It’s happened. Congress has not extended enhanced Marketplace subsidies that have made coverage more affordable since 2021 – and hundreds of thousands of Marketplace enrollees with household incomes over 400% of the federal poverty level are now experiencing the return of the so-called “subsidy cliff,” due to the loss of their premium subsidies.
The impact of this “subsidy cliff” is causing dramatic increases in health insurance premium expenditures. Particularly hard hit are enrollees in their 50s and 60s, who – without subsidies – could well face premiums that consume half or more of their income.
(Premiums are age-based; without subsidies, a person who is 52 will pay about twice as much as a person who is 21, and a person who is 64 will pay three times as much as a person who is 21).
Here’s what Marketplace buyers are facing in 2026 with the return of the “subsidy cliff”:
Many older Marketplace buyers face drastic premium hikes
With the “subsidy cliff” returning to the health insurance Marketplace in 2026, a 63-year-old couple in Charleston, West Virginia, earning $85,000/year, will pay more than 15 times as much for the lowest-cost Gold plan, compared with what they paid in 2025.
In 2025, they would have paid about $300/month for the lowest-cost Gold plan, and they even had access to a zero-premium Bronze plan.
But because Congress didn’t extend the subsidy enhancements that had been keeping coverage more affordable since 2021, this hypothetical couple has lost their subsidy altogether.
To buy the lowest-cost Gold plan in 2025, they would have paid $300/month. But in 2026, their premium is $4,562/month for the lowest-cost Gold plan.
The lowest-cost Bronze plan in 2025 had no premium at all for this couple’s demographics, as their subsidy covered the full cost. But in 2026, the lowest-cost Gold plan has a premium of $3,648/month.
If they decided keep the Gold plan, they’ll be spending two-thirds of their household income on health insurance.
And even the lowest premium Bronze plan – which they could get with no premium at all in 2025 – will cost more than half of their household income in 2026.
‘Subsidy cliff’ affects households with incomes above 400% of federal poverty level
That’s because $85,000 for a household of two is 402% of the 2025 federal poverty level (FPL). And the ACA has a so-called “cliff” where Marketplace subsidy eligibility ends abruptly if an enrollee’s household income is more than 400% of the previous year’s FPL. That’s how it worked from 2014 through 2020, when subsidies weren’t available to these enrollees, regardless of how expensive their coverage was.
The subsidy eligibility income limit was temporarily lifted from 2021 through 2025, due to the American Rescue Plan (ARP) and Inflation Reduction Act (IRA). But it returned in 2026 because the ARP/IRA subsidy enhancements were not extended by Congress.
To illustrate the “subsidy cliff” in more detail, let’s look at the ten states where average full-price Marketplace premiums were projected to be highest for plan year 2026. The following table illustrates the effect of lost or decreased subsidies, including their effect on three different buyer age bands:
State
Age
2025 lowest-cost plan monthly premium (with enhanced subsidy)
2026 lowest-cost plan monthly premium (without enhanced subsidy)
Percentage increase in premium
AK
45
$111
$769
593%
55
$9
$1,188
13,100%
64
$2
$1,599
79,850%
DE
45
$308
$529
72%
55
$233
$816
250%
64
$160
$1,098
586%
ME
45
$354
$623
76%
55
$304
$962
216%
64
$255
$1,295
408%
MS
45
$401
$686
71%
55
$376
$1,060
182%
64
$452
$1,426
215%
NE
45
$298
$585
96%
55
$216
$903
318%
64
$137
$1,214
786%
TN
45
$307
$617
101%
55
$231
$953
313%
64
$156
$1,282
722%
VT
45
$0.08
$824
1,029,900%
55
$0.08
$824
1,029,900%
64
$0.08
$824
1,029,900%
WI
45
$334
$472
41%
55
$273
$729
167%
64
$213
$980
360%
WV
45
$170
$674
296%
55
$18
$1,041
5,683%
64
$0
$1,400
(Infinite)
WY
45
$221
$836
278%
55
$99
$1,291
1,204%
64
$0
$1,736
(Infinite)
American Rescue Plan and Inflation Reduction Act temporarily eliminated ‘subsidy cliff’
Section 9661 of the ARP capped Marketplace health insurance premiums (for the benchmark Silver plan) at no more than 8.5% of household income. The 8.5% cap applied to people with household incomes of 400% of the federal poverty level or higher. For people with lower incomes, the percentage of income that had to be paid for the benchmark premium was reduced across the board. These subsidy enhancements were initially applicable for 2021 and 2022, but the Inflation Reduction Act extended them through 2025.
