With Affordable Care Act (ACA) enhanced premium tax credits set to expire at the end of 2025, Marketplace enrollees are facing an average 114% increase in premium payments. While virtually all subsidized enrollees will pay more next year to keep the same plan, older middle-income ACA enrollees will see the largest dollar increases in premium payments due to the return of the “subsidy cliff.”
Originally, ACA premium tax credits were only available to people earning between 100% and 400% of the federal poverty level (FPL). As a result, a person earning just $1 above 400% FPL had to pay the full benchmark premium and potentially spend a much larger share of their income on premium payments than a person earning slightly less. This sharp increase in premium liability was known as the “subsidy cliff.”
Introduced in 2021, and temporarily extended through 2025, enhanced premium tax credits increased the amount of financial help for people who were already getting premium tax credits and newly expanded eligibility to people earning over 400% FPL, thereby eliminating the subsidy cliff. In 2024, people earning over 400% FPL made about 5% of subsidized Marketplace plan selections. While the vast majority of premium tax credit recipients are enrollees earning under 400% FPL, newly eligible middle-income enrollees have seen the most savings due to the enhanced tax credits.
If enhanced premium tax credits expire, the subsidy cliff will return, with its effects varying by age, geography, and income. The subsidy cliff will be most pronounced for older enrollees because they have higher premiums. Further, premiums will take up a disproportionately higher share of income for people earning just over 400% FPL compared to higher-income enrollees since the full-price benchmark premium remains constant even as income rises. For example, without the enhanced tax credits, a person earning $64,000 (409% FPL) would have the same premium payment as a person with the same age living in the same city earning $160,000, despite earning less.
The subsidy cliff would additionally expose many middle-income ACA enrollees to rising Marketplace premiums. Insurers are proposing a median 18% increase in Marketplace premiums nationally in 2026, though premium increases will vary significantly from place to place. While enrollees earning between 100 and 400% FPL will face higher contribution caps, their premium payments will still be capped at a share of their income. For people earning over 400% FPL, premium payments will no longer be tied to income and will reflect the entirety of any premium increases.
If enhanced tax credits expire, a 60-year-old earning $64,000 (409% FPL) would spend much more on premiums than a person with the same age living in the same city making $62,000 (396% FPL). The person earning $64,000 would pay an estimated $14,931 for their annual premium (with no tax credit), while the person making $62,000 would pay $6,175 (with a tax credit that is less than they currently receive). The person making $62,000 would have their premium capped at about 10% of their income, while the person making $64,000 would pay full price, which is likely to be about a quarter of their income.
The double whammy of expiring tax credits and exposure to rising premiums under the subsidy cliff may render Marketplace coverage unaffordable for many.