The Impact of the ‘ACA Cliff’ on Healthcare Costs of the Middle Class
Written by
Lydia Kibet
Edited by
Brendan McGinley
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The expiration of enhanced Affordable Care Act (ACA) subsidies at the end of 2025 has created what experts are calling the “ACA cliff,” a sharp cutoff of premium tax credits to people earning over 400% of the federal poverty level (FPL). ACA reduced the cost of private health insurance for low- and middle-income earners in 2021 and it was extended through 2025.
But now since its subsidies came to an end, millions of American households are now bracing for higher premiums, tougher coverage decisions, and unexpected tax consequences, according to experts.
Higher Healthcare Costs
One of the most obvious impacts of the ACA cliff is higher premiums for millions of middle-class Americans purchasing coverage through ACA marketplaces. Enhanced subsidies used to limit premium payments to no more than 8.5% of an enrollee’s household income at 400% of FPL or more. Without the cap, many middle-class families could see their healthcare costs double.
“The U.S. is experiencing a healthcare cost crisis, and the ACA cliff will not only drive up prices for those who rely on the government healthcare marketplace for insurance but also those who rely on private markets, like employers,” said Virgil Bretz, CEO and co-founder of MacroHealth. “As healthier people opt out of the ACA risk pools, insurers that offer ACA coverage will be forced to charge higher premiums.”
As reported by The Hill, the Centers for Medicare and Medicaid Services said that one million fewer enrolled in 2026 than in 2025, presumably due to depending on the subsidies for affordability.
Coverage Losses and Increased Uninsured Rate
The subsidy enhancements helped reduce the uninsured rate to historic lows, but no longer. Middle-class families caught in the gap of earning too much for Medicaid but facing unaffordable marketplace premiums are likely going without coverage.
“Since the subsidies were passed, we have seen significant progress in coverage gains, which are now expected to be reversed. Many individuals earn too much to qualify for Medicaid but now have premiums that are no longer affordable,” noted Josh Schultz, head of government affairs at Softheon. “Ultimately this will increase the uninsured rate and raise the risk of delayed care, medical debt, and financial instability.”
Tax Repayment Shock
Another hidden impact of the ACA cliff comes at tax time. Schultz points out that households whose income exceeds subsidy limits (even slightly) may be required to repay large premium tax credits. This could lead to unexpected tax bills, which adds another layer of financial uncertainty for households already struggling to budget for healthcare costs.
“With the reinstatement of full premium tax credits comes the reality that consumers whose income exceeds eligibility, even modestly, may face large, unexpected tax bills,” said Schultz. “This risk is likely to discourage full subsidy uptake by middle-class households with varying incomes. It may also incentivize income management or conservative enrollment decisions to avoid crossing the subsidy cliff.”
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