Personal Finance
ACA subsidy cliff may trigger higher health insurance premiums
Members of the National Guard patrol near the U.S. Capitol on Oct. 1, 2025 in Washington, DC.
Al Drago | Getty Images
Millions of Americans are bracing for a sharp increase in their health insurance premiums next year as expiring enhanced subsidies trigger a “cliff” on aid — and they are worried about the financial stress tied to those extra costs.
Ashley Thompson of Austin, Texas, said she and her husband are weighing whether to drop their health coverage next year and insure only their two children to make the financials work.
Premiums for the family’s current health plan on the Affordable Care Act marketplace could triple, to about $3,553 a month in 2026 from $1,200 this year, without the enhanced federal subsidies set to expire at year’s end, based on marketplace estimates.
That expense, almost $43,000 a year, would account for roughly a third or more of their household income — and that’s before even using the insurance, said Thompson, 49, who is a ceramic artist and physical trainer.
“Quite frankly, it’s terrifying,” she said.
Health premiums poised to double — or more
Thompson and her family are among the 22 million Americans who receive enhanced subsidies that make health premiums cheaper. Overall, that group accounts for 92% of the 24 million people enrolled in an ACA marketplace plan.
The enhanced premium subsidies are at the epicenter of the political fight around the federal government shutdown, now the longest in U.S. history.
Democrats are pushing to extend the subsidies as part of a deal to reopen the government, while Republicans have said they want to negotiate the subsidies separately.
Senate Majority Leader Chuck Schumer on Friday proposed a one-year extension of the existing enhanced subsidies as part of a deal to reopen the government. The deal would also establish a bipartisan committee to continue negotiations on long-term reforms to address the issue of health-care affordability.
More than half, 57%, of ACA marketplace enrollees live in Republican congressional districts, according to a recent KFF analysis. This year, about 80% of all premium tax credits, or $115 billion, went to ACA marketplace enrollees in states won by President Trump in last year’s election, KFF found.
Political pundits have cited affordability as a key issue that drove Democrats like New York City Mayor-elect Zohran Mamdani to victories in Tuesday’s elections.
Without enhanced subsidies, the average recipient’s annual insurance premium will jump 114%, to $1,904 in 2026 from $888 in 2025, according to KFF, a nonpartisan health policy research group.
“On average, to keep their same plan, people getting a subsidy now will see their premium payments double next year,” said Cynthia Cox, vice president and director of KFF’s program on the Affordable Care Act.
Some, like Americans whose incomes exceed a certain threshold, will pay much more. They’d be ineligible for any premium assistance due to the so-called “subsidy cliff.”
Take a 60-year-old couple earning $85,000 a year, for example, which is just over the threshold: Their annual premiums would rise by almost $23,000 in 2026, on average, according to KFF.
The impact of losing enhanced premium subsidies
The political fight around enhanced subsidies, which were enacted in 2021 under the Biden administration, is playing out during the ACA marketplace’s open enrollment, when would-be enrollees are picking their health plans for 2026.
They must do so by Dec. 15 to be covered at the start of the new year.
“Open enrollment is already starting with this big question mark,” Cox said.
U.S. House Minority Leader Rep. Hakeem Jeffries (D-NY) speaks on the current government shutdown during a news conference at the U.S. Capitol on Oct. 6, 2025 in Washington, DC.
Alex Wong | Getty Images
Swelling health insurance premiums will likely have many consequences for households, according to health policy experts.
The Congressional Budget Office estimates about 4 million more people will join the ranks of the uninsured over the next decade if the enhanced subsidies disappear.
That likely wouldn’t happen immediately, Cox said. More than a million may drop coverage next year if they decide insurance premiums are unaffordable, she said.
Others may opt to buy lower-tier plans with smaller upfront premiums, she said. Those plans typically have much higher deductibles, meaning households would be on the hook for a hefty bill if they need to use their insurance, Cox said.
In later years, some of these enrollees would likely drop their coverage, too, if they grow weary of the system and higher costs, Cox said.
