The enhanced premium tax credits for Affordable Care Act (ACA) Marketplace plans may soon come to an end. During the recent government shutdown, Democrats pushed to extend the subsidies, but the final agreement to reopen the government didn’t include an extension.
There’s still a chance Congress and the White House will revisit the topic before year-end, but right now, an extension seems unlikely. If the credits expire, many Marketplace enrollees could see major premium increases in 2026. For some, that could mean more than double their current costs. Individuals earning over 400% of the federal poverty level would lose subsidies altogether.
A drop in subsidies could also mean:
- A less healthy risk pool
- Fewer insurers competing in the individual market
- Higher premiums across the board
How Premium Credit Expiration Impacts Employers
While the enhanced tax credits apply to individuals, employers may feel the ripple effects.
1. Possible increase in employee participation
If Marketplace coverage becomes more expensive, more employees may opt into employer-sponsored plans.
2. Stronger retention in employer plans
Higher Marketplace premiums could encourage employees to stay covered through work, boosting overall plan stability.
3. Lower risk of ACA employer penalties
More employees enrolling in the employer plan reduces the likelihood of penalties tied to unaffordable coverage. As a reminder, self-only coverage must cost no more than 9.96% of an employee’s household income in 2026 (up from 9.02% in 2025).
Employers can use ACA safe harbors, including the Federal Poverty Level, W-2, and Rate of Pay Safe Harbors, to simplify affordability calculations. These help employers stay compliant without knowing each employee’s exact household income. (Details available on the IRS website.)
4. Higher COBRA enrollment
If Marketplace plans become less competitive in cost, employees who lose employer coverage may be more likely to choose COBRA.
Talk With Your Broker
Changes to ACA subsidies can affect employees’ choices and potentially your costs. Your employee benefits broker can help you plan ahead and make sure your coverage strategy still works for your business. If you don’t have a broker, we make it easy to connect with one.
