The ACA Subsidy Cliff, One Year Later: What Actually Happened to Coverage and Premiums
At the end of 2025, after a 43-day government shutdown — the longest in US history — Congress let enhanced Affordable Care Act premium tax credits expire without a resolution. At the time, the debate was mostly theoretical: estimates and projections about what might happen to premiums and coverage. Nearly a year later, there’s real data, and it tells a clearer story than the projections did.
What happened to premiums
The average monthly premium payment for ACA marketplace enrollees, net of tax credits, rose 58% in 2026 — from about $113 to $178 a month, according to KFF’s tracking of enrollment data. That’s a large jump, but notably smaller than the 114% increase KFF had initially projected for enrollees trying to keep their exact same plan. The gap between those two numbers is itself informative: it suggests a large share of enrollees responded to the subsidy loss by switching to cheaper bronze-tier plans with higher deductibles, rather than absorbing the full premium increase on their previous plan.
What happened to enrollment
Effectuated ACA marketplace enrollment fell to roughly 17.5 million people, broadly in line with earlier Congressional Budget Office projections. But the drop wasn’t evenly distributed. Consumers earning above 400% of the federal poverty level — the point at which the enhanced subsidies had eliminated the previous income cap on eligibility — accounted for just 7% of 2025 enrollment but nearly half of the entire enrollment decline. In other words, the “subsidy cliff” language wasn’t just rhetorical: people who lost subsidies entirely left the marketplace at a dramatically higher rate than everyone else, exactly as the cliff metaphor implies.
How insurers and states responded
The market response has been uneven and, in places, active. Colorado passed emergency legislation last year to backfill roughly 40% of the lost federal subsidies for its residents — a state-level stopgap that other states have watched closely but not all have replicated. On the insurer side, Cigna reported a 17% drop in individual marketplace enrollment in the first quarter of 2026 compared with the prior year, even as it expanded into new counties. Preliminary rate filings for 2027 now show insurers largely proposing further double-digit premium increases, and marketplace exits are reported across more than 20 states heading into the 2027 plan year — meaning some current enrollees will need to actively choose a new plan regardless of what they decide about affordability.
What’s coming next
Open enrollment for 2027 coverage begins November 1, 2026. The Congressional Budget Office’s baseline estimates — a 4.3% premium increase in 2026 and 7.7% in 2027 even under a full extension scenario — suggest the pressure on premiums was building regardless of the subsidy fight, driven partly by rising hospital costs and expensive new medications. Layered on top of the subsidy cliff’s adverse-selection effect — healthier, higher-income enrollees leaving the pool disproportionately — several health policy analysts are now watching for what insurers call a “death spiral” risk: a shrinking, sicker risk pool that pushes premiums even higher the following year, which in turn pushes more people out.
If you buy your own coverage through the marketplace, the practical takeaway is straightforward: check whether your state has adopted any backfill funding like Colorado’s, confirm where your income sits relative to the 400% federal poverty line, and compare plan tiers carefully during the November enrollment window rather than assuming your current plan will renew at a similar cost.
The bigger structural question this raises
Beyond the immediate premium and enrollment numbers, this episode has become something of a natural experiment in how quickly an insurance market responds when a major subsidy structure is removed rather than gradually phased down. The speed of the response — a 58% premium jump and a concentrated enrollment drop within a single plan year — suggests marketplace enrollees, particularly higher earners who pay the full cost themselves, are more price-sensitive than some earlier modeling assumed. That has implications well beyond this specific policy fight: it’s evidence for how sensitive individual-market insurance enrollment is to subsidy design generally, which will likely factor into whatever comes next in this debate, whether that’s a future extension attempt, a permanent replacement structure, or more states following Colorado’s lead with their own backfill mechanisms.
It’s also worth noting what didn’t happen: predictions of a full market collapse or a wave of insurers exiting the ACA marketplaces entirely didn’t materialize in 2026, even as the market clearly deteriorated. The 2027 rate filings and insurer exits suggest that deterioration process may simply be running on a longer timeline than the most alarming early projections suggested — which is itself a reason to watch the 2027 open enrollment numbers closely rather than treating 2026’s data as the final word on how this plays out.