The healthcare.gov website on a laptop arranged in Norfolk, Virginia, US, on Saturday, Nov. 1, 2025.
Stefani Reynolds | Bloomberg | Getty Images
Other enrollees, like Beth Keenan, say they intend to keep their current health plan and absorb the higher costs by cutting other expenses.
Keenan, 62, an early retiree who lives in Pittsburgh, is using her ACA marketplace insurance plan as a bridge to Medicare benefits at age 65.
She pays $589 a month in premiums, after accounting for a $302 monthly federal subsidy, also known as a premium tax credit. If the enhanced subsidies expire, Keenan’s estimated net premium would jump to $1,065, up 81%, based on estimates from the state marketplace.
Keenan’s annual pension and Social Security income, totaling about $80,000, would be too high to qualify for aid.
“You get tax credits for private airplanes,” said Keenan, who retired at 60 from her job as a county court administrator, a post she held for three decades. “Why shouldn’t I get a tax break?”
US Senate Majority Leader John Thune, Republican of South Dakota, speaks to reporters on day 37 of the government shutdown, at the US Capitol in Washington, DC, November 6, 2025.
Saul Loeb | Afp | Getty Images
Keenan expects the extra $500 or so per month won’t cause financial hardship, she said. But the sum will likely force her to pull back on certain lifestyle expenses like travel, she said.
The uncertainty around the availability of subsidies into the future is unnerving, especially knowing that insurers might raise premiums again for 2027, she said.
Insurers raised premiums an estimated 26% for 2026, on average, for example, according to KFF, exacerbating the loss of enhanced subsidies.
“I know what I’m doing [for] next year, but I have one year after that” before Medicare benefits start, Keenan said. “Are premiums going up [another] 20%? And then where else do you get insurance?”
Subsidy cliff is ‘an unfortunate disincentive to work’
While certain enrollees would still qualify for a lesser tax credit if the enhanced subsidies disappear, those with incomes above 400% of the federal poverty level would no longer qualify for assistance.
This is the so-called “subsidy cliff.”
That threshold varies by household size. It’s $62,600 for a one-person household and $128,600 for a four-person household in 2026, for example.
Since 2021, the enhanced subsidies have been available to households that earn more than that. Annual premiums were also capped at 8.5% of household income.
If the enhanced subsidies expire, that income cap would disappear, and those who earn even $1 above the 400% poverty line would be ineligible for premium tax credits. This would impact about 1 in 10 enrollees in an ACA marketplace plan, according to KFF.
Matthew Espinoza, 46, is right on the cusp of that income threshold.
The San Francisco resident, who works as a fitness instructor and restaurant server, expects his income to be roughly $60,000 to $65,000 next year, depending on how many hours he works.
Where his income ultimately falls would make a big financial difference if the enhanced subsidies disappear, said Espinoza, who is also a full-time nursing student.
The healthcare.gov website on a laptop arranged in Norfolk, Virginia, US, on Saturday, Nov. 1, 2025.
Stefani Reynolds | Bloomberg | Getty Images
He pays $324 a month for subsidized ACA insurance premiums this year.
Those subsidized premiums would rise to about $461 per month in 2026 if his annual income is $60,000, according to estimates through Covered California, the state marketplace. However, that premium would jump to $818 a month with a $65,000 income, since he’d no longer qualify for assistance.
“I haven’t had to cut down on savings when I started school, but that’d probably be the first thing that took a major hit” if forced to pay the $818 premium, Espinoza said.
Espinoza said he’d be hyper-aware of his income in 2026 and, if it flirts with the 400% poverty threshold, he may try to limit his work hours to ensure eligibility for a premium tax credit.
The subsidy cliff “is an unfortunate disincentive to work,” said KFF’s Cox. “For some families, it totally makes financial sense, especially if they really need the health insurance.”
Open enrollment is already starting with this big question mark.
