If you have health insurance as a freelancer — and you should — there’s a good chance you bought it through the Affordable Care Act’s health insurance marketplace. The federal system offers options for people who are self-employed, employees of small businesses or who otherwise don’t have health insurance elsewhere, like through their job, parents or spouse.
“It’s available everywhere, there are subsidies based on your income, so it works really well for people who are freelancers or running their own business,” Louise Norris, health policy analyst for healthinsurance.org, told me.
But it’s about to work less well, or at least be significantly more expensive, for many of us in 2026. Norris broke down why — and what freelancers can do.
Can you explain the ACA subsidies and how they work?
Under the Affordable Care Act, the administration created subsidies, which are just a tax credit. You project what you think your income will be during the year and then the federal government sends your insurance company one-twelfth of that each month to offset how much you have to pay.
At first, if your income was more than 400% of the poverty level, you didn’t qualify for this tax credit. But if your income was below 400% of the poverty level — assuming you weren’t eligible for Medicaid — you qualified. It was on a sliding scale based on your income and created what we refer to as a subsidy cliff: People were finding that at 400% of the poverty level, they went from getting a pretty significant subsidy to getting no subsidy if their income increased at all.
When the American Rescue Plan was enacted in 2021, one thing it did was remove that 400% cap. Instead, it said, “If you’re over that limit, if it’s going to cost more than 8.5% of your income to buy the second lowest-cost plan, then you get a tax credit to bring it down to 8.5% of your income.”
That meant more people qualified for the tax credits, which also got bigger. As a result, enrollment has increased significantly over the last few years.
The two-year provision was extended through 2025 by the Inflation Reduction Act of 2022. These subsidy enhancements expired at the end of December.
Now, the ACA reverts to its original form: You still get a tax credit if you’re not earning at more than 400% of the poverty level, but if you’re above that, you go back to paying full price. Plus, the underlying cost of premiums has increased over the years, so a full-price plan in 2026 is a lot more expensive than it was in 2020.
What actually is the poverty level?
If you’re in the continental U.S., 400% of the poverty level is roughly a little under $63,000 for a single person. However, the poverty level isn’t adjusted to reflect changes in the cost of living — except in Alaska and Hawaii — and earning $65,000 a year in Fargo, North Dakota, is very different from earning that amount in San Francisco.
Meanwhile, if you are 64, you are paying three times as much for health insurance as a person who’s 21 living in the same part of the country. If you’re under 400% of the poverty level, the subsidies adjust to reflect that: A 64-year-old will get a much bigger subsidy than a 21-year-old, but if you’re 64 and you’re a little over that 400%, you are responsible for the full premium.
How can freelancers predict what they’re going to make over the course of the year?
You just have to do the best you can, and if it starts to become clear as you get into the year that your projection was off, then you need to log into your marketplace account and make an adjustment.
One thing that has changed in 2026 under the One Big Beautiful Bill is there’s no longer any cap on how much excess subsidy you have to repay. So if you underestimate your income, the tax credit you’re going to qualify for is going to be a lot less than what was provided to you throughout the year. You have to repay all of that.
So it is really important for people with variable income to do the best they can projecting it, then keep the marketplace updated. It’s never a pleasant surprise when you start filing your taxes and realize you owe the IRS even more money.
That said, if you’re going to end up earning less than you projected but still in that subsidy-eligible range, you don’t have to keep it updated. You can just claim the additional amount when you file your taxes.
If you’re in a high-cost area, it’s not uncommon for people’s subsidies to be hundreds of dollars a month — sometimes over $1,000. So with this subsidy cliff coming back, people need to be paying attention to [how much they’re getting from the credit versus what they might get from an assignment].
Something else to consider is how your tax deductions can affect your income. If you are a freelancer, it’s well worth scheduling a meeting with a tax adviser because, for example, both pre-tax retirement account contributions and health savings account contributions will reduce the income that’s used to calculate your subsidy eligibility.
Another key point is that for 2026 coverage, all bronze plans in the marketplace are HSA eligible. So let’s say I’m a freelancer and I’m expecting to make $70,000 in 2026. If I select a bronze plan and open an HSA, I can put $4,400 in an HSA that brings my income down to $65,600. If I also have an IRA and put $3,000 into it, I’ve got my income now below 400% of the poverty level.
More generally, it’s important to keep watching because we don’t know what Congress is going to do in January or February or March. When they originally introduced the American Rescue Plan, it was in March and they backdated it to January. So the fact that they didn’t get this done in December doesn’t close the door.
What other advice do you have for freelancers who are worried about this change?
If you haven’t yet picked a health insurance plan for 2026, open enrollment is ongoing through at least the middle of January everywhere except Idaho. You still have time.
If you go in the marketplace right now, you’re going to see the original ACA subsidies; You will see what the premiums are going to be assuming Congress continues to do nothing. But if in another month or two, Congress does something, it’s possible your premiums could go down. They won’t get any worse than what you’re seeing today.
The key point is: Going without health insurance is not a wise idea. No matter how healthy you are, you don’t know how healthy you’ll be in six months. Once that open enrollment period ends, you’re stuck until 2027, unless you qualify for a special enrollment period.
It’s true that in 2021, when Congress changed the subsidy structure, they opened a special enrollment period. But there’s no requirement for them to do that. So it’s not a great idea to do nothing and wait. Right now, people should just sign up for whatever they can afford.
Would you ever recommend freelancers opt out of the marketplace altogether?
If you have an option to, say, go on your spouse’s plan through their job or if you’re under 26 and can join your parents’ plan, those are options. But if the alternatives are non-ACA compliant — things like health care sharing ministry programs or short-term health insurance or fixed indemnity plans — they’re not options I would ever recommend.
Health care sharing ministries are not considered health insurance; you have no recourse if they don’t share your bills. Something like a short-term health insurance policy can exclude preexisting conditions and have caps on their benefits.
Fixed indemnity plans will have a set schedule of benefits, and so the plan might say “for each day you’re in the hospital, we’ll give you $2,000.” That’s a laughably small amount. Real health insurance caps your out-of-pocket; a fixed indemnity plan caps the plan’s out of pocket.
Those plans sometimes get marketed in a way that if you don’t really know what to look for, you might not realize you’re not getting real health insurance. That has been one of my biggest concerns all year as we’ve been facing this subsidy enhancement expiration: that folks would start Googling for alternatives and enrolling in something that’s not real health insurance coverage or that doesn’t provide the sort of protection that they need. They might not find that out until they have a significant medical event.
What else do you want our freelance members to know?
Just stay tuned: We will keep on updating on HealthInsurance.org as this whole process unfolds.
