The Subsidy Question: What Could It Mean for Employers and Employees?
by Jess Southwell
Since the passage of the Affordable Care Act (ACA), subsidies have played a central role in keeping healthcare coverage affordable for millions of Americans. Temporary federal enhancements expanded those subsidies further, lowering premiums for many middle-income families. Now, as policymakers debate whether to extend or let those subsidies expire, both employers and employees face an uncertain landscape.
The outcome will directly impact premiums, employer strategies, and employee access to affordable coverage. Below, we outline what could happen under both scenarios.
| Category | If Subsidies Are Extended | If Subsidies Expire |
|---|---|---|
| Employee Premiums | Marketplace plans remain more affordable | Premiums rise, making coverage unaffordable for many |
| Employer Options | Employers can evaluate ICHRA as a cost-saving alternative to group health plans | Employees may turn to employers for help covering lost subsidies |
| ICHRA | Subsidies combined with employer contributions keep coverage competitive and affordable | Becomes a critical safety net for employees losing subsidies or Medicaid |
| Medicaid | Continues to support low-wage and disabled employees | Employees losing Medicaid may go without coverage unless employers step in |
| ACA Enrollment | Enrollment likely grows, strengthening risk pool and stabilizing premiums | Risk pool shrinks, leading to year-over-year premium increases |
| State Consideration | Less urgency for states to create new employer incentives | States may increase incentives for employers to help offset subsidy loss |
| Timing | Employers have time to explore ICHRAs, test contribution strategies, and plan gradual shifts away from group coverage | Employers may need to urgently adapt benefits to prevent employee coverage gaps |
Example of Impact
Family of four, 325% federal poverty level (FPL) in 2025:
With enhanced subsidies: $165/month
Without subsidies: $372/month
Without the extended subsidies, their premium could increase by 125% per month.
What Employers Should Do Now
Regardless of the outcome, employers have an opportunity and a responsibility to prepare:
- Review alternatives like ICHRA and defined contribution strategies
- Evaluate contribution models that keep coverage affordable even in the absence of subsidies
- Monitor state and federal developments closely
- Engage benefits advisors to stress-test scenarios before the 2026 enrollment cycle
Whether subsidies are extended or expire, change is coming. An extension brings welcome stability, but it shouldn’t lead to complacency. An expiration could cause sudden disruption, requiring fast action and flexibility.
Now is the time to plan, not wait, so you’re ready for what comes next.
About the Author — Jess Southwell
Jess Southwell is the SVP of ICHRA Product at Decisely. She leads the strategy and growth of Decisely’s ICHRA product, helping businesses of all sizes, navigate modern healthcare benefits with flexible, scalable solutions tailored to today’s workforce.