Hit the ACA cliff? Here's what to actually do.
The Inflation Reduction Act's enhanced ACA subsidies expired Dec 31, 2025. For 2026, the Marketplace reverted to the pre-IRA schedule — including the 400% FPL cliff. If your 2026 household income lands above the cliff, you owe the full premium. KFF modeled a 60-year-old couple at $85k seeing a $22,600/yearincrease. Here's what Wisconsin households can actually do about it.
First: confirm you're actually over the cliff
The cliff sits at 400% of the Federal Poverty Level for your tax household size. For 2026, that's roughly:
- 1 person: over $60,240/yr
- 2 people: over $81,760/yr
- 3 people: over $103,280/yr
- 4 people: over $124,800/yr
Important: the Marketplace uses projected 2026 MAGI, not 2025 actuals. If your income is variable (self-employed, retirement drawdown, capital gains, freelance), your real number for the year may end up under the cliff after deductions. Talk to a tax preparer before you assume you're hit.
Run our income calculator to see exactly which programs you cross or miss at your projected 2026 MAGI.
Path 1 — Lower your projected MAGI under 400% FPL
The cliff is binary. $1 below the threshold and you get an APTC of likely thousands per year; $1 above and you get zero. So lowering MAGI by a few thousand is sometimes the highest-ROI move you can make all year.
Legitimate ways to reduce projected MAGI:
- Traditional IRA contribution.$7,000 in 2026 ($8,000 if 50+). Deductible if you don't have an active employer 401(k) — phaseouts apply if you do.
- HSA contribution.Only if you're on a qualifying HDHP. Limits: $4,400 self-only, $8,750 family in 2026. Anyone 55+ can add $1,000.
- Self-employed retirement (SEP-IRA / Solo 401(k)). Up to ~25% of net self-employment earnings. The single biggest lever for freelancers and consultants.
- Self-employed health insurance deduction. Premiums you pay for ACA coverage are themselves deductible from MAGI when you're self-employed — and that deduction can drop you under the cliff. There's an iterative-calculation issue with this one (the deduction depends on the subsidy, which depends on the deduction); tax software handles it but your CPA may need to plug it in twice.
- Business expense recognition. Self-employed people: bunch deductible expenses into 2026 instead of stretching them across years. Section 179 / bonus depreciation on equipment. Home-office deduction if you qualify.
- Charitable contributions / Donor-Advised Fund. Doesn't reduce MAGI directly — but if you itemize and it shifts AGI, it can move the dial enough to matter.
- Defer income.Push a December bonus or client invoice into January 2027 — fully legal as long as the work isn't already done and accepted.
What does NOT count: capital losses (offset capital gains, not other income, beyond a $3k cap), 401(k) loans (not income reduction), Roth IRA contributions (post-tax, no MAGI effect).
Path 2 — Catastrophic plan (under 30, or hardship exemption)
Catastrophic plans have very low monthly premiums and very high deductibles (~$10,000 single in 2026). They're ACA- compliant and cover the same essential health benefits as metal plans, plus 3 primary-care visits before the deductible. They are NOT eligible for APTC, but most people considering them on the cliff path don't qualify for APTC anyway.
Eligibility:
- Under 30 at any point in 2026 — automatic.
- 30+ with an affordability hardship exemption. If the cheapest Bronze plan available to you costs more than ~8.39% of your household income, you can apply for a hardship exemption that unlocks Catastrophic eligibility (and an exemption from any state-level individual mandate). This is the path many cliff-affected 60-somethings overlook.
- 30+ with another hardship(homelessness, eviction, domestic violence, recent bankruptcy, ineligible for Medicaid in a non-expansion state — yes, that's literally Wisconsin's situation for the coverage gap).
Catastrophic plans cover the worst-case (hospital stay, cancer diagnosis, accident) — which is the actual purpose of having health insurance. The deductible is large but bounded; without insurance, a single ICU stay can be $200k+. This is notthe same thing as “junk” short-term insurance described below.
How to apply: on HealthCare.gov, enter your info; if a Catastrophic plan is available based on age, it shows up. For the hardship exemption path you submit Form OMB 0938-1190 (download from healthcare.gov/exemptions). Expect 2–6 weeks for approval; Marketplace will give you a retroactive effective date.
