Considering a Life Change? Brace for Higher ACA Costs

Introduction to ACA Costs

People thinking about starting a business or retiring early — before they’re old enough for Medicare — may want to wait until November, when they can see just how much their Affordable Care Act health insurance will cost next year. Sharp increases are expected.

Factors Contributing to Increased ACA Costs

Premiums for ACA health plans, also known as Obamacare, which many early retirees and small-business owners rely on for coverage, are going up, partly due to policy changes advanced by the Trump administration and Congress. At the same time, more generous tax subsidies that have helped most policyholders pay for coverage are set to expire at the end of December.

Impact of Expiring Subsidies

After that, subsidies would return to what they were before the covid-19 pandemic. Also being reinstated would be an income cap barring people who earn more than four times the federal poverty level from getting any tax credits to help them purchase coverage. Although Congress potentially could act to extend the credits, people weighing optional life changes should factor in the potential cost if lawmakers fail to do so.

Advice for Those Considering Life Changes

“I would hate for people to make a big decision now and then, in a few months, realize, ‘I’m not even going to qualify for a tax credit next year,’” said Lauren Jenkins, an insurance agent whose brokerage helps people sign up for coverage in Oklahoma. “Coupled with the rate increases, that could be significant, especially for someone at or near retirement, when it could easily cost over $1,000 a month.”

Variability in Out-of-Pocket Premiums

Still, how things play out in the real world will vary. The key factor is income, as the subsidy amount people receive is primarily based on household income and local insurance costs.

The Subsidy Cliff

People experiencing the biggest dollar increase in out-of-pocket premiums next year will be those who lose subsidies altogether because they earn more than 400% of the federal poverty level. This year, that’s $62,600 for a single person and $84,600 for a couple.

Impact on Small-Business Owners

“A lot of small-biz owners fall around that level of income,” said David Chase, vice president of policy and advocacy for the Small Business Majority, a Washington, D.C.-based advocacy group, which is urging Congress to extend the credits. And a good chunk of ACA enrollment consists of small-business owners or their employees because, unlike larger firms, most small businesses don’t offer group health plans.

Congressional Decision on Subsidies

Congress must decide by the end of December whether to extend the subsidies a second time. Permanently doing so could cost taxpayers $335 billion over the next decade, but not acting could cause financial pain for policyholders and pose political repercussions for lawmakers.

Potential Fallout and Political Implications

Because new premiums and smaller subsidies would take effect in January, the potential fallout has some Republican lawmakers worried about the midterm elections, according to news reports. Republican pollsters Tony Fabrizio and Bob Ward warned the GOP in a memo that extending the enhanced credits could mean the difference between success and failure in some midterm races, because support for the premium help “comes from more than two-thirds of Trump voters and three-quarters of Swing voters.”

Criticisms of Enhanced Subsidies

While supporters credit the enhanced subsidies for a record 24 million sign-ups for this year’s ACA plans, critics have blamed them for instances in which sales brokers or consumers engaged in improper enrollment. “The expanded subsidies were a temporary covid pandemic policy enacted by congressional Democrats on a party-line vote and scheduled to end after 2025,” said Brian Blase, president of the Paragon Health Institute, a conservative think tank. “They have led to tremendous fraud and waste, they reduce employer coverage, and they should be permitted to expire.”

Expected Behavior of Affected Individuals

Ed Haislmaier, a senior research fellow at the conservative Heritage Foundation, acknowledged that people earning more than 400% of the poverty level would not be happy with losing access to subsidies, but he expects most to stay enrolled because they want to avoid huge medical bills that could threaten their businesses or savings. “They are middle-class or upper-income people who are self-employed, or early retirees with significant income, which means they have a lot of assets behind that income,” he said. “These are people who view insurance as financial protection.”

Hypothetical Consumer Scenarios

Here’s how the expiration of subsidies could play out for some hypothetical consumers. People in households earning less than four times the poverty rate would still get subsidies — just not as generous as the current ones. For example, those whose earnings are at the lower end of the income scale — say, just over 150% of the poverty threshold, or about $23,000 — will go from paying a national average of about $2 a month, or $24 toward coverage for the year, to $72 a month, or $864 a year, according to a KFF online calculator.

Tracking Income and Eligibility

Those who do enroll for 2026, especially the self-employed and people retiring early, should closely track their incomes during the year, she said. It would be easy to bust through that income cap, she said. If they do, they’ll have to pay back any tax credits they initially qualified for. Their income might rise unexpectedly during the year, for example, pushing them over the limit. An income bump could come from drawing down more money from retirement accounts than planned, landing a new customer account, or even from winning big at the casino.

Conclusion

In conclusion, individuals considering life changes such as starting a business or retiring early should be aware of the potential increase in ACA costs. The expiration of enhanced subsidies and the reinstatement of the income cap could significantly impact the affordability of health insurance for many people. It is essential for those affected to closely track their income and eligibility for subsidies to avoid unexpected costs.

FAQs

Q: What is happening to ACA costs?

A: ACA costs are expected to increase due to policy changes and the expiration of enhanced subsidies.

Q: Who will be most affected by the increase in ACA costs?

A: Individuals earning more than 400% of the federal poverty level will be most affected as they will lose access to subsidies.

Q: What can individuals do to prepare for the increase in ACA costs?

A: Individuals should closely track their income and eligibility for subsidies to avoid unexpected costs and consider alternative health insurance options.

Q: Will Congress extend the enhanced subsidies?

A: It is uncertain whether Congress will extend the enhanced subsidies, but a decision is expected by the end of December.

Q: How will the increase in ACA costs impact small-business owners?

A: Small-business owners may be significantly impacted by the increase in ACA costs as many of them rely on ACA plans for health insurance coverage.