Americans purchasing health insurance through the Affordable Care Act (ACA) marketplace face higher costs for 2026 due to premium increases and the expiration of federal tax subsidies. While Congress has debated extending the enhanced subsidies, a permanent solution has not been reached, leading some consumers to look for cheaper coverage outside the government-run exchange.
The enhanced subsidies, which lowered monthly payments for millions of enrollees, are set to expire as open enrollment for the 2026 plan year continues. In the House of Representatives, four Republicans recently joined Democrats in a discharge petition to force a vote on a three-year extension. However, the current House leadership has focused on a conservative policy package that does not include the extension.
Short-term, limited-duration insurance plans are among the alternatives currently being marketed to consumers. These plans were originally designed to bridge gaps in coverage, such as for students or individuals between jobs. Because they are not required to comply with ACA regulations, they often feature lower monthly premiums but do not offer the same level of consumer protections.
Unlike marketplace plans, short-term insurance can exclude individuals with preexisting conditions or cancel policies retroactively based on medical history. According to KFF, a health policy nonprofit, these plans are not required to cover "essential health benefits" such as maternity care, prescription drugs, or preventive services. They are currently available in 36 states, while others, including California, have banned or strictly limited them.
For lower-income households and those with chronic medical conditions, the shift in costs may force a choice between high-premium comprehensive plans and lower-cost alternative plans that offer fewer protections. A person who switches to a short-term plan to save money on monthly bills may face significant out-of-pocket costs—sometimes reaching tens of thousands of dollars—if they require emergency surgery or specialized medication that the plan does not cover.
The outcome of this situation depends on federal legislative action in early 2025. If Congress passes a retroactive subsidy extension, consumers who paid higher rates in January or February may receive credits or refunds. However, if no extension is signed by President Trump, the higher rates will remain in effect for the duration of the year. The deadline for most Americans to select a plan for coverage beginning February 1 is January 15, 2026.