Path 3 — Split the household across programs
The cliff is per-tax-household, but Medicaid is per-person. Some Wisconsin households at 400%+ FPL can still split:
- Children up to 300% FPLqualify for BadgerCare Plus regardless of parents' income (with a sliding-scale premium between 200–300% FPL). At 400%+, kids are over even that ceiling — but they're cheap to insure on the Marketplace because the ACA only counts the three oldest under-21 children, and child rates are 76.5% of the age-21 anchor.
- Pregnant residents qualify for BadgerCare+ up to 306% FPL — household income tested at the household level but coverage applies to the pregnant person and the baby for 12 months postpartum.
- One spouse on Medicare.If one of you turns 65, that person leaves the Marketplace pool entirely. The remaining spouse 's subsidy math is recomputed against a household-of-one income, which often unlocks APTC even when the joint income was above the cliff.
- SeniorCare for 65+ Rx.Wisconsin's state Rx assistance program isn't income-tested at the same threshold as APTC. Even a household at 400%+ FPL might qualify for SeniorCare Level 2b (up to 240% FPL Level 2a; no upper limit on Level 3, just a higher deductible). See SeniorCare vs. LIS.
What NOT to do
Several “cheap insurance” alternatives are heavily marketed to people hit by the cliff. Most are traps.
- Short-term limited-duration insurance (STLDI). Federal rules tightened in 2024 — STLDI plans can no longer extend past 4 months. They are NOT ACA-compliant: they can deny pre-existing conditions, exclude prescription drugs, cap lifetime payout. A 60-yo who buys STLDI then has a heart attack in month 5 is uninsured at the moment they need it most. If you're considering this for a literal 2-month gap before Medicare kicks in, fine; for a full calendar year as primary coverage, it's catastrophically risky.
- Healthshares / Christian medical-cost-sharing. Not insurance — explicitly exempt from ACA rules and from state insurance regulators. They 'share' what they choose, can deny pre-existing conditions, and have no obligation to pay claims at all. Some are well-run; most shouldn't be your only coverage. Wisconsin has had multiple consumer-protection cases against healthshare operators in the last decade.
- “Hospital indemnity” or “accident only” plans as primary coverage. Pay you a flat amount per hospital day. Useful as supplemental coverage (Aflac-style), useless as primary.
- Going uninsured.CBO models 2.2M additional uninsured Americans in 2026. The expected cost of a serious medical event vastly exceeds even the cliff-priced premium — if you're going to spend $1,500/mo, do the math on what one ICU stay costs without coverage. The federal individual-mandate penalty is $0; the practical exposure is unbounded.
If you're close to 65
Cliff math gets a lot less brutal when Medicare arrives. A 60-year-old has 5 expensive years to bridge; a 64-year-old has 1. Strategies that compound that proximity:
- Accelerate retirement-account drawdowns to before 65.Once you're on Medicare, RMDs and high MAGI don't cost you APTC anymore — they only affect IRMAA (the income-related Part B premium surcharge), which tops out far above the cliff.
- Don't miss your IEP. Even a brief uninsured stretch right before Medicare kicks in is workable; missing the 7-month Initial Enrollment Period triggers a lifetime Part B late-enrollment penalty (10% per year missed). See our pre-Medicare timeline.
- Wisconsin Medigap Open Enrollmentkicks in for 6 months after Part B starts. It's the ONLY window when carriers can't medically underwrite. Do not enter Medicare with a chronic condition and then try to buy Medigap a year later — you may be locked out.
Most cliff-affected households we've modeled are best served by:
- Run the numbers on whether MAGI-lowering moves are feasible for 2026. A few hundred dollars of traditional IRA contribution can be the difference between $0 and $15,000 of APTC.
- If MAGI can't move enough, buy the cheapest Bronze planon the Marketplace — this is what the law assumes you'll do, and it's ACA-compliant so pre-existing conditions stay covered.
- If you're under 30 or qualify for the affordability hardship, switch to a Catastrophic plan — same essential benefits, lower premium, much higher deductible.
- Re-check coverage every quarter. Income drops, family-size changes, pregnancy, or a 65th birthday can re-open APTC mid- year via a Special Enrollment Period.
Sources: KFF (2026 premium projections); CBO Report R48290 (uninsured projections); 26 USC §36B (premium tax credit statute); 45 CFR §155.605 (hardship-exemption catastrophic eligibility); HHS Notice of Benefit and Payment Parameters 2026 (Catastrophic plan rules); WI DHS BadgerCare Plus eligibility handbook.