Why health insurance costs could spike for 22 million Americans in 2026

If you buy your health insurance through the Affordable Care Act (ACA) marketplace, your budget may be in for a serious shakeup. Enhanced premium tax credits that have kept monthly premiums affordable for millions of Americans are set to expire at the end of 2025. Unless Congress acts to extend them, many enrollees could face a sharp increase in insurance costs starting January 1, 2026.

For financially stable professionals, this isn’t just a budgeting issue. It’s a financial planning event that could reshape your early retirement timeline, self-employment goals, or even long-term investing strategy. This guide explains what’s changing, who’s most affected, and how to prepare with clarity and control.

The ACA’s original premium tax credits were designed to reduce monthly insurance costs for people earning between 100% and 400% of the federal poverty level (FPL). This threshold covered many lower- and middle-income households but excluded anyone earning just above the line—even if their premiums were disproportionately high.

That changed in 2021, when the American Rescue Plan Act introduced “enhanced” premium tax credits that:

• Increased the amount of assistance for people below 400% FPL, making many zero-premium plans possible.
• Removed the income cap for eligibility, allowing households earning above 400% of FPL to still qualify for subsidies if their premiums exceeded 8.5% of income.

These enhancements were extended through 2025 by the Inflation Reduction Act. Unless renewed, the original subsidy rules will return in 2026—and that means millions will lose financial assistance.

The expiration of enhanced subsidies would result in the largest single-year increase in health insurance premiums for ACA marketplace enrollees since the program launched.

According to the Kaiser Family Foundation (KFF):

• The average marketplace enrollee saved $705 in 2024, a 44% reduction in costs.
• Without enhanced credits, average premiums could rise by more than 75% in 2026.
• More than 22 million Americans currently receive subsidies—92% of all ACA enrollees.

For many, this isn't just a bump in cost—it’s a potential dealbreaker for staying insured.

While the cost increases affect all subsidy recipients, several groups face greater exposure:

1. Early Retirees

If you're retiring before age 65, health insurance can be your single biggest expense. Enhanced tax credits capped premium contributions at 8.5% of income—often saving early retirees thousands annually. Without this cap, premiums could jump from $500/month to over $1,200/month.

2. Self-Employed Professionals

Freelancers, consultants, and gig economy workers rely heavily on ACA plans. Losing the enhanced credit might force some back into traditional employment for the sake of benefits alone.

3. Families With Moderate Income

A family of three earning $110,000 (just over 400% FPL) could see their total premiums go from $7,000 to more than $13,000 annually—nearly doubling their out-of-pocket insurance burden.

4. Black and Latino Enrollees

Expanded credits have driven record enrollment among Black and Latino communities, improving access and affordability. According to the Center on Budget and Policy Priorities, the rollback would likely reverse some of these gains.

Understanding the policy timeline helps you build a strategic response:

• Now (2024–2025): Enhanced credits are in place. Premiums remain capped for most households.
• Fall 2025: Open enrollment for 2026 begins. You’ll see the new (higher) premiums reflected unless Congress extends the credit.
• January 1, 2026: Subsidies revert to the pre-2021 structure if no extension is passed.

Waiting until open enrollment to react could mean missing key opportunities to restructure your cash flow, investments, or household income profile.

Start with these core questions to understand your exposure and options.

1. Are You Currently Receiving Enhanced Tax Credits?

Look at your 2024 insurance documents. If your premium is capped at 8.5% of income or if your household earns above 400% FPL but still receives a subsidy, you are likely receiving enhanced credits.

2. Could Your Income Cross the 400% Threshold in 2026?

The 400% threshold for a family of three is roughly $103,000 in 2025. If your projected 2026 income is above that, and the enhanced credits expire, you may become ineligible for any subsidy.

3. Do You Have Alternative Coverage Options?

Do you or your spouse have access to employer coverage? Are you planning to retire or start a business? Have you considered a high-deductible plan with HSA support? Mapping your coverage options now helps prevent a scramble later.

Let’s walk through two simplified cases to show how your premiums could change.

Case 1: Early Retiree, Age 61

Income: $65,000/year from investment drawdowns

• Current premium: $420/month (after enhanced credit)
• 2026 premium (projected, no credit): $960/month

That’s a $6,480 annual increase—enough to alter a 5-year retirement bridge plan.

Case 2: Self-Employed Couple With One Child

• Income: $115,000/year (slightly over 400% FPL)
• Current premium: $580/month
• 2026 premium (projected, no credit): $1,180/month

That’s an additional $7,200 per year—or the equivalent of an extra month of income.

If you’re likely to be impacted, there are several ways to reduce your exposure:

1. Adjust Your 2026 Income

Explore legitimate ways to bring income below the 400% FPL line:

• Delay realizing capital gains
• Increase retirement account contributions (e.g., solo 401(k) or SEP IRA)
• Harvest investment losses if appropriate

Keeping MAGI (Modified Adjusted Gross Income) in check can preserve eligibility if the old rules return.

2. Maximize HSA Contributions

Use 2024 and 2025 to boost your HSA. This triple-tax-advantaged account can help pay high out-of-pocket premiums in 2026 if needed.

3. Coordinate Spousal Coverage

If your partner has access to employer-sponsored insurance, compare total costs. It may be cheaper to join their plan—even with a spousal surcharge.

4. Plan for a Coverage Gap Fund

If you're in a high-risk group (e.g., early retiree), build a 12–24 month premium buffer. You can park this in a high-yield savings account or short-term bond ladder earmarked for 2026–2027.

While there’s still a chance the enhanced credits will be extended, it’s far from guaranteed. Despite bipartisan support for affordable coverage in the abstract, partisan divisions around the ACA remain deep. Republicans prioritized $4 trillion in tax cuts in July 2025 but did not include a subsidy extension. Health policy experts view this omission as deliberate.

And while the White House could push for renewal in late 2025, budget politics may block a clean extension. For now, assume the credits will expire—and treat any continuation as a bonus, not a baseline.

While some may consider skipping coverage entirely, this comes with major risks:

• A single hospital stay can run into five figures—even for those in good health.
• You may face coverage denial or late enrollment penalties for Medicare if gaps persist into your 60s.
• Going uninsured may also delay care, increase stress, and reduce your long-term savings potential.

Even a catastrophic or bronze-level plan is better than no coverage.

The ACA premium credit expiration highlights a broader truth: government policy changes can disrupt your money plan. That’s why your financial strategy needs buffers, flex options, and review points—not just static assumptions.

Here’s how to recalibrate:

For Retirement Planners: Revisit your drawdown order. Can you adjust taxable vs. tax-deferred withdrawals to stay within thresholds? Are your Roth conversions still viable?

For Business Owners and Self-Employed Individuals: Add a “coverage cost” line item to your pricing model. Factor rising premiums into your rate strategy—especially if you’re setting 2026 contracts in 2025.

For Parents With Young Children: Model childcare, housing, and health insurance together. Consider how a rising premium could affect the margin you allocate to college savings or housing upgrades.

It’s normal to feel frustrated by policy whiplash. You’ve built a plan based on current rules—and now the rules are shifting again. But remember: your financial resilience comes not from perfection, but from adaptability. Losing enhanced subsidies may feel like a setback. But with forethought, you can absorb the shock without derailing your broader goals.

If you rely on ACA coverage, the next 18 months are a crucial window to plan—not panic. You don’t need to overhaul your life. You need to:

• Know where you stand
• Model what might change
• Take a few small, deliberate steps to create buffer and options

The smartest plans aren’t the loudest. They’re the ones that stay calm when the policy winds shift—and adjust with quiet precision.