How will 2026 changes to ACA premium subsidies alter out-of-pocket costs for low-income households?
Executive summary
The scheduled 2026 reversion of ACA premium-subsidy rules will raise out-of-pocket premium costs for many low- and moderate-income households by shrinking subsidy amounts, reinstating the 400%-of-FPL income cutoff, and increasing the share of income some enrollees must pay for benchmark plans (if Congress does not act) [1] [2] [3]. The magnitude varies sharply by income, age and state—some households that paid $0 in 2025 could face meaningful premiums in 2026, while others above the restored 400% cap would lose subsidies entirely and risk large premium bills or tax clawbacks [4] [2] [5].
1. What exactly is changing and who loses aid
Beginning in 2026, the temporary “enhanced” premium tax credits put in place by ARPA and extended in later actions are set to expire and subsidy formulas will revert to pre-2021 ACA rules: eligibility will again be limited to those with household incomes between roughly 100% and 400% of the federal poverty level, and applicable contribution percentages will rise—meaning lower subsidy amounts for many enrollees [6] [2] [3]. That reversion restores the so‑called subsidy cliff: households with incomes even $1 above the 400% FPL threshold would no longer qualify for tax-credit subsidies in 2026 unless Congress intervenes [5] [7].
2. How premium contributions change for low‑income households
Households at the lowest marketplace-eligible incomes (about 100–150% of FPL) — a group that comprised about 45% of marketplace selections in 2025 — are at particular risk because many currently receive full premium subsidies and $0 monthly premiums; under 2026 rules their required contribution could rise to a nontrivial share of income (examples project $0 in 2025 rising to up to ~4% of income in 2026 for some near the top of that range) [4] [1]. More broadly, the pre-ARP sliding scale will cap benchmark-plan contributions at lower generosity than recent years (for example, COmmitteeforResponsibleFederalBudget noted caps such as ~2% of income at 100% FPL up to ~9.96% for 300–400% FPL under current-law 2026 parameters), which directly increases monthly premium payments for low‑income enrollees [3].
3. Middle and near‑poverty households: larger shocks and coverage churn
Middle-income households that benefited from ARPA’s removal of the subsidy cliff can face sharp increases; KFF and insurer analyses illustrate scenarios where a 40-year-old earning $50,000 could pay roughly $2,000 more annually and some families see premiums go from $0 to more than a thousand dollars per year depending on income and region [8] [4]. Experts warn that reinstating the cliff and reducing subsidy generosity will drive “coverage churn,” with people cycling on and off coverage as incomes fluctuate — a destabilizing effect that increases out‑of‑pocket risk and can worsen marketplace risk pools [8] [2].
4. The added complication of tax clawbacks and new bill provisions
Beyond higher monthly premiums, tax-year consequences loom: households that inadvertently receive excess advance credits because of income reporting errors or because they exceed new eligibility rules may have to repay the full excess subsidy on their 2026 tax return — a change spotlighted by CFP and state marketplaces and amplified by other 2025 legislative changes that removed previous repayment caps, creating potentially “astronomical” tax bills for small income misses [5] [9]. The One Big Beautiful Bill Act also changes special-enrollment and other rules that can affect eligibility for advance credits, further complicating out-of-pocket exposure for lower-income enrollees [10].
5. Mitigants, political uncertainty, and state-level variation
Some states and insurers offer additional state-level financial assistance or tools to plan for 2026 costs, and enrollment behavior will vary by local premiums and demographics [11] [6]. Congress moved quickly in early January to pass a House bill extending enhanced credits, but Senate prospects remain unclear, leaving outcomes contingent on rapidly shifting politics — if lawmakers restore the enhanced credits, many of the projected cost increases and cliff effects would be reduced or avoided [12]. Reporting and policy briefs caution that precise household impacts depend on family size, age, zip code, and exact 2026 premium levels; calculators from KFF and healthinsurance.org show widely differing estimates by individual circumstances [13] [6].
Final assessment: unless Congress re‑extends enhanced credits or states step in, low‑income households who previously had $0 or minimal premiums will generally see higher monthly premiums and some will face new tax‑time repayment risks in 2026; the scale ranges from modest increases for the lowest earners to dramatic bills for those near or above the restored 400% cutoff, and the policy shift risks greater coverage churn and financial strain across the market [4] [8] [5].