If your household income was more than 400% of FPL and the benchmark plan’s premium was no more than 8.5% of your income, you wouldn’t qualify for a premium subsidy (meaning, the ARP/IRA didn’t change anything about your situation). This was more likely to be the case for younger enrollees in areas of the country where health insurance is less costly than average.
But if the full-price cost of the benchmark plan was more than 8.5% of your income, you were eligible for a premium subsidy between 2021 and 2025. (This assumes you met the rest of the eligibility requirements, meaning that you were lawfully present in the U.S. and not eligible for Medicaid, premium-free Medicare Part A, or employer-sponsored coverage that was considered affordable and provided minimum value).
So for some people, especially older enrollees in areas of the country where health insurance is particularly costly, even those with income well above 400% of FPL were receiving a premium subsidy between 2021 and 2025. But people who earn more than 400% of FPL no longer qualify for a subsidy in 2026 – no matter how expensive their health insurance is.
Why it’s called a ‘cliff’
Due to the “subsidy cliff,” a few hundred dollars in extra annual income could translate to the loss of thousands of dollars per month in subsidies, if it pushes you over the 400% FPL threshold. And as we illustrated above, some enrollees will find that even the most inexpensive health plan now has premiums that amount to more than half their annual income. For most households, that’s simply unaffordable.
It’s called a cliff because there’s a sharp and sudden spike in health insurance premiums when subsidies end abruptly at 400% of FPL. From 2021 through 2025, subsidies were instead phased out slowly as income increased. But that is no longer the case in 2026 as subsidies are once again only available to enrollees with household income up to 400% of FPL.
Let’s take another look at the 63-year-old West Virginia couple described above, but let’s assume their income in 2026 is $84,500, instead of $85,000. That puts them just over 399% of the 2025 FPL, meaning they will still qualify for a premium subsidy in 2026.
In that case, their after-subsidy premiums for the benchmark Silver plan will be capped at a little less than 10% of their household income. That means the benchmark plan will cost them a little more than $700/month in 2026. They’ll be able to apply their subsidy to any metal-level plan, meaning they’ll be able to get the lowest-cost Bronze or Gold plan for even lower premiums.
But if their income goes above $84,600 (400% of the 2025 FPL), they will lose their subsidy altogether.
Areas with higher average premiums are hit hardest by the ‘cliff’
We used West Virginia as the example here because individual/family health insurance premiums in West Virginia are much higher than the national average.
So let’s also consider Idaho, where 2025 premiums were much lower than the national average. We’ll assume we have the same 63-year-old couple, earning $85,000, but now they live in Boise instead of Charleston, WV.
In 2025, the lowest-cost Bronze plan cost them less than $2/month after subsidies. In 2026, that plan will cost them $1,527/month as the “subsidy cliff” returns.
In 2025, the lowest-cost Gold plan cost $712/month. That jumped to $2,354/month in 2026, with the return of the “subsidy cliff.”
While these amounts aren’t as extreme as the West Virginia example (because full-price health insurance premiums are lower in Idaho), this couple will still have to pay more than a fifth of their household income for the lowest-cost plan, now that the “subsidy cliff” has returned.
Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written hundreds of opinions and educational pieces about the Affordable Care Act for healthinsurance.org.
