The Subsidy Cliff Is Back in 2026: What You Need to Know About Your Health Insurance Costs

For the last several years, health insurance through the Marketplace has been more affordable than ever for many families and individuals. During the COVID-19 pandemic, the federal government expanded premium subsidies to help people keep health coverage during uncertain times. These temporary changes lowered monthly premiums, helped more middle-income households qualify for assistance, and removed strict income limits that had previously caused many people to lose help.

Because of these enhanced subsidies, many people were able to qualify for help even as their income increased. Instead of losing all assistance at a certain income level, the amount of help was based on a percentage of household income, which made health insurance costs more predictable and manageable.

However, those pandemic-era improvements were always meant to be temporary. Congress placed an expiration date on them — and that expiration has now passed. For 2026 coverage, the Marketplace has returned to most of the original Affordable Care Act rules, including the return of the subsidy cliff.

What Is the Subsidy Cliff?

When the Affordable Care Act (ACA) was originally written, premium subsidies were only available to households earning between 100% and 400% of the Federal Poverty Level (FPL). If your household income went even one dollar over 400% of the FPL, you lost all subsidy help and had to pay full price for your health plan.

That sudden cutoff is what’s known as the subsidy cliff.

For the last few years, Congress temporarily removed that income cap. Instead of a hard cutoff, subsidies were based on how much of your income was being spent on premiums. That protection is now gone, and the income cap is officially back for 2026.

While Congress is still in discussions about possibly changing or extending these rules again, we are not holding our breath. We are planning as if the subsidy cliff is fully in effect for 2026. If any changes do happen, we will be among the first to know and will immediately help our clients update their Marketplace applications if needed.

What Is the Federal Poverty Level (FPL)?

The Federal Poverty Level is an income guideline published each year by the federal government. It is adjusted annually for inflation and varies by household size. The larger your household, the higher the income limit. The income is your Adjusted Gross Income which we will define later.

Marketplace subsidies are determined by comparing your household income to the Federal Poverty Level used for that coverage year.

For 2026 Marketplace coverage, you can qualify for subsidies if your adjusted gross income is less than 400% of the FPL for your household size. If your income goes over that amount — even by one dollar — you may lose all subsidy help.

400% FPL Income Limits for 2026 Coverage

To qualify for Marketplace subsidies in 2026, your income must be below the following limits:

• Household of 1: $62,600

• Household of 2: $84,600

• Household of 3: $106,600

• Household of 4: $128,600

• Household of 5: $150,600

• Household of 6: $172,600

• Household of 7: $194,600

• Household of 8: $216,600

• Household of 9: Add approximately $22,000 for each additional person

There is no gradual phase-out once you cross this line. Going over the limit by just $1 can mean full-price health insurance.

What Is AGI — and Why It Matters

Your Adjusted Gross Income (AGI) is essentially your total gross income before the standard deduction, with only a few specific adjustments taken out. It is not your final taxable income, and this is the number the Marketplace looks at when determining subsidy eligibility.

⚠️ IMPORTANT CALLOUT

AGI ≠ Taxable Income

Marketplace subsidies are based on AGI (and MAGI) — not the income amount you see after taking the standard deduction on your tax return.

Income that typically counts toward AGI includes:

• Wages and salary (W-2 income)

• Self-employment or business income

• Interest and dividends

• Capital gains from investments

• Retirement income (taxable IRA, 401(k), pensions)

• Rental income

• Unemployment income (taxable portion)

• Taxable Social Security (when applicable)

Common deductions that can reduce AGI include:

• Traditional IRA contributions (if deductible)

• HSA contributions

• Student loan interest (if eligible)

• Certain self-employment deductions

• Self-employed retirement contributions (SEP, SIMPLE, solo 401(k))

Important: The Marketplace Uses MAGI

For subsidy purposes, the Marketplace actually uses Modified Adjusted Gross Income (MAGI). MAGI starts with your AGI and adds back certain items if you have them, such as:

• Tax-exempt interest

• Non-taxable Social Security

• Certain foreign income

For many people, AGI and MAGI are the same or very close, but this is the income number that determines subsidy eligibility.

Why the Subsidy Cliff Can Be Extremely Costly

If you fall off the subsidy cliff, you are responsible for paying the entire premium for your health insurance.

For many families — especially those in rural areas — this can easily mean $2,000 or more per month, or over $24,000 per year.

Even worse, if you received subsidies during the year based on an income estimate and your final MAGI ends up over 400% of the FPL, you may be required to pay back every dollar of subsidy you received when you file your taxes.

Why This Is a Big Change for Many People

For the last few years, many Marketplace clients didn’t have to worry about income increases. Raises, bonuses, business growth, investment gains, or retirement withdrawals didn’t automatically mean losing help.

That has changed.

If your income is close to the limit, even small changes can now put you at serious financial risk.

What You Should Do Now

Because your 2026 health insurance subsidies are tied to your income, it is critical to review your numbers after you file your 2025 tax return.

We strongly recommend:

• Reviewing your AGI and MAGI with your agent

• Updating your Marketplace application if income has changed

• Talking through potential income risks

• Making sure you understand what happens if you cross the limit

A quick review now can prevent a very expensive surprise later.

The Bottom Line

The subsidy cliff is officially back for 2026. If your household income is under 400% of the Federal Poverty Level, you may qualify for help. If your income goes even one dollar over that limit, you could lose all Marketplace subsidies, pay full price for your health plan, and potentially owe thousands back at tax time.

If you’re unsure where your income falls or your income fluctuates, talk with your local health insurance agent. We’re here to help you understand your options, review your numbers, and protect you from unnecessary risk.

Better coverage starts here.