For households enrolled in the Affordable Care Act (ACA) marketplace, the new year arrived with a sharp increase in monthly health insurance premiums. Why? Enhanced ACA subsidies expired on December 31, 2025. While the One Big Beautiful Bill Act (OBBBA), signed last summer, introduced sweeping changes to the healthcare landscape, it did not explicitly cancel the subsidies; rather, Congress chose not to extend the temporary enhancements originally passed in 2021. As a result, the cost difference has shifted to households.
The timing is notable, as the ACA has become increasingly embedded in household financial planning. Under the 2021 American Rescue Plan and the subsequent Inflation Reduction Act, Americans enrolled in ACA plans enjoyed significantly subsidized premiums. From 2021 through 2025, the temporary elimination of the “subsidy cliff” dramatically expanded access to tax credits. Households earning up to 400% of the Federal Poverty Level (FPL) often saw premiums reduced to near zero, while those above 400% FPL – including families earning well over $150,000 – qualified for help for the first time. For these higher-income families, premiums for a benchmark Silver plan were capped at 8.5% of household income, providing a helpful discount.
Without these enhanced subsidies, the impact is jarring. The “subsidy cliff” has returned for 2026, meaning those earning over 400% FPL lose all financial assistance and must pay full market price. For some, this has resulted in premiums skyrocketing by hundreds or even thousands of dollars a month. Meanwhile, lower-income households still qualify for help but face higher out-of-pocket costs as their required income contributions have risen, and the “zero-dollar” premium plans common since 2021 have largely disappeared.
Congress has taken notice. Last Thursday, the House passed a clean three-year extension of the subsidies, with 17 Republicans breaking party lines to join a unanimous Democratic caucus. While that specific bill faces an uphill battle in the Senate, it has accelerated bipartisan negotiations around a narrower compromise.
Senators Bernie Moreno of Ohio and Susan Collins of Maine are leading talks on a two-year extension—the CARE Act—designed to stabilize the marketplace through the next election cycle. Their framework would restore subsidies but introduce new guardrails, such as an income eligibility cap (potentially at $200,000 or 700% FPL) and a requirement for a minimum monthly payment of $25 to eliminate $0-premium plans. This would be helpful for low-to-middle-income families enrolled in ACA plans, but unfortunately not as much for high earners. Going forward, middle-income families may need to strive to stay under the subsidy cliff by using strategies like maximizing HSA contributions, 401(k) deferrals, or timing capital gains.
From a planning perspective, the focus should remain on what is controllable in the short term. Maintaining coverage is critical, even if premiums feel unreasonably high, as dropping a plan could jeopardize eligibility for retroactive credits. Liquidity also plays a key role. Short-term cash reserves exist to absorb temporary shocks like this without forcing long-term investment decisions at the wrong time.
It is also worth monitoring potential Special Enrollment Periods. Legislative fixes often include an enrollment window that allows households to adjust coverage once subsidies are restored, creating opportunities to shift back into more cost-effective plans later in the year.
Policy changes are inherently uncertain, but planning fundamentals are not. Liquidity, enrollment decisions, and patience during administrative delays matter more than short-term headlines. For questions about how rising premiums fit into a broader financial picture, reach out to your Wealth Manager with questions.
