Millions of Americans are on the brink of a dramatic shift in their healthcare expenses as the enhanced premium tax credits under the Affordable Care Act (ACA) are set to expire at the end of 2025. According to Quartz, this looming change could trigger an average premium increase of 114% in 2026 for roughly 22 million marketplace enrollees, an upheaval that healthcare experts and policy analysts are calling nothing short of a "full-blown crisis," as described by the Financial Times.
For many, the ACA marketplace has served as a vital safety net, cushioning families and individuals from the high costs of private health insurance. The enhanced subsidies, which Congress extended during the COVID-19 pandemic, have kept coverage affordable for a broad swath of the population. Yet, with political negotiations in Congress stalling, the expiration of these subsidies on December 31, 2025, is now a very real possibility—leaving millions in limbo and anxious about their financial futures.
The so-called "subsidy cliff" is at the heart of this crisis. Under current law, anyone earning above 400% of the federal poverty level—$62,600 for individuals or $128,600 for a family of four—will lose all federal assistance and be forced to pay the full cost of their insurance premiums. This is not a minor inconvenience; it's a seismic change for those hovering just above the threshold. As Tim McGrath, a certified financial planner and managing partner at Riverpoint Wealth Management, told Quartz, "If you're $1 over, you're $1 over, and you're out of the pot. It's a huge deal for these people that are on budgets trying to make sure things work month in and month out."
The numbers tell a stark story. According to estimates from KFF, a respected nonpartisan healthcare policy research firm, a 60-year-old earning $64,000 annually would see their annual premiums skyrocket to $14,931 without subsidies. Meanwhile, someone earning just $2,000 less—$62,000—would pay only $6,175 thanks to federal assistance. That's an $8,756 difference in insurance costs for a mere $2,000 difference in income. It's little wonder that many Americans are scrambling to understand and prepare for this cliff.
The impact is especially pronounced for older adults. ACA premiums for those aged 50 to 64 can be up to three times higher than for younger adults, amplifying the financial strain. Currently, about 1.8 million enrollees have incomes between 300% and 400% of the federal poverty level, and another 725,000 are between 400% and 500%. For these groups, the loss of subsidies could be devastating.
Healthcare experts warn that the return of the subsidy cliff could have ripple effects beyond individual families. Dylan H. Roby, chair and professor at the UC Irvine Joe C. Wen School of Population and Public Health, explained to Quartz that removing subsidies and making insurance unaffordable is not only a political challenge but also a policy problem that threatens the stability of the entire health insurance market. "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," Roby said. He pointed to California, where premium prices are already about 20% higher than they would have been due to insurers anticipating fewer people buying insurance if the subsidies disappear. "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 added.
While the federal budget would benefit from lower spending on tax credits in 2026, Roby noted that this is cold comfort for state budgets, hospitals, and, most importantly, families. "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," he said. In short, the savings at the federal level could be more than offset by increased costs elsewhere.
The looming crisis has prompted financial advisors and planners to offer strategies for ACA participants hoping to avoid the subsidy cliff. McGrath and other experts recommend a range of proactive steps:
1. Max Out Tax-Advantaged Accounts: Contributing the maximum allowed to pre-tax accounts such as 401(k)s, IRAs, or Health Savings Accounts (HSAs) can help reduce your modified adjusted gross income (MAGI), which is what the ACA uses to determine subsidy eligibility. For 2026, the annual contribution limit for 401(k) plans is $24,500, with an $8,000 catch-up for those aged 50 and older. Workers aged 60 to 63 can take advantage of an additional $11,250 "super catch-up," bringing their total possible contribution to $35,750. For IRAs, the limit is $7,500, plus an extra $1,100 for those 50 and older. HSAs allow $4,400 for individuals and $8,750 for families, with a $1,000 catch-up for those 55 and older who aren't on Medicare.
2. Be Strategic About Income: Avoiding or minimizing taxable distributions from retirement accounts or deferring income—such as end-of-year bonuses—could help keep your MAGI below the subsidy cliff. McGrath emphasized the importance of consulting a professional on these decisions: "But don’t try to figure this one out alone and consult an accountant or financial advisor."
3. Adjust Work Hours: For some, especially hourly workers or the self-employed, reducing work hours or adjusting business income could make sense if it keeps their income within subsidy-eligible limits. This is a tough call, particularly for those with chronic health conditions, but the alternative may be unaffordable premiums.
4. Increase Charitable Distributions: Americans aged 70½ or older can make qualified charitable distributions directly from an IRA to a qualified charity, reducing their MAGI. As McGrath put it, "They take it out, and it's not taxable. It's a win-win." However, he cautioned that this strategy is best suited for those with enough wealth to give up assets comfortably. Additionally, upcoming tax law changes via the One Big Beautiful Bill Act will set a 0.5% of income nondeductible floor before claiming itemized deductions for charitable giving, making it potentially advantageous to bunch charitable contributions for both 2025 and 2026 before the end of this year.
With negotiations in Congress stalled and the deadline fast approaching, the uncertainty is palpable. As of November 30, 2025, Americans are bracing for what the Financial Times has aptly dubbed "a full-blown crisis" in healthcare affordability. The expiration of enhanced ACA subsidies threatens to upend the financial stability of millions, reshape insurance markets, and force difficult choices on families across the country.
As the clock ticks toward December 31, the sense of urgency is only growing. For those facing the prospect of doubled or even tripled premiums, the coming year will require careful planning, tough decisions, and perhaps a bit of luck. The stakes, both political and personal, could hardly be higher.
