- In 2025, about 24 million Marketplace enrollees get enhanced ACA premium tax credits, keeping average paid premiums around $888/year.
- Premium subsidies are calculated from household income and size as a share of the Federal Poverty Level and the local benchmark (second-lowest-cost) Silver plan price.
- Under the enhanced rules, benchmark Silver premiums are often fully covered below ~150% FPL and capped as a rising percent of income up to 400% FPL and beyond.
- If enhanced subsidies expire after 2025, the 400% FPL “subsidy cliff” returns and average paid premiums are projected to jump to about $1,904 in 2026.
Read More
The Affordable Care Act (ACA) marketplaces use a combination of premium tax credits and cost-sharing reduction subsidies to limit how much individuals and households must pay for health insurance—in particular, for a benchmark Silver tier plan. The subsidies are income-based and slide down as income increases, with households at the lower end paying very small shares of income, and those closer to the upper eligibility limit paying larger shares. In 2025, premium tax credits fully cover benchmark premiums for those under ~150 % of the FPL; others pay increasing percentages as they move up the FPL ladder: for example, those at 250–300 % FPL pay ~8.44–9.96 %, while those above 400 % FPL receive no subsidies. These subsidy provisions were expanded under the American Rescue Plan Act and Inflation Reduction Act, eliminating prior income caps and increasing assistance at almost every level.
However, enhanced subsidies are scheduled to expire at the end of 2025. Analyses suggest that absent congressional extension, individuals currently paying an average of $888 annually for subsidized plans will see that figure nearly double to approximately $1,904 in 2026—a roughly 114 % increase. The dramatic rise is driven by both the loss of subsidy limits and rate increases proposed by insurers (median ~18 %) because of rising medical costs and inflation.
Strategically, the looming subsidy cliff at 400 % of FPL will once again penalize households with incomes just over the threshold, triggering potentially large enrollment drop-offs, higher uninsured rates, and adverse risk pooling in the individual markets. Across states, particularly non-Medicaid-expansion states in the South, the impacts are expected to be more acute.
Open questions remain: Will enhanced subsidies be extended via legislation before open enrollment ends? Can insurers manage the anticipated adverse selection if many lower-cost but healthier enrollees drop coverage? What state-level policy levers might smooth the cliff effect, especially for areas with high premiums? And how will affordability pressures intersect with rising deductibles and cost-sharing as people shift to lower-premium plans?
Supporting Notes
- Approximately 24 million ACA Marketplace enrollees benefit from enhanced premium tax credits in 2025, with about 92 % of those enrolled in Marketplace plans receiving subsidy assistance.
- In 2025, the national average annual premium payment by subsidized Marketplace enrollees is ~$888; projected to rise to ~$1,904 in 2026 if enhanced subsidies expire.
- Income thresholds for subsidy eligibility are tied to the Federal Poverty Level (FPL); in 2025, for a one-person household the FPL is ~$15,650, making 400 % of FPL ~$62,600.
- In 2025, consumers with incomes up to ~150 % FPL can access benchmark Silver plans with premiums fully covered by subsidies; those between 150–400 % FPL pay increasing percentages—culminating in ~9.96 % of income for 300–400 % FPL, and no subsidy for incomes above 400 % FPL.
- Rate increases proposed by insurers for 2026 median about 18 % in many states, compounding the cost surge from subsidy changes.
- Example: A family of four with annual income of $85,000 (about 272 % FPL) pays ~$4,148 annually (~4.88 % of income) in 2025 under enhanced credits, but would owe ~$7,536 (~8.87 % of income) in 2026 if enhanced Tax Credits are allowed to expire and premiums rise 18 % as proposed.