A 60-year-old woman buying her own health insurance next year can earn $63,800 and get roughly $9,400 of help with her premium. If she earns $63,900, she gets nothing. That $100 raise costs her about the price of a used car, and it’s the rule again for 2027. The ACA subsidy cliff came back when Congress let the enhanced premium tax credits expire at the end of 2025, and HealthCare.gov opens for 2027 coverage on November 1.
Most coverage of open enrollment is about picking a plan. For anyone whose income sits anywhere near the line, the plan matters less than the income estimate you type into the application. The good news is that the cliff can be moved after the fact, sometimes as late as April 2028. The bad news is that a 2026 law change made a wrong guess more expensive for people on both sides of the line.
The ACA subsidy cliff charges you for the last dollar, not the average one
The premium tax credit is the gap between your benchmark plan (the second-cheapest silver plan where you live) and a fixed share of your income. For 2027, that share tops out at 10.22% of income for households between 300% and 400% of the federal poverty level, according to healthinsurance.org’s breakdown of the 2027 applicable percentages. Coverage for 2027 uses the 2026 poverty guideline of $15,960 for one person, so 400% lands at $63,840 for a single person and $132,000 for a family of four.
From 2021 through 2025, there was no cutoff. Nobody paid more than 8.5% of income for the benchmark plan, no matter what they earned. That cap is gone. Above 400%, the credit doesn’t shrink gently. It disappears.
The people living near $63,840 tend to be freelancers, early retirees doing a little consulting, and women in their 50s who left a corporate job and are still years from Medicare. That last group gets hit hardest, because marketplace premiums climb steeply with age while the 400% line doesn’t move.
Run the numbers on a 60-year-old and the cliff gets ugly
KFF found that the average benchmark premium for a 40-year-old in 2026 was $625 a month. Insurers can charge older enrollees more on a set scale, and the federal default age curve in CMS guidance on age rating puts age 40 at a factor of 1.278 and age 60 at 2.714. Divide 2.714 by 1.278 and a 60-year-old pays about 2.12 times what a 40-year-old pays for the same plan. That’s $625 times 2.12, or about $1,327 a month and $15,927 a year at 2026 prices.
Now put her at $63,800 of income. Her expected contribution is 10.22% of that, which comes to $6,520 a year. The credit covers the rest: $15,927 minus $6,520 is $9,407. At $63,900, she’s over the line and pays the full $15,927 herself. A $100 difference in income moves $9,407 of cost onto her.
And 2026 prices are the floor. KFF’s review of filings from 276 insurers found a median proposed increase of 15% for 2027, the second-highest requested change since 2018. Every dollar the benchmark rises gets added to the subsidy for people under the line and to the bill for people over it, so the cliff gets taller every year that premiums climb.
The income that counts is a number you can still lower in April
Most “subsidy cliff” explainers stop at the warning. The part they skip is that the marketplace doesn’t use your salary. It uses modified adjusted gross income, which is your adjusted gross income plus a few add-backs like tax-exempt interest and untaxed Social Security. Anything that reduces AGI pulls you back down the hill.
The two big levers are a deductible traditional IRA contribution and an HSA contribution. The IRS lets you make IRA contributions for a tax year up until that year’s filing deadline, and HSAs follow the same April deadline. So if 2027 ends with you at $64,500, you have until April 2028 to put enough into a deductible IRA to land under $63,840 and claim the credit when you file. The HSA route got easier too: starting in 2026, every bronze and catastrophic marketplace plan counts as HSA-eligible, so that lever is open even if you picked the cheapest metal tier.
In our example, a $1,000 traditional IRA contribution drops her from $63,900 to $62,900. Her expected contribution becomes $6,428, the credit comes back at about $9,499, and she still has the $1,000 in her own retirement account. One caveat worth taking to a tax preparer: if you or a spouse are covered by a workplace retirement plan, the IRA deduction can phase out, which defeats the purpose. Self-employed women have extra room through a SEP or solo 401(k).
A wrong estimate now costs every dollar, even under the line
The marketplace pays your credit in advance, based on what you predict you’ll earn, and the IRS settles up when you file. Until this year, households under 400% who underestimated income repaid only a capped amount. The One Big Beautiful Bill Act removed those caps starting with tax year 2026, per IRS release IR-2025-127. Above 400% you always owed the whole thing back. Now everyone does, which turns the income box on your application from a formality into real money.
Picture the December bonus. You estimate $61,000, collect the advance credit all year, then a $3,500 year-end bonus lands you at $64,500. Without a fix, you repay the full year of advance credits on your 2027 return, roughly $9,400 in our example. With a $700 IRA contribution before April, you’re at $63,800 and owe nothing extra.
That’s why the estimate deserves the same attention as the plan. If your income is lumpy, it can make sense to estimate a little high and take a smaller advance credit, then collect the difference as a refund. You can also update your income on HealthCare.gov midyear when something changes, which resets the advance going forward.
What to do before December 15
Open enrollment for 2027 starts November 1, and enrolling by December 15 gets you coverage that starts January 1. Before you compare a single plan, write down three numbers: your best guess at 2027 MAGI, the 400% line for your household size ($63,840 for one person, more for each person added), and how much you could put into a deductible IRA or HSA if you ended up close.
If you’re comfortably under the line, estimate honestly and shop plans the usual way. If you’re within a few thousand dollars, treat that IRA or HSA contribution as part of your health insurance budget, because in effect it is. If you’re well over it, the credit isn’t coming back, and your comparison is purely on full price, which is where a lot of 50-somethings will discover that a bronze plan plus an HSA beats silver. We ran similar worst-year math for employer plans in our HDHP vs PPO guide, and the same logic applies on the marketplace.
The ACA subsidy cliff is a blunt rule, and it’s the rule for 2027 unless Congress changes it. I’d rather you know where your line sits in November than find out from a tax bill in April 2028. When a $1,000 deposit into your own retirement account decides whether you pay about $6,400 or $15,900 for the same plan, that deposit belongs in your health insurance math as much as your retirement math. (Our Roth IRA vs 401(k) explainer covers why only the pre-tax side lowers MAGI.) If your income has moving parts, run the numbers with a tax professional before December 15.