Closing a business in 2026 changes your health coverage in one of two ways, and the difference decides your deadline. Owners and employees covered by a group health plan through the business lose that plan when it terminates, and that loss of coverage opens a 60-day Marketplace SEP. Sole proprietors who already hold an individual Marketplace plan keep that plan after the doors close, because ending a business is not a qualifying life event (QLE) by itself, but a drop in income changes the subsidy they should be receiving. Medicaid, which is free and open year-round in the 40 expansion states plus DC, becomes available when projected 2026 household income falls under 138% of the Federal Poverty Level, or $22,025 for a single adult in 2026. Medi-Cal in California, AHCCCS in Arizona, MassHealth in Massachusetts, and BadgerCare in Wisconsin all operate within that federal framework under different names. Reading your termination notice first tells you which situation applies and which clock is running.
Marketplace coverage after a closure is usually cheaper than owners expect, because subsidies follow projected income, not last year's profit. For 2026, the premium tax credit applies from 100% to 400% of the Federal Poverty Level ($15,960 to $63,840 for a single person in 2026), and the enhanced credits that removed the 400% cap expired on January 1, 2026, so the subsidy cliff is back. A second 2026 change raises the stakes on estimating income: starting with tax year 2026, repayment caps on excess advance premium tax credits no longer apply, so Form 8962 reconciliation can produce a full repayment bill when you underestimate. Healthcare.gov, Medicaid.gov, and KFF's Marketplace analysis are the primary sources behind the figures on this page. COBRA continuation is a narrower option than most closing owners assume, since COBRA requires the employer to keep some group health plan in place. A fully closed business normally has none, so COBRA rarely applies when the whole company shuts down.
6 Steps to Get Coverage
Common Mistakes That Cost People Thousands
Business owners make these costly errors when their company closes in 2026:
- Assuming COBRA is available. COBRA requires the employer to keep a group health plan, so a fully closed business usually has no plan to continue.
- Waiting until the business is fully wound down to start shopping. The 60-day SEP clock starts when the health plan ends, and you can enroll up to 60 days before that date.
- Reporting last year's profit instead of projected 2026 income. A closing business often means far lower income, and the larger subsidy only arrives if you report it.
- Underestimating income. Starting with tax year 2026, repayment caps on excess premium tax credits no longer apply, so an overstated subsidy can mean repaying the full difference on Form 8962.
- Skipping Medicaid. In 2026, a year with a closed business can push household income under 138% FPL, and Medicaid is free coverage with no SEP deadline.
What Counts as Losing Coverage When a Business Closes in 2026
Group health plans sponsored by the closing business create the clearest qualifying life event. When a small-group plan terminates because the company dissolves, every covered owner, employee, spouse, and dependent loses minimum essential coverage, and healthcare.gov grants a 60-day Special Enrollment Period counted from the termination date. Individual Marketplace plans work differently. A sole proprietor who bought a plan on healthcare.gov keeps it after the business closes, and ending the business is not a qualifying life event, so no new SEP appears. That owner should instead update projected 2026 income on the existing application so the premium tax credit recalculates. Voluntary cancellation of a plan, or termination for unpaid premiums, does not open an SEP either. Retaining proof matters: the Marketplace may ask for a document showing the date the plan ended, and the insurer's termination notice is the strongest evidence. Owners of S corporations and partnerships who were covered on the company's group plan fall in the same category as employees, so they also qualify for the 60-day window once that plan terminates.
Medicaid Eligibility After Closing Your Business in 2026
Closing a business in 2026 often drops household income below the Medicaid line you did not qualify under while operating. Medicaid is income-gated at 138% of the Federal Poverty Level in the 40 expansion states plus DC, which means $22,025 for a single person or $45,540 for a family of 4 in 2026, and Medicaid.gov confirms that applications are accepted year-round. State programs carry their own names: California's Medi-Cal, Arizona's AHCCCS, Massachusetts's MassHealth, Wisconsin's BadgerCare, Connecticut's HUSKY Health, and Oklahoma's SoonerCare. Medicaid counts current monthly income at application, which helps a former owner whose business stopped producing revenue. The 10 non-expansion states (Alabama, Florida, Georgia, Kansas, Mississippi, South Carolina, Tennessee, Texas, Wisconsin, and Wyoming) apply much stricter adult limits, so a former owner there with income between 100% and 400% FPL ($15,960 to $63,840 for one person in 2026) should use subsidized Marketplace coverage instead. Children often qualify for CHIP at higher incomes, commonly 200% to 300% FPL in 2026.
Why Each Document Matters for Your 2026 Application
The plan termination letter is the document that most often decides whether a Marketplace SEP application is approved, because healthcare.gov verifies loss of coverage against a dated notice. Business dissolution papers matter when the owner was covered under the company's group plan, since they show the plan ended for a reason outside the owner's control. Profit and loss statements and the prior-year Schedule C support your projected 2026 income, which drives both Medicaid eligibility and the size of the premium tax credit. A self-employed applicant can estimate income without pay stubs, but the Marketplace may ask for a signed attestation or a profit and loss statement when the figure looks inconsistent with tax data. Social Security numbers let the Marketplace run identity and income checks in minutes. Address and ZIP code decide which insurers and which benchmark Silver plan set your subsidy. A prior 1095-A lets you reconcile credits already received, which protects you from repayment surprises when you file in 2027.
