How will the return of the 400% FPL cap in 2026 affect ACA enrollment and premium subsidies by state?
Executive summary
The temporary enhanced premium tax credits that removed the 400% federal poverty level (FPL) eligibility cap and boosted subsidy amounts from 2021–2025 are scheduled to expire at the end of 2025, which will reinstate the 400% FPL cutoff and higher applicable contribution percentages beginning in 2026 if Congress does not act [1][2]. That change will sharply raise out‑of‑pocket premiums for people above 400% FPL and reduce subsidies for many below that threshold, with variation across states depending on enrollment mixes, state subsidy programs, and local premium levels [3][4].
1. The mechanics of the “subsidy cliff” returning
Under pre‑ARP/IRA law the premium tax credit was only available to households with incomes between 100% and 400% of FPL and required enrollees to pay a rising fixed share of income for the benchmark (silver) plan; the enhanced rules eliminated the upper cap and lowered required contribution percentages but those enhancements expire for 2026 coverage, restoring the 400% cap and the steeper applicable percentages [2][5].
2. Who stands to lose the most — and why states will differ
Households just above 400% FPL and older enrollees will face the largest increases: analyses show a 60‑year‑old couple at roughly 402% FPL could see annual premiums jump by tens of thousands relative to enhanced credits, and younger or lower‑income enrollees also face higher contributions as the sliding scale tightens in 2026 [3][6]. State differences matter because enrollment concentration by income, state premium levels, and whether a state runs its own exchange or supplements federal credits with state subsidies will moderate impacts — states that have created or expanded state premium assistance can blunt or replace lost federal help for those under 400% FPL, while others (notably high‑enrollment states like Florida and Texas) will see steeper enrollment shocks absent federal action [7][8].
3. Enrollment effects expected: fewer enrollees, selective churn
Past evidence and modeling suggest reduced affordability lowers marketplace take‑up: with subsidies reverting, overall enrollment is expected to drop and the share of enrollees receiving credits to fall, because many who benefited under enhanced credits would either pay full premiums or forego coverage; enrollment among those above 400% FPL is particularly price‑sensitive and likely to decline [9][5]. KFF and other analysts project dramatic increases in net premiums for many, which typically reduces enrollment particularly among middle‑income and older populations most exposed to age‑rated price differences [3][10].
4. Financial picture — how dollars shift between households and government
Reinstating the cap and pre‑enhancement percentages reduces federal subsidy spending but shifts costs back to households; analyses illustrate that for a hypothetical household the federal share falls while the enrollee share of a $2,000/month plan rises substantially under the original subsidy formula [2]. From a budget perspective most enhanced dollars had been concentrated under $150,000 incomes, so the fiscal savings from expiration derive in part from cutting aid for higher‑income exchange enrollees, while the distributional effect burdens middle earners and older enrollees in high‑premium markets [10].
5. Policy choices, political incentives, and state responses
Congressional debate over extending or modifying enhanced credits is ongoing and politically fraught; advocates stress affordability and continuity, while opponents highlight cost and targeting of federal dollars — these competing agendas shape prospects for a clean extension, partial renewal, or leaving the pre‑2021 rules in place [1][6]. Several states already have or are planning state subsidy programs to replace or supplement federal assistance for many households under 400% FPL, which creates a patchwork outcome in 2026: some states will largely cushion residents from premium jumps, others will not [7][4].
Conclusion: a geographically uneven affordability shock
If the 400% FPL cap returns in 2026, the national story will be a sharp affordability cliff for those above 400% FPL and steeper payments for many under that level, but the lived outcome will vary dramatically by state depending on demographics, premiums, and whether state subsidies step in — the most plausible near‑term result is lower marketplace enrollment overall, concentrated losses for middle‑income and older enrollees, and a patchwork of state mitigation that leaves unequal access across the country [1][3][7].