Millions of people are silently getting a financial life. The federal tax credits that were significantly boosted by the Inflation Reduction Act (IRA) and that assisted a historic 2 million Californians in paying for health care coverage will expire on December 31, 2025. To most of them, it implies that the welcome envelopes of Covered California will be shocking sticker shocks in late 2025 when the premiums are estimated to increase drastically.
However, there is one important piece of good news: the state subsidy program of California is prepared to play the role of a financial buffer. This change is what is important to ensure that your coverage is affordable. Before facing a payroll tax audit, we must look for an experienced tax expert for help.
What are the Reasons Behind the Rising Premiums?
The IRA temporary subsidies accomplished two mighty things: they made premium tax credits more generous to all income earners, and they removed the notorious cliff in subsidies that cut off support of higher income earners.
Their expiry would see them revert to less generous, pre-2021 rules of calculation. This may mean an increment of $300 or higher in the monthly premiums of the same Silver-tier plan to a family of four in Los Angeles with a household income of $120, 000.
Understand the Immediate Impacts
- Increased monthly premiums for the same plan.
- Another subsidy cliff for those earning above 400 percent of the Federal Poverty Level.
- Possible necessity to re-deliberately re-shop in Open Enrollment to discover the optimal new value.
Learn about the State Safety Net, The Affordable Program
This was a federal pullback that California expected, unlike most states. The Enhanced Premium Subsidy initiative of the state is a program where the state utilizes its funds to offer supplementary financial assistance. In the case of 2026, it will cushion the federal cut.
How to Use Them to Your Advantage?
- You Must Re-Enroll
Your subsidy will not readjust. To have your eligibility recalculated with new state and federal numbers, you will have to actively undergo the Open Enrollment process on Covered California (Nov 1, 2025 – Jan 31, 2026).
- Review Switching Tiers
The least expensive plan following the changes can change. A more expensive Gold plan, having more monthly premiums but less deductibles, may prove cheaper with the new subsidy math than your old Silver plan. Be industrious with the plan comparison tool. Try to consult with a tax expert (like a California tax attorney) for additional guidance.
- New State Middle-Class Credit
California has special regulations to assist those who are just above the cliff of subsidy. Ask about California-specific help, which still may be provided, in case your income is more than 400% FPL.
Finding a New Tool for Your Health Budget
Another avenue to savings is provided by a distinct yet important change in rules to be made in 2026. The new federal rules have enabled you to use your Health Savings Account (HSA) to cover the Direct Primary Care (DPC) membership payments using pre-tax funds.
- DPC models have a monthly fee, which includes unlimited primary care access with typically longer appointments and direct access to the doctor.
- A combination of a High-Deductible Health Plan (HDHP), which is eligible to serve an HSA, and a DPC membership can be quite a smart approach. Your guessable primary care is tax-free HSA money, and your insurance is for your specialists and emergencies.
- Such a mix would be able to provide more control over access to and the cost of healthcare, which will be stable despite changes in insurance premiums.
Making the Perfect Action Plan for 2026
Mark Your Calendar to Open Enrollment (Nov 1, 2025). Do not auto-renew.
Budget for an Increase. Estimate New Costs: Early to Model Contact Covered California or use their online estimator.
Shop Beyond Premiums. Compare plans based on total out-of-pocket (deductible + premium + copays).
Consult a Expert. A free licensed Covered California insurance agent would assist you with navigating the new terrain and maximizing your state subsidy.
The federal step back is a challenge, but the proactive subsidies in California, and new HSA flexibility gives the keys to make it through. With a smart move in the course of Open Enrollment, you may come out all right in terms of finding a good cover and still fitting it into your budget.