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Sharing this article (free link, I hope) because it does a great job explaining the ACA “subsidy cliff” — how a small change in income can suddenly make health insurance unaffordable. Hoping it helps people explain this to family or friends and sparks a real conversation about why subsidies matter and how the rules could be improved.
https://www.nytimes.com/2026/01/30/upshot/obamacare-subsidies-financial-cliff.html?unlocked_article_code=1.JVA.k0hc._GnYquc58qF6&smid=url-share
I’ve tried to explain the ACA and subsidies to a number of friends to limited success. Between calculating MAGI, understanding what income “counts,” navigating the exchanges, comparing premiums, plan levels, and deductibles, it’s a lot for anyone to wrap their head around. That complexity makes the cliff even harder to see — until someone falls off it. (Add politics to the conversation, whew!)
Hopefully, conversations — whether with family, friends, or those setting policy — can help move us toward fixing the health insurance morass in America.
I will bet most people do not even know what the cliff is! Hopefully they have family members or friends to help guide them. This cliff needs to be mended.
I understand your pain, Suzee. I’ve been helping my daughter navigate the ACA for years. She’s on the low end of the income spectrum, though. She must make at least $15,650 (100% of FPL for a single person), and not $1 under, to qualify for subsidies. We live in a state that not expanded Medicaid so that is not an option.
My husband retired early, and used the ACA as a 2 year bridge to Medicare, so I’m familiar with the upper income “cliff” also. We were able to manipulate our income to stay under the cliff. Thank goodness we are both on Medicare now.
Trying to explain this to anyone is a struggle, even to people who have ACA plans. Many couples don’t understand why both of their incomes count toward “household” income. Most people in my own state don’t understand why Medicaid expansion is so important. Because, God forbid an “able bodied” person could get “free” health care.
Our local paper published an opinion piece in October 2025 by Dean Clancy, a senior health policy fellow at Americans for Prosperity. Here’s a clip from his piece:
There is a way to have a high TOTAL income and pay little to no premiums. Your subsidy is determined by your MAGI which is calculated by:
Taking your Adjusted Gross Income
(dividends, business income, capital gains, retirement distributions, and unemployment) and adding back specific deductions like student loan interest, tax-exempt interest, and foreign income. It is used to determine eligibility for ACA health insurance subsidies, Medicaid, and IRMAA for Medicare premiums.
Before we retired we received an inheritance which included Roth IRAs and cash from the sale of my parents house.
Each year I used the calculator on the ACA website to determine the maximum taxable income to get essentially a 100% subsidy. Then we withdrew an amount from our own traditional retirement accounts to be just short of the taxable income, then we used either the Roth account or can to fund the rest of our expenses.
Also insurance companies must spend 80% of their premiums on actual healthcare benefits for the insured. If they spent less than 80% the difference has to be refunded to the insured. Because our insurance company paid out equal payments to all the insured regardless of the premiums paid we were actually paid hundreds of dollars to have the coverage.
My wife used to be embarrassed if she heard me explaining this to people. She thought we were cheating, but in reality we were playing by the government’s rules.
To rectify this loophole the law needs to be changed to include ALL income, not just taxable income. It is another give away to those with higher incomes and the knowledge as to how the ACA rules/law works.
“To rectify… ALL income.” You taking money from a cash account or a Roth isn’t income. Am I missing something?
This is hard to believe. “Many couples don’t understand why both of their incomes count toward “household” income.” I wonder what they think.
If both are under 65 and on ACA, then both incomes apply to determining ACA subsidy – makes sense. If then one goes on Medicare, both incomes still apply in a 1 person household for determining ACA subsidy. This means a disappearing of a subsidy at the same income level. It happened to us and it’s painful.
Thanks for posting this article. I’ve never needed the ACA – so while I knew it existed and it provided affordable health insurance to folks needing help, I’d never looked at the way coverage costs work.
Sooner or later – maybe someday- Americans will stop all the nonsense surrounding health care coverage, the complexity, the numerous ways we get insurance and come to the realization that we need a single, universal insurance system and risk pool similar to Medicare.
And, no, that’s not socialized medicine. 🥵
We have tried virtually all other options and none guarantee universal coverage or are less costly overall.
Yes, some version of universal insurance seems like a step in the right direction. It’s. Unfortunate we seem to be at never ending impasse, not giving up hope.
We have a one-payer system for those over 65, Medicare, Veteran’s receiving their care from the VA, medicaid, leaving only a section of the population with a large cost of care. Maybe we’ll get to the finish line some day.