How do ACA subsidies work for families with children?
Executive summary
Premium tax credits on the ACA Marketplace lower monthly premiums for eligible families by covering the difference between a benchmark plan and a family's required contribution, with eligibility generally tied to household income measured as a percentage of the federal poverty level (FPL) and to whether someone qualifies for Medicaid or has affordable employer coverage [1] [2] [3]. Key 2026 shifts — the scheduled end of temporary enhanced credits and the reappearance of the “400% FPL subsidy cliff” — mean many families with children may see sharper eligibility limits and higher out‑of‑pocket premiums unless Congress acts [4] [5] [6].
1. How eligibility is determined: household income, MAGI and the poverty line
Eligibility for premium tax credits is based on modified adjusted gross income (MAGI) relative to the federal poverty guidelines for the coverage year — for 2026, those use 2025 FPL numbers — and typically applies to households with incomes between about 100% and 400% of FPL [7] [1] [8]; families below the Medicaid threshold in expansion states are generally steered to Medicaid instead and therefore do not get Marketplace subsidies [3] [9].
2. What subsidies actually pay for: premium tax credits and cost‑sharing reductions
Premium tax credits (also called APTCs) lower the monthly premium by capping what a family is expected to pay as a percentage of income and covering the rest up to the Marketplace’s benchmark plan; separate cost‑sharing reductions (CSRs) can cut deductibles and copays for eligible lower‑income enrollees who choose Silver plans, with CSR eligibility typically concentrated at lower FPL ranges [1] [3].
3. The family glitch and employer coverage rules
Historically, families were blocked from Marketplace subsidies if an employer offered "affordable" coverage for the employee alone even if adding family members was unaffordable; reporting indicates that changes since 2023 have made premium subsidies available to some families previously affected by that “family glitch,” though exact eligibility can depend on employer plan rules and state specifics [10] [11].
4. Children, Medicaid and CHIP: different rules for kids
Children in families can qualify for Medicaid or the Children’s Health Insurance Program (CHIP) at higher income levels than adults in many states, meaning that a child might be eligible for public coverage while parents qualify for Marketplace subsidies — a distinction that affects how a family’s coverage is mixed and which subsidies apply [3] [9].
5. The 2026 subsidy cliff and the end of enhanced credits
Temporary enhancements from the American Rescue Plan and extensions through 2025 made subsidies more generous and removed the hard 400% FPL cutoff for some years; unless Congress extends those enhancements, the pre‑ARP rule returns in 2026 so families who exceed the income cap (commonly described as 400% FPL, e.g., roughly $128,600 for a family of four in 2026) would lose eligibility entirely and could face large premium increases or tax repayment exposure [4] [5] [6].
6. Practical mechanics: enrollment, reconciliation and income volatility
Subsidies are advanced monthly through the Marketplace but must be reconciled on tax returns; if a family's income changes during the year they should update their Marketplace account because getting more advance credit than allowed can mean owing money at tax time, and many families have volatile incomes that make accurate forecasting difficult [1] [8]. Open enrollment timing matters for plan selection and many marketplaces auto‑renew enrollees, which can require reconfirmation if a $0 premium was previously subsidized [10] [12].
7. Where complexity and tradeoffs live for families with children
Families must weigh whether children are better served by Medicaid/CHIP versus Marketplace plans, whether employer offers create eligibility barriers, and how the loss of enhanced credits in 2026 could change the net cost of coverage; calculators from KFF and other organizations can estimate premiums and the impact of policy changes, but outcomes vary by state, household size, ages and zip code [3] [4] [10]. Sources present alternative framings — consumer‑facing sites emphasize tools to find savings [10] [13], while policy trackers warn of cliff effects and larger tax‑time bills if subsidies lapse [5] [6].