Cynthia Cox
vice president and director of KFF’s program on the Affordable Care Act
Thompson, the Austin resident, doesn’t want to drop her health coverage.
But even lower-tier plans with high deductibles available on the ACA marketplace would still cost at least $3,000 a month for her family of four, she said, based on estimates via the marketplace.
“We are not broke, but this would put us in that position,” she said. “It’s not the only bill.”
They’re also looking into various options, such as insuring only their two children and using a cooperative health share for Thompson and her husband, she said. (Such services aren’t technically health insurance, and may come with various risks.)
“People think it’s people who are undeserving that get subsidies,” Thompson said. “But it’s just neighbors, regular people.”
The Federal Reserve held interest rates steady at the conclusion of its policy meeting on Wednesday.
In what could be Jerome Powell’s last as chair before President Donald Trump’s yet-to-be-confirmed nominee Kevin Warsh takes the helm, central bankers maintained the federal funds rate in a target range of 3.5% to 3.75%.
Inflation has surged since the war with Iran began, leaving policymakers with limited room to act, according to Sean Snaith, the director of the University of Central Florida’s Institute for Economic Forecasting. “We’re in a kind of suspended animation — between Iran and the Fed transition,” Snaith said.
Before the oil shock, inflation was holding above the Fed’s 2% target but not worsening. Now the jump in energy costs could have longer-term inflationary effects, economists say.
For Americans struggling in the face of higher gas prices and overall affordability challenges, the central bank’s decision to keep interest rates unchanged does little to ease budgetary pressures. “The cavalry isn’t coming anytime soon,” Snaith said.
How the Fed decision impacts you
The Fed’s benchmark sets what banks charge each other for overnight lending, but also has a trickle-down effect on many consumer borrowing and savings rates.
Short-term rates are more closely pegged to the prime rate, which is typically 3 percentage points above the federal funds rate. Longer-term rates, such as home loans, are more influenced by inflation and other economic factors.
Credit cards
Most credit cards have a short-term rate, so they track the Fed’s benchmark.
After the Fed cut rates three times in the second half of 2025, the average annual percentage rate has stayed just under 20%, according to Bankrate.
“Without Fed rate cuts, there’s not much reason to expect meaningful declines anytime soon, so carrying a balance will remain very expensive,” said Matt Schulz, chief credit analyst at LendingTree.
Mortgage rates
Fixed mortgage rates, on the other hand, don’t directly track the Fed but typically follow the lead of long-term Treasury rates.
Concerns about how the Iran war will impact the U.S. economy have already pushed the average rate for a 30-year, fixed-rate mortgage up to 6.38% as of Tuesday, from 5.99% at the end of February, according to Mortgage News Daily.
That leaves homeowners with existing low mortgage rates “feeling stuck,” said Michele Raneri, vice president and head of U.S. research and consulting at TransUnion. “Mortgages, more than any other credit type, work on a churn,” she said, referring to how a dip in rates can boost borrowing activity.
Student loans
Federal student loan rates are also fixed and based in part on the 10-year Treasury note, so most borrowers are somewhat shielded from Fed moves and recent economic uncertainty.
Current interest rates on undergraduate federal student loans made through June 30 are 6.39%, according to the U.S. Department of Education. Interest rates for the upcoming school year will be based in part on the May auction of the 10-year note.
Car loans
Auto loan rates are tied to several factors, including the Fed’s benchmark. Because financing costs remain elevated, new car buyers are taking on longer loans to keep their monthly payments manageable, according to the latest data from Edmunds.
Even so, with the rate on a five-year new car loan near 7%, the average monthly payment on a new car rose to $773 in the first quarter of 2026, an all-time high.
“Car buyers are in a tough spot right now because they’re getting squeezed from both ends: high sticker prices and high interest rates, with neither showing any signs of letting up,” said Joseph Yoon, consumer insights analyst at Edmunds.
“Until the rate picture shifts, buyers will keep stretching loan terms to make payments work, which only adds to the total cost of ownership down the road,” Yoon said.
