that premium will increase to $818 a month because he or she will no longer qualify for assistance.

“I didn’t have to cut back on savings when I started school, but if I was forced to pay $818 in premiums, that would probably be the first thing that would take a big hit,” Espinoza said.

Espinoza said he will be hyper-aware of his income in 2026 and may try to limit it if it flirts with the 400 percent poverty threshold. his hours of operation to ensure eligibility for premium tax credit.

KFF’s Cox said the subsidy gap “is an unfortunate disincentive to work.” “For some families, this makes complete financial sense, especially if they really need health insurance.”

Thompson, an Austin resident, doesn’t want to give up her health insurance.

But even lower-tier plans with high deductibles in the ACA marketplace would cost at least $3,000 a month for his family of four, he said, based on market estimates.

“We’re not broke, but this puts us in this situation,” he said. “This is not the only bill.”

She said they are also exploring various options, such as insuring only their two children and using shared health benefits for Thompson and her husband. (Such services are technically not health insurance and may come with: various risks.)

“People think people who don’t deserve the subsidy are getting it,” Thompson said. “But just neighbors, ordinary people.”