Why Millions of Americans Dropped Obamacare Plans After Subsidies Ended
Many Americans signed up for Affordable Care Act health insurance plans during open enrollment. However, not everyone who selected a plan kept the coverage.
According to recent reporting, about 23.1 million people selected ACA Marketplace plans during the 2026 open enrollment period. But HHS later reported that actual enrollment in February was about 19.2 million. This means nearly 4 million people who selected plans did not continue their coverage.
One major reason was the expiration of enhanced ACA subsidies. When those extra subsidies ended, many policyholders saw their monthly premiums increase sharply. Some people reportedly saw premium increases of 100% or more.
This issue is not only about health insurance. It is also a tax issue because ACA subsidies are connected to the Premium Tax Credit and Form 8962 on the taxpayer’s income tax return.
How ACA Subsidies Work
The Affordable Care Act allows eligible taxpayers to receive financial help when they buy health insurance through the Marketplace.
This financial help is called the Premium Tax Credit.
Taxpayers do not always have to wait until they file their tax return to receive this credit. In many cases, the credit is paid in advance during the year. When the credit is paid in advance, it is called the Advance Premium Tax Credit.
Here is how it works.
The taxpayer applies for health insurance through the ACA Marketplace.
The Marketplace estimates the taxpayer’s household income for the year.
Based on income, family size, location, and available insurance plans, the Marketplace calculates how much subsidy the taxpayer may receive.
The government pays the subsidy directly to the insurance company.
The taxpayer pays the remaining monthly premium.
For example, assume the full monthly premium is $700.
If the taxpayer qualifies for a $600 monthly subsidy, the taxpayer pays only $100 per month.
The insurance company still receives the full $700 premium. The taxpayer pays $100, and the government pays $600 through the Advance Premium Tax Credit.
How Enhanced Subsidies Lowered Monthly Premiums
During the enhanced subsidy period, many taxpayers received larger subsidies than they would have received under the regular ACA rules.
Because of these larger subsidies, many people were able to buy Marketplace insurance at a much lower monthly cost. Some taxpayers even qualified for $0 premium plans.
But the insurance itself was not actually free.
It meant the government was paying most or all of the premium directly to the insurance company through the Advance Premium Tax Credit.
For example, assume the full monthly premium was $700.
During the enhanced subsidy period, the taxpayer may have qualified for a $650 subsidy. In that case, the taxpayer paid only $50 per month.
The insurance company still received the full $700 premium.
The taxpayer paid $50.
The government paid $650.
However, when we say “the government paid,” we should remember that government money ultimately comes from taxpayers, all of us. The Advance Premium Tax Credit is funded by tax dollars collected from all of us.
In other words, even if the individual policyholder paid only $50 per month, the remaining $650 did not disappear. It was paid by the government using public funds.
After the enhanced subsidies ended, the government-paid portion became smaller for many taxpayers. As a result, the taxpayer’s monthly payment increased.
Note: This article is intended for informational purposes only and does not constitute tax advice. For personalized guidance, please consult a tax professional.