The ACA Subsidy Cliff is Here: What Small Business Owners Need to Know About 2026 Health Insurance Costs
If you've opened your health insurance renewal notice recently and felt your stomach drop, you're not alone.
Premiums are up— way up. And if you or your employees have been relying on Affordable Care Act marketplace plans with subsidies, the sticker shock is real. Some people are seeing their monthly premiums double or even triple compared to what they paid in 2025.
Here's what happened, why it matters to your business, and most importantly, what you can do about it.
What Is the ACA Subsidy Cliff?
Let's back up for a second. Since 2021, enhanced subsidies under the American Rescue Plan and Inflation Reduction Act made health insurance significantly more affordable for millions of Americans, including many small business owners, self-employed individuals, and employees of small companies.
These enhanced subsidies increased the amount of financial assistance available and removed the income cap that previously cut off help for people earning more than 400% of the federal poverty level.
But those enhanced subsidies expired on December 31, 2025.
Now, in 2026, we're back to the original ACA subsidy structure, and for many people, that means dramatically higher premiums. Nearly 20 million Americans are affected by this change, and a significant portion of those are connected to small businesses in some way— either as owners, self-employed workers, or employees.
This isn't a small adjustment. For some families, it's the difference between affordable coverage and impossibly expensive coverage.
Why This Hits Small Businesses So Hard
You might be thinking, "I offer group insurance—why does this affect me?"
Here's the reality: the Marketplace and small business group insurance are more connected than you might think.
Many small business owners and their families get their personal coverage through the marketplace, especially if they're sole proprietors or have just a few employees. Even if you offer group coverage to your team, some of your employees might have spouses or family members on marketplace plans. And let's be honest—when your team is stressed about their family's health insurance costs, it affects their focus, morale, and financial stability.
Beyond that, small group health insurance premiums are climbing too. Median premium increases are hitting 11% this year, with some plans seeing increases of 20% or more. The entire health insurance landscape is getting more expensive, and small businesses are caught in the middle.
What This Means for You and Your Team
If you or your employees were benefiting from enhanced subsidies, here's what's likely happening:
Premiums are going up—significantly. People who were paying $50 or $100 a month might now be facing $400, $600, or even $800+ monthly premiums for the same coverage.
More people are uninsured or underinsured. When coverage becomes unaffordable, people drop it. That puts your employees at financial risk and can affect productivity and retention if health concerns aren't addressed.
Small business owners are reassessing everything. If your personal health insurance just doubled, you're probably taking a hard look at your business finances, including whether you can afford to keep offering group benefits or if there are better alternatives.
What You Can Do Right Now
This situation feels overwhelming, but you have options. Here's where to start:
1. Review What You're Currently Offering (or Not Offering)
If you're not currently offering group health insurance, now might actually be the time to reconsider. While premiums are up across the board, a well-structured group plan can sometimes be more cost-effective than individual marketplace plans—especially now that subsidies are reduced.
If you are offering group coverage, it's worth reviewing your plan design. Are there ways to adjust deductibles, copays, or coverage tiers that could lower premiums without sacrificing too much value?
2. Explore Alternative Benefits Strategies
Group insurance isn't the only game in town anymore. Here are a few alternatives worth exploring:
Health Reimbursement Arrangements (HRAs): Specifically, an Individual Coverage HRA (ICHRA) allows you to provide tax-free reimbursements to employees who buy their own marketplace plans. You set the budget, and employees choose the plan that works for them.
Direct Primary Care (DPC): Some businesses are pairing high-deductible plans with DPC memberships, which give employees unlimited access to a primary care doctor for a flat monthly fee (usually $50-100/month). It's not insurance, but it dramatically reduces out-of-pocket costs for routine care.
Professional Employer Organizations (PEOs): If you're struggling with small group rates, a PEO can pool your employees with other small businesses to access better pricing and more plan options.
3. Communicate with Your Team
If your employees are affected by the subsidy cliff, they're probably stressed. Even if you can't solve every problem, letting them know you're aware of the situation and exploring options goes a long way.
Consider hosting a benefits Q&A session or sending out resources about marketplace enrollment, qualifying life events, or other coverage options. Showing you care about their financial wellness builds loyalty.
4. Get Expert Help
This is complex stuff, and the stakes are high. Whether you're trying to control costs, switch strategies, or just figure out what's even possible with your budget, you don't have to navigate it alone.
At Shipley Benefits, this is exactly what we do. We work with small businesses across the country to design benefits packages that actually work— not just on paper, but in real life, with real budgets. We'll walk you through your options, explain the trade-offs in plain English, and help you make a decision you feel good about.
The Cliff Notes
The ACA subsidy cliff is real, it's here, and it's affecting your world— whether you realize it yet or not. Health insurance is getting more expensive, and small businesses are bearing the brunt of it.
But here's the thing: you're not powerless. There are strategies, alternatives, and solutions that can help you control costs, support your team, and keep your business on solid ground.
You just need someone in your corner who knows how to navigate this stuff.
Let's talk. Schedule a free 30-minute consultation, and let's figure out the best path forward for your business.
You don't have to do this alone.
Shipley Benefits & Insurance specializes in employee benefits and insurance solutions for small businesses and individuals nationwide. With over 20 years of experience, we make benefits simple, strategic, and stress-free, so you can focus on running your business.
