Does the OBBB Affect Health Insurance for Early Retirees?

Early retirees rely on ACA plans until Medicare, but enhanced subsidies end in 2026—raising costs for many.

The One Big Beautiful Bill Act made some positive changes to the Affordable Care Act. REDPIXEL.PL/Shutterstock

There’s a gap between many seniors’ retirement dates and when they can start receiving Medicare benefits at 65. According to Fuchs Financial, the median age for Americans to retire is 62, with 70 percent of retirees stopping work before turning 65. Where’s the interim health insurance coming from?

Health insurance through the Affordable Care Act (ACA) marketplace was filling in the gap between employer insurance and Medicare. And because many retirees’ incomes dropped after retirement, the enhanced premium tax credits (PTCs) provided by the ACA made health insurance more affordable.

The One Big Beautiful Bill (OBBB) Act made some positive changes to the ACA, but didn’t renew enhanced subsidies.

ACA Helped Early Retirees and Closed ‘Donut Hole’

The 14-year-old ACA has expanded access to affordable health coverage. According to a Kaiser Family Foundation report, an estimated 5.5 million adults aged 50–64 received health insurance from ACA marketplaces in 2025. Regardless of whether they are subsidized, the ability to easily purchase individual policies has helped retirees fill the coverage gap.

The ACA prohibited health insurers from denying coverage or charging older adults a higher premium based on pre-existing conditions. It also reduced age-based premium hikes.

But because many seniors have lower incomes once they retire, the ACA offered premium tax credits and cost-sharing reductions, which made the marketplace more affordable for some older adults. This made the difference between having health insurance and going without it for many seniors.

It also closed the Medicare Part D “donut hole” for prescription drugs.

What Are Premium Tax Credits for the ACA Marketplace?

According to the Internal Revenue Service, the PTC is a refundable credit that helps eligible individuals cover the premiums for their health insurance purchased through the health insurance marketplace. To receive this credit, you must meet certain financial requirements and file a tax return with Form 8962.

Current Enhanced Premium Tax Credits Based on Poverty Level

Enacted during the COVID era, enhanced premium credits were applied to the already used credits of ACA premiums. Now and in the past, credits for ACA are based on the percentage of the income that goes over the federal poverty level (FPL). According to Medicaid Planning Assistance, in 2025, the FPL for a household of one is $15,650, while a household of two is $21,150.

According to HealthInsurance.org, the credit for an ACA subsidy is compared to the baseline FPL and the percentage a health insurance policy would be of your income. For example, from 2021 to 2025, income between 150 percent and 200 percent (1.50–2.0 percent) of FPL is zero percent to 2 percent. This means that your health insurance cannot make up more than 2 percent of your income.

Currently, the subsidy goes up to 400 percent of FPL. Which means higher-income individuals can still be eligible for assistance. For example, 400 percent of FPL is 8.5 percent. A premium cannot make up more than 8.5 percent of income.

These enhanced credits, based on the benchmark Silver Plan, include:

• Income up to 150 percent of FPL = zero percent of income
• 150 percent to 200 percent of FPL = zero percent to 2 percent of income
• 200 percent to 250 percent of FPL = 2–4 percent of income
• 250 percent to 300 percent of FPL = 4–6 percent of income
• 300 percent to 400 percent of FPL = 6–8.5 percent of income
• 400 percent of FPL or higher = 8.5 percent of income

All these percentages were retroactive back to the start of 2021.

Enhanced Premium Tax Credits Set to Expire

At the end of 2025, the premium tax credits are set to expire unless action is taken to extend them. That’s because these provisions weren’t extended as part of the healthcare reforms in the OBBB. Although the enhanced credits are scheduled to end, the post–2021 credits will still be in place.

New Premium Tax Credits for 2026

The 2021 to 2025 percentages ranged from zero percent to 8.5 percent. But this changes in 2026. Based on the benchmark Silver Plan, here’s the percentage of household income that marketplace enrollees will pay in 2026:

• Income less than 133 percent of FPL = 2.1 percent of income
• At least 133 percent, but less than 150 percent, of FPL = 3.14–4.19 percent of income
• At least 150 percent, but less than 200 percent, of FPL = 4.19–6.6 percent of income
• At least 200–250 percent of FPL = 6.6–8.44 percent of income
• At least 250–300 percent of FP = 8.44–9.96 percent of income
• At least 300 percent, but not more than 400 percent, of FPL = 9.96 percent of income
• Above 400 percent of FPL = no subsidy

According to the Kaiser Family Foundation, about 51 percent of early and pre-retiree enrollees with incomes four times FPL would lose subsidies. This is in contrast to 23 percent of the non-elderly population.

OBBB Provisions Tighten ACA Marketplace Rules

There are some provisions that have an impact on how insurance can be purchased through the marketplace. These changes go into effect at different times.

When determining premiums during open enrollment, the insured estimates their yearly income. Starting in 2026, everyone will be required to repay excess advanced premium credits fully. Previously, if you significantly understated your income, the repayment was capped. You didn’t necessarily have to pay it all back.

There will be a more rigorous verification of income in order to qualify for PTC and cost-sharing reductions.

These provisions should strengthen the ACA marketplace and make it harder to game the system.

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