If my income is less than expected this year, I might be eligible for Medicaid. What can I do to cover my bases?

Q. I’m self-employed, so my income varies from one year to the next. I enrolled through the exchange and projected an income that makes me eligible for premium subsidies, but what if my income actually ends up being low enough that I would have been eligible for Medicaid instead? Will I have to pay back those subsidies? What if I don’t take monthly subsidies and use my savings to pay premiums, hoping my income will increase? What’s the best strategy for me right now?

A. Income volatility and its impact on subsidy eligibility have been addressed by various provisions of the ACA and IRS regulations.¹ But since 2021, the rules have become more consumer-friendly for people who would otherwise be caught in the “coverage gap” in states that have not expanded Medicaid.

A federal rule finalized in 2025 called for increased income documentation when federal data sources indicate that a Marketplace applicant’s projected income doesn’t match data the government already has on file. This had been scheduled to take effect in August 2025 but was blocked by a court pending the outcome of a lawsuit.² The lawsuit had not been resolved as of November 2025, so the stay remained in place and the rule had not yet taken effect.

As described below, the Marketplace’s approach to this situation has changed over time.

Lawsuit and new HHS guidance protect people whose income might dip below the poverty level

Starting with 2019 coverage, if an applicant in a state using the HealthCare.gov exchange attested to having an income that would have made them subsidy-eligible, and the electronic data the government already had on hand (eg, tax returns, Social Security data, etc.) indicated that the person’s income was likely below the poverty level (and thus not subsidy-eligible), the exchange would request additional documentation from the applicant to verify the attested income. (This is assuming the difference between the attested income and the government’s electronic data was more than a “reasonable threshold," which had to be at least a 10% difference.)³

If the applicant couldn’t provide documentation to support the attested income, the exchange would make a subsidy eligibility determination based on the income data that the government already had – in other words, the applicant would be found to be ineligible for premium subsidies and cost-sharing subsidies. This was detailed in the 2019 Benefit and Payment Parameters, finalized in April 2018.³

But in March 2021, a court overturned four provisions that had been in the 2019 Notice of Benefit and Payment Parameters – including the rule that had required income verification when an applicant projected income above the poverty level but federal data indicated an income below the poverty level.⁴

In May 2021, CMS published the final Notice of Benefit and Payment Parameters for 2022, and clarified that they would no longer require income verification in these situations. They noted that it would take some time to integrate this new rule with the automated system, and that applicants may still get automatically-generated requests for income verification. But in that situation, they would manually notify those consumers that they can disregard the request for additional income verification documentation.⁵

This was particularly important in the nine states where a coverage gap still exists due to those states’ failure to expand Medicaid eligibility.⁶ In those states, there is no financial help available for many applicants who project an income below the poverty level, since Medicaid isn’t available unless they’re eligible based on the state’s existing pre-ACA guidelines (depending on income, Medicaid can be available to some low-income parents, but not to childless adults).

As noted above, the federal government finalized a rule in 2025 that would have reverted to the 2019 approach, requiring income documentation when attested income didn’t match what the government had on file. But a court ruling has stayed that provision pending the outcome of a lawsuit challenging the federal rule. So as of late 2025, this rule had not yet been implemented.⁷

People whose income ends up being below 100% of the poverty level (or not more than 138% of the poverty level in a state that has expanded Medicaid) generally do not have to repay advance premium tax credits when they file their tax return. But as noted below, that only applies if the applicant provided information to the exchange in good faith, without “intentional or reckless disregard for the facts.”⁸

Here are some additional tips to keep in mind when you’re enrolling:

Update the exchange when your circumstances change

It is essential to notify the exchange of any income fluctuations (or other changes that could impact subsidy eligibility, such as a change in family size) when circumstances change throughout the year. The exchange can recalculate your subsidy or Medicaid eligibility at that time, and make changes as necessary.

Enroll on-exchange if your income is uncertain

Enroll in Medicaid if you’re eligible. For people who aren’t eligible for Medicaid but who have uncertain incomes, it’s generally a good idea to enroll through the exchange during open enrollment. If you do, and your income changes during the year and makes you eligible for a subsidy, you can notify the exchange of your new income and start claiming premium tax credits at that point. And when you reconcile your premium tax credit on your tax return, you’ll be able to claim the tax credit for each month of the year, since you were enrolled in an exchange plan throughout the year.

Prior to 2020, there was no provision to allow people enrolled in plans outside of the exchange to switch to an on-exchange plan if their income changed mid-year and made them newly eligible for premium tax credits, since an income change was only considered a qualifying event if the enrollee already had a plan in the exchange.

But that changed as of 2020, and off-exchange enrollees now have the option to switch to the exchange mid-year if their income changes to a subsidy-eligible level.⁹ In that case, however, the subsidies are only available on a pro-rated basis for the months that the person ends up having on-exchange coverage, rather than for the entire year. (Regardless of income, subsidies cannot be used to offset premiums for plans purchased outside the exchange.)

It’s also important to remember that switching to an on-exchange plan mid-year will generally result in your deductible and out-of-pocket costs resetting to $0 at that point. If you’re switching to the on-exchange version of your off-exchange plan, the carrier might agree to transfer your accumulated out-of-pocket costs, but they are not required to do so.

