The enhanced Affordable Care Act premium tax credits that capped what higher earners paid for marketplace coverage expired at the end of 2025 after Congress took no action to renew them, and the fallout is no longer a projection. Average monthly premium payments on ACA marketplace plans, net of any remaining subsidy, climbed 58 percent this year, from $113 to $178, according to enrollment and payment data compiled by the Centers for Medicare and Medicaid Services. For Americans who retired before 65 and rely on marketplace coverage to bridge the gap to Medicare, the increase lands with unusual force, since many sit just above the income line where financial help disappears entirely.
A Subsidy Rollback Congress Let Take Effect
The credits at issue began in 2021 under the American Rescue Plan and were extended through 2025 by the Inflation Reduction Act, which for the first time let households earning more than 400 percent of the federal poverty level receive marketplace subsidies and capped what everyone else paid at a fixed share of income. No bill renewing that structure passed before the credits expired on December 31, 2025, so the return to the older, narrower subsidy rules is enacted policy, not a proposal working through a committee or awaiting a floor vote.
That reversion produced an immediate and measurable change in what marketplace enrollees actually paid. Federal enrollment and payment data show the average monthly premium payment across all marketplace consumers, including those who kept a subsidy and those who lost one entirely, rose from $113 to $178 in 2026, a 58 percent increase. That figure includes people who bought down to cheaper plans to soften the blow, which means enrollees who kept their original coverage often absorbed an increase well above the average.
Insurers are not treating the change as temporary. Peterson-KFF Health System Tracker’s review of preliminary 2027 rate filings found that the enhanced credits’ expiration at the end of 2025 left behind a smaller, sicker risk pool, and insurers are layering a projected 14 to 15 percent median increase for 2027 on top of the 58 percent jump already absorbed in 2026. Two consecutive years of double-digit increases would leave typical marketplace premiums more than a third higher than they were in 2025.
Free retirement updates: Miss an enrollment or claim deadline and it may be gone. The free Retirement Shield newsletter keeps readers ahead of the ones that matter. Get the free newsletter.
Why the 60-to-64 Cohort Absorbs the Full Hit
The people most exposed to this increase are not the marketplace’s typical enrollee. They are Americans who left a job with employer coverage in their early sixties, often to retire ahead of Medicare eligibility at 65, and now buy an individual plan while living on a pension, retirement account withdrawals, or investment income. Because the subsidy cliff is measured against total household income rather than wage income, a retired household drawing modestly from savings can land just above the threshold even without a paycheck, and once it crosses that line, the enhanced credit that used to cap the premium at a share of income no longer applies at all.
That threshold sits at 400 percent of the federal poverty level, or $62,600 for a single person in 2026, and KFF’s own enrollment analysis shows the group just above it absorbed the sharpest coverage losses of any income band, accounting for 27 percent of the marketplace’s enrollment decline in 2026 while making up only 3 percent of 2025 sign-ups. Sign-ups in that narrow band fell 44 percent, more than 321,000 people, as households who could no longer justify the full premium either found other coverage or went uninsured rather than absorb the increase.
For someone in that position, the arithmetic is unforgiving in a way it is not for a 30-year-old with the option to wait a few years for an employer plan to open up. A 63-year-old retiree cannot enroll in Medicare early to escape a marketplace premium increase, and early withdrawal penalties or tax consequences often make dipping further into savings before 65 an expensive workaround. The subsidy cliff effectively taxes the years between retirement and Medicare eligibility at a moment when many retirees have the least income flexibility left in their working lives.
The exodus of healthier, wealthier enrollees above the cliff is also reshaping the risk pool that remains, which insurers say is now sicker on average and more expensive to cover. That dynamic, which insurers estimate added roughly four percentage points to 2026 rates and expect to add a similar amount again in 2027, means the early-retiree cohort that stays enrolled is effectively subsidizing a pool it can no longer get help paying into.
Bronze Plans Trade a Lower Premium for a Bigger Deductible
Many marketplace shoppers responded to the premium jump by downgrading coverage rather than dropping it, and that shift carries its own cost for retirees who are more likely to need care. The share of enrollees choosing bronze plans, which carry lower monthly premiums but far higher deductibles, rose from 30 percent to 40 percent of all marketplace sign-ups in 2026, while silver plan selection fell to a record low of 43 percent. The average marketplace deductible climbed 37 percent, or about $1,027 per person, to $3,786, the steepest single-year increase since the marketplaces launched in 2014.
For an early retiree managing a chronic condition or expecting a procedure before turning 65, a bronze plan’s lower premium can mask a much larger cash outlay the first time a claim is filed. A retiree who traded a silver plan for a bronze one to keep the monthly payment near $178 may now face several thousand dollars in out-of-pocket costs before insurance covers a substantial share of a hospital stay or a specialist course of treatment.
None of this is scheduled to ease before Medicare eligibility arrives for today’s near-retirees. Insurers’ 2027 filings assume the smaller, older, sicker marketplace pool persists, and neither KFF’s enrollment analysis nor its rate-filing review identifies a federal proposal moving to restore the enhanced credits or narrow the subsidy cliff before the current pricing cycle locks in. Absent that, the bridge years between an early retirement and Medicare at 65 will keep costing more each year the credits stay expired, not less.
The clearest evidence of who is absorbing that cost is the enrollment data itself: a group that made up just 7 percent of last year’s marketplace sign-ups accounted for nearly half of this year’s coverage losses, according to KFF’s review of federal enrollment files. That imbalance shows the subsidy cliff is not a marginal inconvenience for a small slice of buyers, but the dominant reason healthier, higher-income enrollees, including early retirees bridging to Medicare, are leaving marketplace coverage altogether.
This article was produced with AI assistance and reviewed by The Money Overview editorial team.
More Financial Reading
