Since 2021, people buying their own health insurance through the ACA Marketplaces have received larger premium tax credits than the original law provided. The American Rescue Plan Act created the enhancement, and the Inflation Reduction Act extended it through 2025. The reconciliation law signed in July didn't extend it again. Unless Congress acts, the enhanced credits expire on December 31, 2025.
That might sound like an individual market problem, but it reaches employer clients too. Small employers whose staff rely on Marketplace coverage, ICHRA sponsors, and employees deciding whether to take a group plan will all feel it.
What changes on January 1, 2026
The premium tax credit is based on how much of their income a household is expected to pay for the benchmark (second-lowest-cost silver) plan. Under the enhanced rules, households up to 150% of the federal poverty level could pay nothing for a benchmark plan, and no one paid more than 8.5% of household income, regardless of how much they earned.
Under the 2026 table in IRS Rev. Proc. 2025-25:
- Expected contributions rise across the board, starting at 2.10% of income for the lowest-income enrollees and reaching 9.96% for households from 300% to 400% of the poverty level.
- The 400% cliff returns. Households with income above 400% of the poverty level are no longer eligible for any premium tax credit. For older enrollees and families in high-cost areas, that can mean paying the full premium.
Premiums are rising at the same time
KFF reviewed proposed 2026 rate filings from 312 Marketplace insurers and found a median proposed increase of 18%, compared with a median of 7% for 2025. It's the largest requested change since 2018. Most insurers that addressed it assumed the enhanced credits would expire, and KFF found that assumption added about 4 percentage points to rates on average, because insurers expect healthier people to drop coverage when their subsidies shrink.
These are proposed rates. Regulators can still adjust them, and final 2026 premiums will be visible when open enrollment begins. HealthCare.gov's open enrollment for 2026 coverage runs from November 1, 2025, through January 15, 2026.
Over the longer term, the Congressional Budget Office estimated in June that letting the enhanced credits expire would increase the number of uninsured people by 4.2 million in 2034.
What it means for employer clients
Small employers without group coverage
Many small businesses that don't offer health benefits have employees who buy subsidized Marketplace plans. Those employees may see much larger net premiums for 2026. Expect some owners to ask whether they should start offering something. A modest ICHRA or QSEHRA can help, but run the numbers carefully: an employee offered an affordable ICHRA loses eligibility for the premium tax credit.
ICHRA sponsors
- Allowances may need to rise just to keep pace with individual market premium increases.
- Affordability math changes. Applicable large employers test ICHRA affordability using the lowest-cost silver premium, which is likely to be higher for 2026. The 9.96% affordability percentage helps, but it may not offset an 18% premium increase.
- Opt-out decisions look different. Employees whose ICHRA is unaffordable can waive it and claim a premium tax credit. With smaller credits, fewer may find that worthwhile, and more may want the ICHRA after all.
Group plan sponsors
Employees offered affordable, minimum-value employer coverage generally can't get Marketplace credits anyway, so the expiration doesn't change their eligibility. But it does affect:
- Family members. Since 2023, family members can qualify for a premium tax credit if the cost of family coverage under the employer plan exceeds the affordability percentage. Smaller credits make that path less valuable.
- Waived employees. Part-time employees and others who aren't offered coverage may see much higher costs and ask about joining the group plan, which matters for participation and plan design.
Talking points for the fall
- Be precise about timing. The enhanced credits run through December 31, 2025. Nothing changes for 2025 coverage.
- Don't predict Congress. Lawmakers in both parties have discussed an extension, but as of this writing, Congress hasn't passed one. Plan for expiration and treat an extension as upside.
- Wait for final rates before setting ICHRA allowances, or build a buffer into the budget.
- Help employees understand the cliff. Higher earners, especially older employees and families, are most exposed to losing all assistance.
- Revisit non-offering clients. The change may be the reason a small employer finally considers a benefit.
The expiration is the biggest scheduled change to the individual market in years. Brokers who prepare their clients now will look a lot better in November than those who wait for the renewal notices.