Most people who buy Marketplace coverage currently receive federal subsidies that help lower their monthly premiums. The are two main types.

1. Premium Tax Credits (PTCs)

These reduce the amount someone pays each month for a Marketplace plan. 

2. Cost-Sharing Reductions (CSRs)

These lower out-of-pocket costs (deductibles, copays) for lower-income individuals on Silver plans.

What to Expect

• Federal enhancements to Marketplace subsidies are expected to decrease or sunset for 2026
• If this happens, Marketplace premiums will rise for many individuals next year
• Employees may wonder whether these premium increases allow them, or their dependents, to move into the employer’s group health plan mid-year

Important Compliance Note

IRS Code Section 125 rules require employees to keep their health plan elections in place for the entire plan year unless they experience a qualifying event (a “Permitted Election Change Event”) that permits a mid-year change.

A Marketplace premium increase does not create mid-year enrollment rights!

Increases in Marketplace premiums or reductions in subsidies:

• Are treated as cost changes to outside coverage and not changes in eligibility
• Do not meet the criteria for a permitted election change event
• Do not allow mid-year enrollment into the employer’s plan

Why is this the case?

• Section 125’s “cost change” provision applies only to cost changes within the employer’s own group health plan.
• It does not extend to Marketplace (QHP) plans or any other external coverage.
• Even substantial Marketplace premium changes do not override these rules.

Guidance for employees

• Employees experiencing higher Marketplace premiums will need to wait until their next annual open enrollment period to make a change to their employer plan election.
• Financial impacts on external coverage alone do not qualify as a basis for a mid-year switch under Section 125 rules.

As of the date of this email, the Senate has rejected both the extension of the tax credits/enhanced funding and an alternative plan to fund expanded Health Savings Accounts.

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