Texans are tightening their budgets to pay for health insurance after subsidies expired

When Daniel Morrow answers the phone, he is out of breath from raking leaves. Professional lawn maintenance is one of a long list of expenses he has trimmed to budget for higher health insurance premiums in 2026.

"There's a lot of different things I'm doing to keep monthly expenses down," he said.

Morrow is now paying $1,529 a month for insurance purchased through the Affordable Care Act marketplace, compared to $687 last year. It's an expense he didn't anticipate when he retired a few years ago.

"If I was not going to be on Medicare in a few months, I would literally go back to work," he said. "I would be looking for any job that would provide health insurance."

At 64, the Dallas resident has around six more months before he qualifies for Medicare. In the meantime, he's tightening his belt.

Morrow's costs are affected by the expiration of the enhanced premium tax credit, a COVID-era subsidy that made ACA plans more affordable for many Americans, including middle-income earners who make more than 400% of the federal poverty level. Yet early data indicates that many Texans, like Morrow, are finding ways to keep health insurance in their budget for 2026 despite being confronted with higher premiums.

As of Jan. 3, more than 4.1 million Texans had enrolled in a health plan via HealthCare.gov, according to the Centers for Medicare & Medicaid Services. That's a record for Texas. These early numbers come as a surprise to some policy experts who predicted skyrocketing premiums would influence many Texans to forgo insurance in 2026.

But experts also say the current data don't paint a full picture. For one thing, they exclude people who enrolled or made changes to plans between Jan. 3 and Jan. 15, when the enrollment period ended. They also don't reflect any Texans who enrolled but didn't pay their premiums when they came due.

"Many people who enrolled for 2026 won't be able to start their plans because of the expensive January payment," said Lynn Cowles, a policy expert with Every Texan. "Or, they're able to pay for a month or two before having to drop when monthly premiums outpace income."

That might include folks who were automatically re-enrolled in their health plans from 2025 without realizing their costs were set to increase. CMS generally releases a report that shows the number of "effectuated" enrollees — that is, those who paid their premiums — in July.

Considerations and tradeoffs

The raw enrollment numbers also don't communicate the difficult calculations Texans have made in order to make health insurance fit within their budget this year. Some, like Morrow, switched to lower-quality plans. In addition to a higher monthly premium, his deductible and out-of-pocket maximum costs have risen.

"A lot of people did switch to either bronze level plans or to other lower cost plans, depending on what their income levels are, so that they could have a more affordable option with their monthly premiums, which then usually means less affordable options for coverage throughout the year," Cowles said.

Others are closely watching their income this year to ensure they don't pass beyond a so-called "subsidy cliff." Many lower-income residents are still eligible for some government subsidies — the original premium tax credits that existed before the Biden administration introduced the additional "enhanced" tax credit in 2021. But if their actual earnings over the coming year are higher than expected — a common outcome for freelancers and small business owners — they could end up paying some or all of the subsidies they received back in taxes next year.

Austinite Kathryn Pacheco relied on marketplace insurance for her and her two sons, whom she homeschools while her husband works at a small business. Their household income puts the family just shy of the income limit to receive subsidies for a family of their size, around $130,000.

With the help of subsidies she was able to re-enroll in the same plan she had in 2025 for about $95 more per month, Pacheco said. But she's bracing the cost of an expected surgery for her son while on the high-deductible plan.

"If we made extra money to cover the surgery, or just plain make extra money, or if I wanted to get a part-time job, it could send us over that subsidy cliff," she said.