Tax Items to Handle After Closing a Business in 2026
Self-employed health insurance deduction rules apply for the months your business earned a net profit in 2026. IRS Form 7206 lets a sole proprietor deduct Marketplace premiums, up to the net profit of the business, for months when no subsidized employer plan was available to you or your spouse. A business that closes at a loss produces no deduction. The Marketplace sends Form 1095-A in January 2027, and Form 8962 reconciles the advance premium tax credits paid during 2026 against the credit you actually earned based on final income. Starting with tax year 2026, repayment caps no longer limit how much excess credit you owe back, so updating income at healthcare.gov when final business numbers change is the best protection. Final self-employment tax filings, the closing of an EIN account with the IRS, and state business dissolution filings follow separate timelines, and a CPA can confirm those deadlines for your entity type.
Frequently Asked Questions
What is the Special Enrollment Period window after my business closes?
The Marketplace SEP for loss of coverage lasts 60 days after your group health plan ends, and you can also apply up to 60 days before the end date. If your business plan ends October 31, 2026, your window runs from September 1, 2026 through December 30, 2026. The clock starts when the health plan ends, not when the business files dissolution papers. Closing a business while keeping an individual Marketplace plan does not open an SEP on its own. Medicaid and CHIP accept applications year-round with no window. Apply at healthcare.gov or your state Marketplace and upload your termination letter to document the loss.
How do I document that my business closed for a Special Enrollment Period application?
Upload the insurer's plan termination letter showing the coverage end date, because healthcare.gov verifies loss of coverage against that dated notice. Add business dissolution papers, a final payroll report, or a notice of closing when you were covered under the company's group plan. Keep a profit and loss statement and last year's Schedule C to support your projected 2026 income. The Marketplace usually asks for SEP proof within 30 days of plan selection, so gather them before you start. Self-employed applicants without pay stubs can use a signed income attestation when records are limited.
What if I miss the 60-day SEP window after my business closes?
Missing the 60-day SEP means you wait for ACA Open Enrollment, which starts November 1, 2026 for 2027 coverage and runs through January 15, 2027 on healthcare.gov (enroll by December 15, 2026 for January 1 coverage). You would be uninsured until then unless another qualifying life event applies, such as marriage, a move, or a birth. Medicaid and CHIP are not affected, because both accept applications year-round. A short-term plan can bridge a gap, but short-term plans do not cover pre-existing conditions and do not count as minimum essential coverage.
Can I get retroactive coverage after my business closes?
Marketplace SEP coverage is not retroactive. If you select a plan before your coverage ends, the new plan starts the first day of the month after your old plan ends, leaving no gap. If you select a plan after the loss date, coverage starts the first day of the month after you choose the plan. Medicaid may be different: federal law allows up to 3 months of retroactive Medicaid coverage for medical bills incurred before you applied, but several states have waived that rule, so ask your state Medicaid agency (Medi-Cal, AHCCCS, MassHealth, or your state's program) before relying on it.
What is the difference between COBRA and Marketplace coverage after a business closes?
COBRA keeps your old group plan at 102% of the full premium, about $400 to $900/mo for one person in 2026, but COBRA exists only if the business or a related employer still sponsors a group health plan. When a company closes and its plan terminates, no COBRA right exists. Marketplace plans use 2026 premium tax credits that often bring costs to $0 to $300/mo for moderate incomes, though you may change doctors. You have 60 days to elect COBRA and 60 days for the Marketplace SEP, so compare both before deciding. Medicaid beats both when your projected 2026 income is under 138% FPL.
What state-specific rules apply when a business closes?
State rules change where you apply and what you are called. California residents use Covered California and Medi-Cal, Minnesotans use MNsure, Kentuckians use kynect, and most other states use healthcare.gov. Cal-COBRA and New York continuation laws extend group coverage up to 36 months, but only while a group plan remains in force. Texas and Florida have not expanded Medicaid, so incomes under 100% FPL ($15,960 for one person in 2026) fall into a coverage gap. Wisconsin's BadgerCare Plus covers adults up to 100% FPL in 2026. Check your state Marketplace for any state-funded subsidies on top of federal 2026 credits.
Do I qualify for Medicaid after my business closes?
In 2026, you qualify in the 40 expansion states plus DC when your household income is under 138% of the Federal Poverty Level: $22,025 for one person, $29,863 for two, and $45,540 for a family of 4 in 2026. Medicaid counts current monthly income at application, so a former owner with no revenue after closing can qualify even if the 2025 tax return showed high profit. Use the household-size table on this page, then apply at healthcare.gov or your state agency. Medicaid is free coverage with no SEP deadline, and applications are accepted all year.
What happens to my children's coverage after my business closes?
Children often qualify for Medicaid or CHIP at higher incomes than adults, commonly up to 200% to 300% FPL depending on your state in 2026. Medi-Cal for Kids, AllKids in Illinois, HUSKY Health in Connecticut, and NJ FamilyCare are examples of state-branded programs. CHIP enrollment is year-round, and premiums are free or low. If your children lose coverage that was tied to the closed business's group plan, they also qualify for the 60-day Marketplace SEP. Apply for the whole family at healthcare.gov so the system routes each person to the correct program.
