Health Insurance Subsidies

For many years, as I worked with clients nearing retirement, I often saw them working until age 65 solely because of health insurance. As you may know, Medicare doesn’t kick in until 65, so health insurance coverage was a big hurdle prior to the Affordable Care Act (ACA), commonly called Obamacare, which took effect in 2014. Prior to that, for most people, if you didn’t have a job that offered health insurance, you didn’t have health insurance, especially for those with preexisting conditions. Regardless of your politics, this law opened the door to coverage for those wanting to retire prior to age 65, and retirement conversations are different now because of it.

Even now, for those with higher incomes, the premiums can be steep. Lower income individuals may qualify for a premium subsidy to bring the costs down to a more manageable level. In addition, during the pandemic, the American Rescue Plan Act expanded and enhanced the premium subsidies, so more people received financial assistance and could afford to obtain and keep their ACA health insurance. Although the higher subsidies were scheduled to end in 2022, the Inflation Reduction Act of 2022 extended them through 2025.

Now the reason for all this background information…

Extending the higher subsidies was not included in the One Big Beautiful Bill Act that was recently passed. The subsidies aren’t going away; just the enhancement that many have become accustomed to receiving or what has made the insurance affordable in the first place. This means most people with ACA health insurance will see significant increases in premiums starting in 2026 and the expectation is enrollment will materially decline because of this (enrollment has doubled since 2021).

I’ve seen many cases where the premium subsidies have been a boost to an early retiree, someone between jobs or a young person who is just starting out. I want to keep looking at this as “the glass is half full” because we continue to have access to health insurance regardless of job status and insurability standing. However, those with ACA coverage need to be prepared to spend more on healthcare next year.

- Juli Erhart-Graves, CFP®, Worley Erhart-Graves Financial Advisors

This article was included in the Worley Erhart-Graves Quarterly Newsletter.