Are Affordable Care Act Subsidies at Risk? What It Means for Your Wallet
Written by
John Csiszar
Edited by
Rebekah Evans
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If you’re one of the millions of Americans who rely on an Affordable Care Act (ACA) health plan, it’s time to start watching the news. The enhanced ACA subsidies that reduced monthly premiums for many plan members are scheduled to end on Dec. 31, 2025, as reported by NBC News. Congress has left for the year without reaching a healthcare deal, so we’ll likely be facing significantly higher insurance costs come Jan. 1, 2026. Here’s what you need to know about the current status of ACA subsidies and what may change, since Congress didn’t implement a solution.
The Subsidy Cliff
One of the key features of the ACA is that it provides premium tax credits, typically referred to as subsidies, to certain participants based on income and household size. In 2021, Congress temporarily expanded these subsidies to include assistance for families earning more than 400% of the federal poverty level. These enhanced subsidies eliminated the “subsidy cliff” that existed for those earning above the 400% level. Without the subsidies, those making even $1 more than the 400% limit received no subsidies at all.
Will 2026 See the Return of the Subsidy Cliff?
As things stand now, the subsidy cliff will indeed return in 2026, as the enhanced subsidies will automatically expire at the end of 2025, so there has been no Congressional action. Here are some of the likely consequences:
- Much higher monthly premiums for many marketplace enrollees
- Loss of all subsidies for some middle-income households
- Higher deductibles and out-of-pocket costs for participants switching to cheaper plans
With enhanced subsidies going away, cost increases will be swift and dramatic. According to KFF (formerly the Kaiser Family Foundation), the average annual premium paid by subsidized ACA enrollees would more than double, from roughly $890 per year to about $1,900.
Who Will Suffer the Most?
Some households will not be affected at all by the elimination of the enhanced subsidies. But a large number will be, particularly the following:
- Lower- and middle-income households that depend heavily on subsidies
- Self-employed workers and freelancers without employer coverage
- Early retirees who are not yet eligible for Medicare
- People living in areas with above-average insurance premiums
KFF cited the Congressional Budget Office as projecting that millions of Americans could lose marketplace coverage if premiums rise significantly, as some people would simply be priced out of unsubsidized plans.
The Debate Over Subsidies
Critics of the expanded subsidies, according to the Paragon Health Institute, argued that they increase federal spending and may weaken employer-based insurance by making it easier for businesses to shift workers toward subsidized marketplace plans.
Supporters counter that healthcare premiums continue to rise faster than wages and inflation, making subsidies critical to maintaining coverage. The Center on Budget and Policy Priorities (CBPP) has warned that letting the enhanced subsidies expire would reverse coverage gains and increase the number of uninsured Americans.
What To Expect Next
Democratic lawmakers wanted to extend the enhanced subsidies for three more years. Republicans were pushing for changes such as new income limits, eliminating $0 premium plans or funding participants’ HSA accounts directly. As it turn out, however, none of these ideas will be happening heading into 2026. We will have to wait and see how Congress decides to move forward next month.
Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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