What Is the Subsidy Cliff? Why You Might Pay Full Price for Health Insurance Again in 2026

If you’ve been receiving financial help with your health insurance through the Marketplace, you’ve likely benefited from expanded subsidies made possible by two major federal laws: the American Rescue Plan (ARP) and the Inflation Reduction Act (IRA). These programs temporarily increased the amount of subsidy available and removed what used to be known as the “subsidy cliff”—but both of those changes are currently set to expire at the end of 2025.

Let’s break down what that means and how it might affect your coverage.

What is the American Rescue Plan (ARP)?

Passed in 2021 in response to the COVID-19 pandemic, the ARP made health insurance more affordable for millions of Americans by:

• Increasing the size of premium subsidies (also called APTCs—Advanced Premium Tax Credits). This is the amount of help the government gives you towards your health insurance premium based on your income, household size, birthdays and zip code.

• Expanding eligibility so that people making more than 400% of the Federal Poverty Level (FPL) could still qualify for help. This was known as the subsidy cliff and has helped many families afford health insurance when they had no other option. It ensured that no individual or family paid over 8.5% of their income towards their health insurance premium.

What is the Inflation Reduction Act (IRA)?

The IRA, passed in 2022, extended the ARP’s expanded subsidies through the end of 2025. Without this extension, subsidies would have returned to pre-2021 rules at the end of 2022. Now, unless Congress acts again, those extra savings will disappear after this year. We hope that Congress will extend these much needed subsides that have made health insurance affordable especially for self employed individuals who have no option of a work health plan.

What is the Federal Poverty Level (FPL)?

The Federal Poverty Level is a measure the government uses to determine who qualifies for financial assistance programs. It’s based on your household size and annual income, and it’s adjusted each year.

In 2025, for example:

• 100% of the FPL for a single adult is around $15,000/year,

• 300% of the FPL is about $45,000/year,

• 400% is $60,000/year, and so on.

Why Does the Marketplace Use the FPL?

Marketplace subsidies are based on a sliding scale tied to your income as a percentage of the FPL. The lower your income compared to the FPL, the more help you get paying for your health insurance premium.

Thanks to the ARP and IRA:

• People earning up to 150% of FPL often qualify for plans with $0 premiums.

• Households over 400% of the FPL could still get some help—especially if they live in areas with high premiums.

Before 2021, if your income was even $1 over the 400% threshold, you got no help—that’s the “subsidy cliff” we’ve been able to avoid the last few years.

What Happens If These Subsidies Expire?

If Congress doesn’t renew or extend these laws, Marketplace subsidies will shrink, and many middle-income families—especially those earning over 300% of the FPL—may see their monthly premiums go up sharply in 2026.

That’s why we’ll be watching this closely and reaching out to help our clients prepare.

If you’re estimating your income over 300% of the FPL, now is a good time to take a closer look at your tax returns and current year earnings. Small changes—like a bonus, a raise, or a spouse returning to work—can push your income above 400% of the FPL. Without the extended subsidies in place, going even a few dollars over could result in losing all premium assistance. This means that you pay back the full price of the health plan back at tax time which can be well over $10,000. We recommend scheduling a mid-year check-in to see where you stand.

It’s also worth reviewing your alternatives. If you opted out of a group health plan through your employer because it was considered unaffordable, now may be a good time to re-evaluate. Once Marketplace subsidies shrink, that group plan might actually become the more affordable option. In addition, there are private health plans available year-round, although these plans often have limitations such as smaller networks and no guaranteed coverage for pre-existing conditions. In Utah, SelectHealth may soon offer a new private health plan that includes Intermountain Healthcare (ICH) in-network—potentially providing more flexibility for those looking beyond the Marketplace.

To review your options and protect your budget, contact a local agent at Utah Avenue Insurance. We’re here to help you make sense of your choices and keep your coverage affordable no matter what changes lie ahead.