9 Years on ACA: Learnings for Early Retirees

Healthcare.gov started the 2027 ACA health insurance open enrollment on November 1, and some state-run exchanges started sooner. It will be my 9th year on ACA health insurance.

ACA health insurance serves millions of people for many reasons. This post covers one group: retirees under 65 and people who plan to retire early. I dug up the premium history over these years. It revealed good learnings for early retirees.

ACA premiums have been climbing fast. After adjusting for general inflation, the full price for the benchmark Second Lowest Cost Silver Plan (SLCSP) in my area is up 43% since 2024, and the full price for the Bronze plan I buy is up 52%.

ACA Subsidy Cliff

Not everyone feels the large increases the same way. The ACA subsidy cliff, which returned in 2026, imposes a hard cutoff at 400% of the Federal Poverty Level (FPL). It splits participants into two groups. Below the income cutoff, a premium tax credit caps what you pay as a percentage of income. Above it, you pay the full price. A $1 difference in income can gain or lose over $20,000 in tax credit. Here are the income cutoffs in 2027 based on the household size and the state:

Household Size	Lower 48 States	Alaska	Hawaii
1	$63,840	$79,800	$73,440
2	$86,560	$108,200	$99,560
3	$109,280	$136,600	$125,680
4	$132,000	$165,000	$151,800
5	$154,720	$193,400	$177,920
6	$177,440	$221,800	$204,040
7	$200,160	$250,200	$230,160
8	$222,880	$278,600	$256,280

The income used to measure against these cutoffs is the Modified Adjusted Gross Income (MAGI) for ACA, which is basically AGI plus muni bond interest plus untaxed Social Security benefits.

What gets less attention is how differently the two sides of the cliff experience rising premiums. I’ve had ACA health insurance in three different states, on different plans, with five or six different insurance companies. I calculated what a two-person household with income right at the cliff would have paid each year.

Premium History

I adjusted everything by the applicable Federal Poverty Level each year, which itself is adjusted for inflation. I’m only showing the effect of the current law, as if it were in effect between 2021 and 2025 (ignoring the enhanced subsidies during those years).

The red line shows the full annual price of the Second Lowest Cost Silver Plan (SLCSP), which is a benchmark in ACA health insurance. The blue line shows the net cost after the premium tax credit (PTC) for a two-person household with an income at the cliff. Households with income below the cliff pay less. The net cost is flat after adjusting for inflation because it’s set to a percentage of income.

Premiums were relatively stable in the first several years. Then they started taking off in 2025. The increase in 2026 was twice as big as in 2025. 2027 will be a third year of large increases. The cumulative increase over these three years is 43%. Because everything in the chart is already adjusted for inflation, these increases are above and beyond general inflation.

This phenomenon isn’t unique to my area. KFF reported that the median proposed premium increase from insurers nationwide was 15% for 2027 after a 20% increase in 2026. Some places may have had smaller increases, and others may have had larger increases than my area.

Premium increases in my chart come from two sources. One is normal aging. The other is health insurance prices rising faster than general inflation. Healthcare costs more over time because we’re more prone to health problems as we age. Why premiums have substantially outpaced general inflation is a debate for economists and policymakers. This post is about what we can do in the face of large premium increases.

Effect of Premium Increases

Premium increases affect two sides of the cliff very differently.

Benchmark Plan

When your income falls on the left of the cliff, you’re shielded from premium increases in the benchmark plan. Your net cost after the premium tax credit is capped at a percentage of your income. If the premium doubled, your net cost would still stay the same as long as your income doesn’t change (after adjusting for general inflation).

The right side of the cliff doesn’t have that shield. You’re completely exposed to premium increases. Even if you can afford the full price today, it can become a problem down the road.

