Health insurance premiums are poised for a steep climb in 2026, as over 300 ACA marketplace insurers propose average rate hikes of 20%. With premiums rising sharply with age in most states, early retirees who haven’t yet qualified for Medicare could face an even tougher battle to keep their coverage affordable.
For Americans already struggling to pay for health insurance, the hike will push care even further out of reach. Because most states tie premiums to age, early retirees aiming to leave the workforce before qualifying for Medicare could face a serious financial squeeze.
Health Insurance for Early Retirees
Medicare eligibility typically begins at 65, leaving anyone who retires earlier to find alternative coverage. While early retirees have several options, many plans are costly and may not provide lasting protection.
Health Insurance Marketplace: The ACA lets you buy health insurance without medical underwriting, guaranteeing coverage even with pre-existing conditions. Losing employer-based insurance triggers a 60-day special enrollment window to choose an ACA plan, after which changes can only be made during the annual open enrollment period, Nov. 1 through Jan. 15, for coverage in the following year.
Spouse or partner’s health insurance plan: Employer-sponsored health plans often let employees extend coverage to a spouse, domestic partner, or dependent children. If a spouse or partner retires before the employee, they may still have the option to maintain that coverage.
Retiree coverage from a former employer: While some employers still provide health insurance to retirees, such coverage has become far less common than in previous decades.
COBRA: Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), employees with employer-sponsored health plans can continue their coverage after leaving a job. Eligible individuals can extend their insurance for a limited period, typically paying the full premium themselves.
Medicaid: Low-income retirees may be eligible for Medicaid, which is administered by states within federal guidelines. Unlike Medicare or private insurance, Medicaid is not universally accepted, meaning enrollees might need to switch their primary care physician.
Early Retirement Realities
Allison Tom, 55, and her husband, Dylin Redling, 54, retired early in 2015. Drawing on their experience, the couple authored Start Your F.I.R.E. (Financial Independence Retire Early): A Modern Guide to Early Retirement to help others navigate the path to early retirement.
The couple now holds a Silver Plan through California’s ACA Marketplace, paying $158 per month after subsidies. Their coverage includes major medical care, from cancer treatments to surgeries, and their premiums have remained stable since retirement.
With an average 10.3% increase projected in California, the couple faces uncertainty over how their premiums and subsidies may be affected.
“We qualified in the past,” Redling said. “Not sure what will happen as a result of the new budget bill that was passed earlier this year. We should be OK, since we have built up a sizable nest egg to take care of any increases in expenses. If worst comes to worst, we are open to the idea of seeking medical treatment overseas.”
Peggy Farris, 63, a semi-retired registered nurse from Mississippi, has been without health insurance for two years. Attempts to secure coverage through the ACA revealed a steep cost—over $1,000 per month—to cover both herself and her husband.
“We cannot afford this,” she said.
Her former insurer has proposed a nearly 25% rate increase for 2026, though the hike is largely irrelevant for Farris, who no longer carries the policy.
“I can’t even afford the insurance premium as it was,” she said.
Farris’s sole focus is now caring for her adult son, who has Down syndrome and is covered through Medicaid.
“At this point, I feel all I can do is to make sure he is healthy,” Farris said. “My husband and I, apparently, are out of luck.”
Rising Costs
One factor driving potential cost increases is the scheduled expiration of the enhanced ACA premium tax credit from the American Rescue Plan after 2025. These expanded subsidies helped millions by eliminating income-based exclusions for higher earners, capping premium payments at 8.5% of household income. Without an extension, many early retirees could face a sharp rise in their health insurance costs.
In addition to the expiration of tax credits, insurers have pointed to several other factors driving the proposed rate hikes.
Cost of care and increased use: The costs of doctor visits and hospital care continue to rise each year.
Inflation: Broader economic inflation can drive up administrative and operational expenses.
Labor costs: Rising costs have also been fueled by labor shortages, as well as hospital acquisitions and mergers.
GLP-1 medications: High-cost medications like Ozempic and Wegovy, prescribed for diabetes and obesity, have surged in popularity. In response, some insurers have dropped coverage for certain drugs, potentially affecting up to 45.8 million Americans under 65.
Tariffs: Recently imposed tariffs could raise the cost of medical supplies and certain medications, prompting providers to push premiums up by an average of three percentage points.
Smaller health risk pool: Insurers warn that if the tax credits expire, some relatively healthy policyholders may abandon their marketplace coverage, leaving a sicker—and costlier—pool of enrollees. To offset these higher risks, providers could raise premiums for those who remain.
How to Manage Costs
Early retirees are navigating an increasingly challenging health insurance landscape. These strategies can help them control costs, even if tax credits disappear.
Carefully research all insurance options: Early retirees should review the ACA marketplace each year to find the most cost-effective coverage, rather than automatically renewing their current plan—especially as premiums continue to climb.
Consider a high-deductible plan (if healthy): A high-deductible health plan (HDHP) offers lower monthly premiums but requires higher out-of-pocket costs when care is needed. Healthy retirees might save money with an HDHP, while those with ongoing medical needs would likely benefit from a plan with more comprehensive coverage.
Save through an HSA: Enrolling in a high-deductible health plan (HDHP) makes you eligible for a health savings account (HSA), which allows you to set aside money tax-free for future medical expenses such as deductibles, copayments, and prescriptions. HSA funds cannot be used to pay insurance premiums, but if you already have an HSA from a previous job, those savings can help offset costs during early retirement.
Plan ahead for seeking care: Where you receive care can significantly impact costs. Staying in-network with providers helps lower out-of-pocket expenses, and comparing procedure prices across facilities can yield savings. When feasible, opting for outpatient treatment instead of hospital care can also reduce costs.
Invest in good health: Maintaining your health can help prevent costly medical problems down the line. Investing in preventive care allows for early detection of issues before they become serious. Address ongoing health concerns, and take advantage of your plan’s financial incentives for healthy behaviors, such as participating in weight-loss or smoking cessation programs.
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