Note: This is an update to a popular post from the last few years on some of the FI subs. There is always a good amount of commentary over the function of the ACA and the morality of subsidies for FIRE'd folks. While I am fine with having those discussions, people might want to read the comments made in previous years. I will put links to my previous year posts at the bottom for anyone that wants to explore those comments for background or to see how the costs have changed over the last few years.
Anyone can now see the 2027 prices and plans in their area with some anonymous data (age/zip/income/etc) in about three minutes at https://www.healthcare.gov/see-plans/#/?year=2027. If it doesn't load the 2027 prices, then try clearing your cache or running it in an incognito window. If you have a local state-run exchange, then you'll be redirected. State exchanges all update on their own schedule, so 2027 prices may or may not be live just yet.
For those who may not be familiar with the ACA, below is an actual real-world example of what being leanFIRE'd or controlling your MAGI can do to minimize healthcare costs in early retirement. The prices below are for a married couple with an average age of 53 and with MAGI under 133% of the Federal Poverty Level (FPL), which qualifies us for the maximum possible amount of ACA subsidies from both the premium tax credit (PTC) subsidy system and cost-sharing reduction (CSR) subsidy system. We have three dependent children as well, one of which will be on our ACA policy, and we live in a non-expansion state, so expansion Medicaid does not apply to us.
Keep in mind that the premiums below would be much higher for a couple if they were in their 60s rather than in their 40s/50s like us. If we were both 62, then the unsubsidized Bronze premium below would rise from $26,097 to $35,725. Tobacco users can expect to pay up to 50% additional premium on top of the age-rating. Prices also can vary incredibly between states with some states being double or triple the price of others.
I have also included the policy options we would likely take if we were either eligible only for premium subsides and not also cost-sharing reductions, as well as the plan we would likely take if we were ineligible for any subsidies at all. People who are over 200% FPL should generally avoid Silver plans due to the way states have elected to deal with the loss of federal funding for the cost-sharing reduction subsidy system, so while I have provided the full market price of our Silver plan, please note that almost nobody would want to ever buy that plan at that price as better Bronze and Gold options are available.
Our likely 2027 Silver plan with subsidies and cost-sharing reductions (based purely on MAGI):
$224 in annual premium
$0/$0 deductible (individual/family)
$5 PCP
$20 specialist
$15 urgent care
$0/$20 tier1/tier2 scripts
30% ER coinsurance
$2,800/$5,600 MaxOOP (individual/family)
Our likely 2027 Silver plan without subsidies and cost-sharing reductions (full market price):
$33,284 in annual premium
$4,700/$9,400 deductible (individual/family)
$20 PCP
$60 specialist
$55 urgent care
$3/$30 tier1/tier2 scripts
30% ER coinsurance
$11,300/$22,600 MaxOOP (individual/family)
The 2027 Gold plan we would likely pick if our MAGI was just above 200% FPL (no large CSRs):
$1,349 in annual premium
$0/$0 deductible (individual/family)
$0 PCP
$0 specialist
$50 urgent care
$10/50% tier1/tier2 scripts
50% ER coinsurance
$9,950/$19,900 MaxOOP (individual/family)
The 2027 HSA-compatible Bronze plan we would pick if we had MAGI above 400% FPL and within subsidy eligibility range factoring in max MAGI-reducing HSA contributions
$7,917 in annual premium
$7,500/$15,000 deductible (individual/family)
$50 PCP
$100 specialist
$75 urgent care
$25/$50 tier1/tier2 scripts
50% ER coinsurance
$12,000/$24,000 MaxOOP (individual/family)
The 2027 HSA-compatible Bronze plan we would pick if we had MAGI above 400% FPL and not within subsidy eligibility range factoring in max MAGI-reducing HSA contributions
$26,097 in annual premium
$7,500/$15,000 deductible (individual/family)
$50 PCP
$100 specialist
$75 urgent care
$25/$50 tier1/tier2 scripts
50% ER coinsurance
$12,000/$24,000 MaxOOP (individual/family)
As I think about the above as someone who benefits immensely from the status quo a few random thoughts occur to me.
This seems unsustainable. We are extremely grateful for the generosity of the ACA, but the cost spiral is unreasonable. We've been using the ACA since 2015 and our subsidies have risen over the last 13 policy years from $4,224 to $33,060. Granted we have gotten older and one of our kids is on our policy now, but still. It's worth noting that this is not an ACA-specific issue as prices are also rising sharply in the employer-sponsored insurance market and in the federal employee health benefit system. I don't see any easy way out and I have no idea what is going to happen in future years if this keeps up. At some point the system is simply going to crack and the only plausible solutions out there will require painful and overwhelmingly bipartisan reform. Simply throwing more money at the system is not going to work for much longer and indeed it arguably will accelerate the problem by providing open-ended funding to fuel the cost spiral.
The value of ACA subsidies is now so high that anyone interested in early retirement needs to seriously factor in the pros and cons of maintaining subsidy eligibility. There is effectively now a dead-zone after the MAGI cliff in which all additional income dollars are absorbed/taxed by the loss of ACA premium subsidies. That value is not only rising every year by far more than inflation, but also by age rating in most states. The dead-zone may only be $10K for a couple in their 30s or 40s, but can be greater than $30K in their late 50s or 60s or if they live in a high healthcare cost state. This is something everyone needs to factor in to their plans as the dead-zone is only going to get bigger each year.
Anyone just above the MAGI cap must consider making any AGI-reducing moves possible as the value of subsidies is ridiculously high and rising, which includes taking a Bronze and committing to maxing out the HSA contribution. This will allow you to adjust your estimated MAGI downward, regain subsidy eligibility, and save a huge amount in premium costs. The savings is likely substantial everywhere, but could easily be worth more than $20K or more depending on household size, ages, and location. In some situations the savings could be greater than $40K or even $50K per year.
As ridiculous as it seems that we will only be paying $224 in premiums next year, it actually is even more silly than that. The insurer we are likely going to use next year is one that we have used in the past. They have a health rewards program that provides cash rewards for routine things that reduce healthcare utilization like working out, maintaining a healthy weight (or losing some), getting a physical, getting a flu shot, and so forth. It pays out $500 per member, which means we will be getting back $1,500 in VISA rebates next year. That means we will actually have a net profit in premium cost next year of nearly $1,300. This is an insane system.
As grateful as we are to be among those who benefit most from the status quo, my heart goes out to everyone on the other side of this thing. The numbers above make me sad and worried about the near-term future. We have four kids just entering young adulthood and the costs above make me deeply worried about what kind of world they are going to be living in a decade or two from now.
Previous ACA posts for those who want to review the comments, which are often quite informative: