For millions of Americans who are self-employed, between jobs, or retired before reaching Medicare eligibility at age 65, the primary source of health insurance is the Federal or state Marketplace exchanges created by the Affordable Care Act (ACA). Many of these individuals and families rely on the Premium Tax Credit (PTC) to reduce the cost of their coverage: By limiting the out-of-pocket premium cost to a certain percentage of household income, the PTC effectively subsidizes Marketplace-purchased plans – which are often significantly more expensive than employer-sponsored or government-provided coverage.
From 2021 through 2025, COVID-era legislation temporarily 'enhanced' the PTC by reducing the maximum out-of-pocket limits on insurance premiums and making the credit available to households with income higher than 400% of the Federal Poverty Level (FPL), a group who had previously been disallowed from receiving the PTC. However, Congress allowed the enhanced credit to expire at the end of 2025, reverting the PTC rules back to their pre-2021 version. Which means that households still eligible for the PTC will see a reduction in their credit amount – leading to moderate increases in their out-of-pocket premium payments in 2026 – while those with income over 400% of FPL will be disqualified from receiving the PTC at all, resulting in even sharper cost increases for Marketplace coverage.
The actual amounts of these premium increases will depend on household size and the cost of the underlying insurance plan. Single people with plans that cover only themselves may see modest increases; however, larger families or older couples with more expensive coverage could see their premiums rise by more than $1,000 per month. And because the 400%-of-FPL threshold is a hard cutoff for the PTC, even $1 of income beyond that amount can result in thousands of dollars of additional premiums – all of which must be repaid to the IRS if they were originally paid out as advance premium subsidies.
For households with Marketplace coverage, then, it can be extremely beneficial to keep income under 400% of FPL – $62,600 for a single person, $84,600 for a couple, or $128,600 for a family of four in 2026 – when it's possible to do so. For people who are still working, contributions to pre-tax retirement accounts such as traditional IRAs and 401(k) plans, as well as HSAs and FSAs, can help reduce AGI, which is used to calculate household income for PTC purposes. Self-employed individuals may also have flexibility through the timing of business income and expenses. And those who are retired or between jobs can manage their income by adjusting the mix of pre-tax, Roth, and taxable account distributions, even when traditional tax planning strategies might otherwise favor drawing from pre-tax accounts.
The key point is that even though health insurance premium increases are coming to nearly everyone on Marketplace plans in 2026, the most severe increases – particularly for families just over the 400%-of-FPL threshold, for whom losing the PTC could significantly strain cash flow – can often be mitigated through careful tax planning to reduce AGI via income exclusions and above-the-line deductions. And even for the many families who have already enrolled in Marketplace plans for 2026, income changes made during the year can be updated on their insurance application to re-calculate their PTC for the remainder of the year – meaning it's not too late to put strategies into place to reduce the pain of higher insurance premiums in the year ahead!