Savings rates
While the Fed has no direct influence on deposit rates, the yields tend to be correlated with changes in the target federal funds rate. So, although rates on certificates of deposit and high-yield savings accounts have fallen from recent highs, they are holding above the annual rate of inflation.
For now, top-yielding online savings accounts and one-year CD rates pay around 4%, according to Bankrate.
“Yields on high-yield savings accounts and certificates of deposit are down from their peaks of a few years ago, but they’re still strong compared to what we’ve seen for most of the past decade,” Schulz said.
Milan Markovic | E+ | Getty Images
The average tax refund is 11.2% higher this season, compared with about the same period in 2025, according to the latest IRS filing data.
As of April 10, the average refund amount for individual filers was $3,397, up from $3,055 about one year ago, the IRS reported on Friday.
The IRS data reflects about 114 million individual returns received, out of about 164 million expected through Tax Day. Next week’s filing update is expected to include data through the April 15 deadline.
President Donald Trump‘s 2025 legislation, rebranded to the “working families tax cuts,” was a key talking point for Republicans on Tax Day.
With the November midterm elections approaching and Republicans defending slim majorities in Congress, many GOP lawmakers have highlighted Trump’s tax breaks and higher average refunds.
Meanwhile, affordability has been top of mind for many Americans amid rising costs of gas, electricity, food and other living expenses.
For filers who expected a refund this season, nearly one-quarter, or 23%, planned to use the funds to pay down credit card debt, and the same share said they would save the payment, according to the CNBC and SurveyMonkey Quarterly Money Survey, released in April. It polled 3,494 U.S. adults at the end of March.
Who benefited from Trump’s ‘big beautiful bill’
“It’s been a great tax season for the American people,” many of whom have benefited from Trump’s tax breaks, Treasury Secretary Scott Bessent said during a White House press briefing on Wednesday.
More than 53 million filers claimed at least one of Trump’s “signature new tax cuts” — the deductions for tip income, overtime earnings, seniors and auto loan interest — the Department of the Treasury also announced on Wednesday.
Those filers, who claimed the deductions on Schedule 1-A, have seen an average tax cut of over $800, according to the Treasury. Tax cuts can trigger a higher refund or reduce taxes owed, depending on the filer’s situation.
Some filers who itemize tax breaks have also seen benefits from the bigger federal deduction limit for state and local taxes, known as SALT. Trump’s legislation raised that cap to $40,000, up from $10,000, for 2025.
The latest SALT deduction limit change is expected to primarily benefit higher earners, according to a May 2025 analysis of various proposals from the Tax Foundation.
The Treasury has not released data on how many filers have claimed the SALT deduction during the 2026 filing season.
Traders work at the New York Stock Exchange on April 16, 2026.
NYSE
U.S. stocks climbed to record highs on Thursday against a backdrop of war, an oil supply shock and economic forecasts warning of stunted growth amid a protracted conflict.
Many investors may be thinking: Why?
Largely, it’s because the stock market is a barometer of what investors think will happen in the future, rather than an assessment of the present day, according to economists and market analysts.
Investors are essentially shrugging off the Middle East conflict as a blip that will be resolved relatively quickly, they said.
“The stock market isn’t trying to price what’s happening today,” said Joe Seydl, a senior markets economist at J.P. Morgan Private Bank. “The stock market is always trying to price what the world is going to look like six to 12 months from now.”
Why stocks have been ‘resilient’
The S&P 500, a U.S. stock index, fell about 8% in the initial weeks of the Iran war, from the start of the conflict on Feb. 28 to a recent low on March 30.
But stocks have rebounded since then, erasing all losses since the beginning of the war. The S&P 500 closed at an all-time high on Thursday — about 11% higher than its nadir at the end of March. That followed a record close on Wednesday.
“The market has remained very resilient in the face of the war and has rallied strongly on the prospect that it will be resolved,” said Mark Zandi, chief economist at Moody’s.
