Many retirees face a gap between retirement and reaching the age of 65 to qualify for Medicare benefits. According to a survey by Fuchs Financial, the median retirement age in the United States is 62, with 70% of retirees stopping work before they turn 65. So, where does health insurance for this transitional period come from?
The Affordable Care Act (ACA) marketplace serves as a bridge between employer insurance and Medicare during this gap. With many experiencing a drop in income post-retirement, the enhanced Premium Tax Credit (PTC) provided by the ACA makes health insurance more affordable.
While the One Big Beautiful Bill Act amends the ACA, it does not extend the enhanced subsidies. The ACA, in effect for 14 years, has expanded access to affordable health insurance. Kaiser Family Foundation reports that around 5.5 million adults aged 50 to 64 obtained health insurance through the ACA marketplace this year, regardless of subsidies, making individual insurance more accessible to retirees to bridge their healthcare gap.
The ACA prohibits health insurance companies from denying coverage or charging higher premiums based on pre-existing conditions or age, thus curbing age-related premium hikes. Given the reduced income for many retirees, ACA offers premium tax credits and cost-sharing reductions, allowing seniors to afford insurance on the market, addressing potential gaps in coverage.
Moreover, the ACA fills gaps in Medicare Part D prescription drug plans. The Premium Tax Credit (PTC) is a refundable tax credit that helps eligible individuals pay for health insurance purchased through the marketplace, subject to financial requirements and filing Form 8962 for tax purposes, as per the IRS.
The enhanced premium tax credit introduced during the COVID period builds on existing ACA subsidies tied to income relative to the Federal Poverty Level (FPL). For single households, the FPL is $15,650, and for two-person households, it is $21,150 as of 2025, set by Medicaid Planning Assistance. ACA subsidies, based on FPL percentages and limits, aim to ensure that healthcare expenses do not exceed a fixed percentage of income.
Subsidies cover individuals up to 400% of the FPL, offering assistance even to higher-income individuals. As the enhanced subsidies are set to expire by the end of 2025 without extension in the OBBB Act, regular subsidies post-2021 will remain in effect.
The income-to-premium ratio ranged from 0% to 8.5% from 2021 to 2025, but changes are expected in 2026. Market participants must pay varying percentages of household income based on ACA benchmark Silver Plan criteria starting 2026.
Further regulations in the OBBB Act impact insurance marketplace enrollment and will take effect at different intervals. During open enrollment for health insurance, applicants must estimate their annual income. Starting in 2026, full repayment of any excess Advanced Premium Tax Credit (APTC) will be required, with stricter income verification for eligibility in the future.
These new terms aim to strengthen the ACA insurance market mechanisms and reduce potential abuse, ensuring a fairer system for all participants.