Some people who don’t qualify for premium subsidies (and are certain that will be the case throughout the year) prefer to shop outside the exchange because they want to purchase a silver plan and are able to get lower-priced silver plans outside the exchange. That continues to be true in many states, so this is a decision that enrollees have to make on a case-by-case basis.

You can switch from Medicaid to a private plan and vice versa if your income fluctuates during the year

You can switch between Medicaid and a subsidized plan if your income fluctuates, as long as you’re in a state that has expanded Medicaid. Medicaid enrollment is available year-round, and conversely, loss of Medicaid is a qualifying event that allows you to enroll in an exchange plan.¹⁰

Understand how premium subsidies are reconciled at tax time

Premium subsidies are available on metal (Bronze, Silver, Gold, or Platinum) plans if your household income is at least 100% of the federal poverty level (income has to be above 138% of FPL in states that have expanded Medicaid, since people are eligible for Medicaid instead if their income is at or below 138% of FPL).

There is normally an income cap of 400% of the federal poverty level (FPL), above which subsidies are not available. The American Rescue Plan eliminated that upper income cap for 2021 and 2022, and the Inflation Reduction Act extended that provision through 2025. But unless Congress acts to further extend the subsidy enhancements, the 400% of FPL income limit will apply in 2026, meaning the “subsidy cliff" will return. (As of mid-November 2025, Congress had not taken action to extend the subsidy enhancements).¹¹

When you file your tax return, the correct subsidy amount is determined based on your actual income (as opposed to your projected income that was used when you enrolled). If your subsidy is overpaid throughout the year, you will have to pay back all of the excess. This is new for 2026; in previous years, there were limits on how much excess premium subsidy had to be repaid, depending on household income. But as a result of the “One Big Beautiful Bill" that was enacted in 2025, all excess premium tax credit has to be repaid when the enrollee files their tax return.

On the other hand, if your subsidy is underpaid throughout the year (meaning your income ends up lower than you projected, but still subsidy-eligible), you’ll be able to claim the rest of your premium tax credit when you file your tax return.

If you receive an advance premium tax credit and then your income actually ends up being under 100% of the poverty level, you do not have to pay back the subsidy; this is confirmed in the Form 8962 instructions.¹² For reference, here’s what 100% of the poverty level translates to in terms of dollars, for coverage effective in 2026).

The same is also true if the Marketplace determined that you were ineligible for Medicaid/CHIP and instead eligible for a premium tax credit. In that case, according to the instructions for Form 8962, “the individual is treated as not eligible for Medicaid or CHIP for purposes of the PTC for the duration of the period of coverage under the qualified health plan (generally, the rest of the plan year), even if your actual income suggests that the individual may have been eligible for Medicaid or CHIP." In other words, you do not have to repay the premium tax credit if your actual income ends up in a range that would have made you eligible for Medicaid/CHIP.⁸

But in both cases, the information you gave to the exchange must have been truthful:

• IRS Publication 974 clarifies that the exception from the subsidy repayment rules for people with income under the poverty level “does not apply if, with intentional or reckless disregard for the facts, you provide incorrect information to the Marketplace for the year of coverage. You provide information with intentional disregard for the facts if you know that the information provided is inaccurate. You provide information with a reckless disregard for the facts if you make little or no effort to determine whether the information provided is accurate and your lack of effort to provide accurate information is substantially different from what a reasonable person would do under the circumstances."¹³
• The instructions for Form 8962 note that “in order to rely on a Marketplace’s determination that you or a family member was ineligible for Medicaid, CHIP, or a similar program, you must provide accurate information to the Marketplace when you enroll in a qualified health plan. You or the family member may be treated as eligible for Medicaid, CHIP, or the similar program, and not eligible for the PTC, if the Marketplace determination is later found to be based on incorrect information that was given with an intentional or reckless disregard for the facts.”¹⁴

In other words, you cannot intentionally misrepresent your income as being over the poverty level or over the Medicaid/CHIP eligibility limit and then avoid having to repay the subsidy that was paid on your behalf throughout the year.

But it’s unclear how well that particular provision can be enforced. In implementing the (now defunct) 2019 rule that prevented a person from receiving a premium subsidy based on an attested income above the poverty level when government data show otherwise, HHS noted that “Particularly to the extent funds paid for APTC (for tax filers whose income ends up being under the poverty level) cannot be recouped through the tax reconciliation process, it is important to ensure these funds are not paid out inappropriately in the first instance.”¹⁵

On the other hand, if you pay full price for a private plan – expecting your income to increase – and then your income ends up being below 100% of the poverty level (or below 139% of FPL in states that have expanded Medicaid), there is no tax credit available to assist you, even if you’re in a state that has expanded Medicaid. You have to enroll in Medicaid when you’re eligible – there’s no provision for switching to Medicaid retroactively and recouping premiums you paid for private coverage.

So make sure you’re enrolled in a “metal” exchange plan during open enrollment (with premium subsidies if your projected income at that point makes you eligible) – or Medicaid if you’re eligible – and then keep the exchange updated during the year if your circumstances change.

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.