Bronze Plan

My wife and I have always used a Bronze plan because we’re relatively healthy. Bronze plans have lower premiums but high deductibles and high out-of-pocket maximums. All Bronze plans are HSA-eligible now. The plan we most likely will choose for 2027 has a $13,800 deductible and a $24,000 out-of-pocket maximum. We don’t expect to come close to meeting the deductible.

The chart below shows our plans’ annual prices over the years.

The red line shows the full price. The blue line shows the net cost after the premium tax credit for a two-person household with an income at the cliff. Again, I adjusted everything for inflation.

Bronze plans cost less than the SLCSP. Their premiums had a similar pattern. They were relatively stable through 2024. Then there were consecutive large increases in 2025, 2026, and now 2027. The cumulative increase over three years is 52% on top of general inflation.

People on the right side of the cliff are fully exposed to these large increases. Choosing a Bronze plan saves some money initially, but prices can still escalate much faster than general inflation.

Price Gap Fluctuations

People receiving a tax credit while using a Bronze plan are rewarded for choosing a less expensive plan. The net premium formula is:

Percentage of Income – (Full Price of SLCSP – Full Price of Bronze Plan)

The component in the parentheses, i.e., the price difference between the SLCSP and the Bronze plan, isn’t stable. When the price gap shrinks, it can raise the net annual premium from $2,000 one year to $5,000 the next year in this example. However, we’re talking about lower total dollar amounts here. Whether it’s $2,000 a year or $5,000 a year, it’s still much more affordable than paying full price.

The price difference doesn’t necessarily change only in one direction. The net annual premium can drop back to $2,000 in another year when the price gap between SLCSP and the Bronze plan increases again.

Learnings for Early Retirees

Examining 9 years of premium history shows that the same large premium increases land very differently depending on where your income falls.

If your income falls on the left of the cliff, the premium tax credit absorbs most of the increases. After adjusting for general inflation, if your income stays the same, your net cost for the SLCSP in 2027 would be the same as in 2019, even though the full price rose sharply. The net cost for a Bronze plan swings from year to year as the price gap between the SLCSP and Bronze plan changes, but it stays far below the full price.

If your income falls on the right of the cliff, you don’t have such protection. Anyone paying full price is hit by the increases directly.

Know Your Cliff

The cliff is a hard cutoff. You must know where the cliff is and what counts and doesn’t count toward the cliff.

Track your income throughout the year and leave a cushion below the cliff. Don’t let a surprise year-end dividend or capital gain distribution blow you over. Choosing a Bronze plan and contributing to an HSA lowers your MAGI for ACA. So does making pre-tax 401k and IRA contributions when you have earned income. My tax calculator for retirees shows how far your income is from the cliff.

Retiring After 60

If you’re retiring at 63 and you’ll use ACA health insurance for only a couple of years, you can delay Social Security, set aside cash in an after-tax account, and withdraw from Roth accounts during those years. In some cases, it even makes sense to borrow from a HELOC or a securities-backed line of credit for a couple of years (please read the linked article for details). Spending after-tax cash, qualified withdrawals from Roth accounts, or spending borrowed money doesn’t increase your income for ACA.

Retiring Much Earlier

If you retire much earlier and expect to use ACA health insurance for many years, you need a plan to keep your income on the left side of the cliff. Self-employment, Social Security, interest and dividends, Roth conversions, withdrawals from pre-tax accounts, and realizing capital gains all increase your income for ACA. Keeping them low during years you’re on ACA health insurance will help. You can convert to Roth or realize large capital gains in years either before you get on ACA health insurance or after you get off.

If you can’t keep your income on the left of the cliff for the entire duration until you’re 65, it’s more important to land on the left in later years than in earlier years because premiums go up over time.

You can also bunch your income. If you must go past the cliff, go over big in one year to bank the money for the next several years. Spending banked money in subsequent years can help because it doesn’t add to your income.

Large premium increases above general inflation create challenges when you retire before 65. You can protect yourself from these increases by managing your income to the left of the cliff. Make a plan, track your income, and leave a cushion.