Marketplace ‘subsidy cliff’ returned for 2026 and future years

At the end of 2025, Congress did not extend enhanced Marketplace subsidies that had made coverage more affordable since 2021. Legislation to extend the subsidy enhancements passed in the House of Representatives in December 2025, but did not advance in the Senate, so the subsidy enhancements expired.¹

As a result, hundreds of thousands of Marketplace enrollees with household incomes over 400% of the federal poverty level experienced the return of the so-called “subsidy cliff,”² due to the loss of their premium subsidies.

The impact of this “subsidy cliff” caused 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).³

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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, paid 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.⁴

But because Congress didn’t extend the subsidy enhancements that had been keeping coverage more affordable since 2021, this hypothetical couple lost their subsidy altogether in 2026.

• To buy the lowest-cost Gold plan in 2025, they would have paid $300/month. But in 2026, their premium was $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 Bronze plan had a premium of $3,648/month.⁵

If they decided to keep the Gold plan, they were spending two-thirds of their household income on health insurance in 2026.

And even the lowest premium Bronze plan – which they could get with no premium at all in 2025 – cost more than half of their household income in 2026.

For 2027, if their household income remains at $85,000, they're no longer subject to the subsidy cliff, due to the annual increase in the federal poverty level. For 2027 coverage, $85,000 for a household of two in the continental U.S. is 393% of the 2026 FPL.⁶ So this couple (who are now 64) will qualify for a subsidy of $4,895/month. The five least expensive Bronze plans are all premium-free with that subsidy, and the lowest-cost Gold plan would cost them just $123/month.⁷

But let's consider what happens to this couple if their income has grown to $87,000 for 2027, perhaps due to the Social Security cost-of-living increase, which adds an average of $1,800 to the average couple's total income.⁸

With an $87,000 income for 2027, this 64-year-old couple will see the following options:

• Lowest-cost Bronze plan: $4,161/month ($49,932 for the year, which is 57% of their total income)
• Lowest-cost Gold plan: $5,018/month ($60,216 for the year, which is 69% of their total income)

So with a total income of $87,000 for 2027, the cheapest plan available to this couple will cost 57% of their household income, and that's just for the premiums. That plan also has an out-of-pocket exposure of $19,000 for the year if they both need extensive medical care.

So with that plan, if they had enough medical needs to reach the out-of-pocket maximum, the cost of their coverage and care would consume 79% of their income. They would be left with only $18,000 for anything other than medical care.

‘Subsidy cliff’ affects households with incomes above 400% of federal poverty level

The reason this couple loses access to subsidies with a household income of $87,000 is that $87,000 for a household of two is 402% of the 2026 federal poverty level (FPL).⁶ 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.⁹

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.¹⁰

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 2026.¹¹ The following table illustrates the effect of lost or decreased subsidies, including their effect on three different buyer age bands:

For 2027 coverage, there was a small increase in the income limit where the subsidy cliff begins, since the federal poverty level increased. But for people still subject to the federal poverty level in 2027, average full-price premiums are about 14% higher in 2027 than they were in 2026, with significant variation from one state to another.

As we saw illustrated above for the West Virginia couple, health insurance premiums for people just a little above 400% of the poverty level consume an even larger percentage of total household income in 2027 than they did in 2026.

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.¹² 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 starting 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 phased out slowly as income increased. But that is no longer the case, as subsidies are once again only available to enrollees with household income up to 400% of FPL.

As we saw with the 64-year-old West Virginia couple described above, the difference between being just below 400% of FPL versus just above 400% FPL amounts to nearly $5,000/month in subsidies that they either qualify for or don't qualify for. There's no in-between or gradual drop in the subsidy amount. To be clear, the subsidy amount they get at 399% of FPL is smaller than the subsidy they would get at 199% FPL, as the subsidy does phase down as income grows — but only up to 400% FPL. Once you go over that level, the subsidy drops abruptly to $0. And in that couple's case, it results in the sudden loss of nearly $5,000/month in subsidies.

That's because if that couple's household income were to be no more than 400% FPL, their 2027 after-subsidy premiums for the benchmark Silver plan would be capped at a little more than 10% of their household income. That means the benchmark plan would cost them a little more than $723/month in 2027. They would be able to apply their subsidy to any metal-level plan, meaning they’d be able to get the lowest-cost Bronze or Gold plan for even lower premiums (as noted above, an income of $85,000 in 2027 would allow that couple to choose from among five Bronze plans that have no net premium at all).

But if their income goes above $86,560 (400% of the 2026 FPL),⁶ they will lose their subsidy altogether, and the cheapest Bronze plan will cost over $4,100/month.

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.¹³

So let’s also consider Idaho, where 2025 premiums were much lower than the national average.¹⁴ We’ll assume we have the same 63-year-old couple, earning $85,000, but now they live in Boise instead of Charleston, WV.¹⁵

• 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.”
• In 2027, assuming this couple's income grows to $87,000 (still 402% of the FPL), the lowest-cost Bronze plan is $1,670/month and the lowest-cost Gold plan is $2,615/month.¹⁶

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.