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No, not Cliff. Cliff is fine.
But cliff. I hate you, cliff.
As in “income cliffs.”
Part of the drama unfolding in the American healthcare / ACA / Obamacare system involves how the “Big Beautiful Bill” allows the temporary, expanded ACA subsidies to fade away while tightening eligibility rules for coverage.
Pre-OBBBA = more subsidies = you pay less.
Post-OBBBA = fewer subsidies = you pay more.
For many people buying insurance on the ACA exchanges for 2026, their premiums (aka insurance costs) will rise meaningfully. Some households that previously qualified for help may no longer do so.
But rather than a smooth transition of benefits, this ACA premium change is a cliff. Here’s an example that Cody Garrett recently shared on LinkedIn.
The impact of the ACA cliff returning in 2026:
A married couple (age 64) covered by a Marketplace plan (in Texas):
With a household income (MAGI) of $84,600, their Premium Tax Credit is $2,076/mo. = $24,912/yr.
But with an income of $84,601, their Premium Tax Credit is $0.
Yes, a $1 increase in income triggers a $24,912 increase in their health insurance premiums.
This type of situation will be an ugly surprise when taxpayers file in early 2027 – having to repay $10,000s of excess advance PTC.
And will likely increase the number of early retirees who hire a financial planner.
Cliffs can be gorgeous. But not all.
$1 of extra income = $25,000 in expenses. It’s unbelievable. Who wants to fall off that cliff?
The world of taxes, income limits, government benefits, etc, is usually a world of ramps. Phase-ins, phase-outs, marginal rates, sliding scales. These ramps are intentionally designed because cliffs are so asinine. I’m an engineer. C’mon. Who doesn’t love a ramp?!
But some parts of this financial planning world are sheer cliffs. Take one little step over that cliff and whooooooooooaaaaaa it’s a long way down. Who wrote these policies? Which Signal chat was I excluded from?
Some other common cliffs include:
- Medicaid eligibility
- IRMAA surcharges
- FAFSA / financial aid
- Certain childcare subsidies and tax credits
I think the Medicaid eligibility and childcare subsidies are especially heinous, as they tend to affect more financially vulnerable families. For example:
Childcare assistance is usually administered at the state or county level, but many programs cap eligibility around 200% – 300% of the Federal poverty level.
Take a family of 3, whose childcare subsidy cutoff is at 250% of FPL, or $64,500 of household income.
Below the cutoff, that family might pay $300- $500 per month, with their state covering the rest
Above the cutoff, the subsidy disappears, and full daycare cost kicks in. Daycare is ridiculously expensive…annual cost: $15,000+ per child.
So the cliff looks like this:
- Earn $64,500…childcare costs ~$5,000/year
- Earn $65,000…childcare costs ~$15,000/year (or more)
That’s a $500 raise creating a $10,000 expense. Yikes.
Lower-c cliff is a major scoundrel. Make sure you know where he lurks.
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