ACA premiums to surge in 2026. Here’s what to do about it

Millions of Americans who buy health insurance through the Affordable Care Act marketplace will face staggering premium increases in 2026 if enhanced subsidies expire on Dec. 31. Although Congress discussed extending the subsidies during the recent government shutdown, negotiations have hit a wall, leaving millions in limbo.

The return of the so-called “subsidy cliff” means anyone earning an income that exceeds 400% of the federal poverty level — $62,600 for individuals or $128,600 for a family of four — will lose all federal assistance and pay full premiums, no matter the cost.

The ACA subsidies help lower insurance costs for 22 million out of the 24 million marketplace enrollees. Approximately 1.8 million enrollees have incomes between 300% to 400% of the federal poverty limit while another 725,000 are between 400% and 500%.

Current enrollees who get the subsidies will see their monthly average premium payments more than double, increasing by about 114% if the premium tax credits expire, according to estimates from KFF, a nonpartisan healthcare policy research firm. ACA premiums for older adults ages 50 to 64 can be up to three times higher than those for younger adults.

ACA looks at enrollees’ modified adjusted gross income (MAGI) and not adjusted gross income (AGI) — a key distinction many participants don’t understand, said Tim McGrath, a certified financial planner and managing partner with Riverpoint Wealth Management in Chicago.

MAGI adds back certain deductions to your AGI, such as tax-exempt interest and foreign income exclusions, potentially pushing earners closer to or even over the 400% threshold. Here’s an example from KFF: A 60-year-old earning $64,000 annually would pay an estimated $14,931 in premiums without subsidies, while someone earning $62,000 would pay just $6,175 with federal assistance. That’s a $2,000 difference in income and a $8,756 gap in insurance costs.

“If you're $1 over, you're $1 over, and you're out of the pot,” McGrath said. "It's a huge deal for these people that are on budgets trying to make sure things work month in and month out."

A political and public health landmine

Without any action from Congress, the return of the subsidy cliff further complicates the financial picture for millions of Americans already grappling with surging healthcare and everyday living costs.

"Taking away subsidies and making insurance unaffordable for people is a political challenge, and from a policy perspective making health insurance more expensive undermines the market and makes everyone's premiums go up," said Dylan H. Roby, chair and professor of the UC Irvine Joe C. Wen School of Population and Public Health. For example, California's premium prices are about 20% higher than they would have been because insurers assumed fewer people would buy insurance if the premium tax credits were removed, Roby noted.

"Those left in the market would be more likely to have health needs than those who exited, driving premiums up across the risk pool," he said. "The ACA tax credit expiration does benefit the federal budget (we will spend less on tax credits in 2026 than we did on 2025)."

"However, the federal budget is isolated from state budgets, hospital finances and personal budgets where additional spending will occur to obtain insurance or due to healthcare use when someone is underinsured or uninsured."

How ACA participants can avoid the subsidy cliff in 2026

To avoid going over the ACA subsidy cliff, here are some strategies McGrath and other experts recommend.

1. Max out annual 401(k), HSA, IRA or other tax-advantaged accounts

Maxing out contributions to a pre-tax account like an employer-provided 401(k) or 403(b) account, an IRA, or a health savings account (HSA) can also help reduce your income if you’re close to the cliff. And if you’re older, you can make catch-up contributions to further reduce your income, McGrath said.

For workplace retirement accounts, such as a 401(k), the annual contribution limit for 2026 is $24,500, while employees aged 50 and older can contribute up to $8,000 more. Workers ages 60 to 63 can now contribute an additional $11,250 “super catch-up” contribution, for a total limit of $35,750.

For 2026, the maximum IRA annual contribution limit is $7,500, with those 50 and older allowed an additional $1,100 in catch-up contributions. The HSA annual contribution limit for high-deductible health plans is $4,400 for just yourself and $8,750 for family coverage. If you’re 55 and older and aren’t enrolled in Medicare, you can make an additional $1,000 catch-up contribution.

2. Be strategic about taxable distributions

Avoiding or minimizing taxable distributions from retirement accounts or deferring income (such as bonuses) is another move to consider — especially if those distributions would push your adjusted gross income beyond the cliff, McGrath said. But don’t try to figure this one out alone and consult an accountant or financial advisor, he added.

3. Work fewer hours

The subsidy cliff presents another tough choice for some who need manageable health premiums: reducing their work hours. This applies to hourly workers or those who are self-employed with flexible incomes who can adjust their work schedules to lower their income enough to qualify for the subsidy.

Working (and earning) less may make more sense for those with pre-existing health conditions that are expensive to manage to keep their premiums from skyrocketing.

4. Increase charitable distributions

If you’re 70 ½ or older, making qualified charitable distributions directly from an IRA to a qualified charity is one way to reduce your modified adjusted gross income if you’re on the cliff borderline, McGrath explained.

“They take it out, and it's not taxable. It's a win-win,” McGrath said. “But typically, if someone's doing that they need to have enough wealth that they're okay with giving up that wealth.”

He added that 2025 may be particularly important for charitable bunching since tax law changes in 2026 via the One Big Beautiful Bill Act will require having a 0.5% of income as a nondeductible floor before claiming an itemized deduction for charitable giving, according to the Tax Foundation. In other words, you may be better off making your charitable contributions for both 2025 and 2026 before the end of this year, McGrath said.