A ship waits to pass through the Strait of Hormuz following the two-week temporary ceasefire between the US and Iran, which is conditional on the opening of the strait, in Oman on April 8, 2026.
Shady Alassar | Anadolu | Getty Images
And while investors cheered the possibility of a diplomatic off-ramp to the conflict, the temporary ceasefire has appeared tenuous, with the U.S. and Iran each accusing the other of breaking the agreement.
Nations haven’t been able to reach a peace deal ahead of the ceasefire’s end. Vice President JD Vance said U.S. officials left peace talks in Pakistan over the weekend after the Iranian delegation refused to agree to American demands not to develop a nuclear weapon.
The markets ‘have memory’
Ultimately, the stock market is signaling a collective belief that tensions will ratchet down, the war will end in the near term and oil flows through the Strait of Hormuz will normalize, economists said.
That’s largely because investors have been conditioned to believe that President Donald Trump will back off if the economic pain becomes too intense, economists said — the so-called “TACO” trade, shorthand for “Trump always chickens out.”
“Investors strongly believe — and have been conditioned to believe — he’s going to stand down, find a way to pivot, declare victory and move on,” Zandi said.
Trump has pushed back on the notion of backing down, framing his brinkmanship as a savvy negotiating tactic.
Economists pointed to a recent example of this dynamic: in April 2025 during so-called liberation day, when the Trump administration levied a host of tariffs on U.S. trading partners.
Within days — after the stock market had cratered more than 12% — Trump announced a 90-day pause on those tariffs. Stocks then saw one of their biggest daily rallies in history following Trump’s reversal.
Investors remember that Trump often de-escalates geopolitical shocks — which is why they’ve seized on positive headlines that hint at progress in peace talks, for example, Seydl said.
“The markets have memory,” Seydl said.
AI stocks and the ‘tech boom’
Traders celebrating at the New York Stock Exchange on April 15, 2026, as the S&P 500 closed above the 7,000 level for the first time.
NYSE
There are other factors underpinning market resilience during wartime, economists said.
One is the investors’ enthusiasm for artificial intelligence and technology stocks, which account for almost half of the S&P 500’s market capitalization, Zandi said.
“Those stocks run on their own dynamic independent of anything, including the war in Iran,” Zandi said. “I think we would have been down a lot more and it would have been harder for us to recover had it not been for the very, very optimistic perspectives on AI.”
We’re in the middle of a “tech boom” — and investors are likely to remain optimistic until they think the tech cycle has run its course, Seydl said.
More broadly, stock investors are essentially making a bet on the future earnings growth of a company — and the earnings backdrop has been “pretty solid,” Seydl said.
Consumer spending appears to be stable, for example, economists said. And companies are getting a boost to their after-tax earnings from the GOP’s so-called “big beautiful bill,” which, among other things, made it easier to write off investments upfront and therefore reduce their tax liability, Zandi said.
Going forward
Experts said there will be an economic hit from the Iran war, though.
“Despite the recent news of a temporary ceasefire, some damage is already done, and the downside risks remain elevated,” Pierre-Olivier Gourinchas, director of research at the International Monetary Fund, wrote Tuesday.
A protracted conflict risks deep and global economic pain, he wrote.
Even if the conflict is short-lived — as the broad market expects — stocks are unlikely to march much higher until it’s clear the U.S. is on the other side of the war and its economic fallout, Zandi said.
If investors are incorrect, and President Trump doesn’t back down or quickly extricate the U.S. from the war, the stock market may see a “full-blown correction” or worse, Zandi said. A stock market correction is a decline of at least 10% from recent highs.
“Everyone thinks they know what the script is,” Zandi said. “Now they just need to follow the script. If they don’t, the market will have some real problems.”
The uncertainty provides yet another example of why the average investor with a long time horizon should stick to their investment plan and ignore the noise, experts said.
“Trying to time the market is very difficult if not impossible for the average investor,” Seydl said. “It’s better to take a long-term perspective and ride out bouts of volatility.”
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