BiggerPockets Money Podcast - Will 2026 Healthcare Costs Destroy Financial Independence for Millions?

Episode Date: November 25, 2025

Will 2026 healthcare costs destroy your FIRE plan? Enhanced ACA tax credits expire in 2026—meaning health insurance premiums could DOUBLE or TRIPLE overnight. This healthcare subsidy cliff threatens millions who depend on affordable marketplace coverage. In this episode of the BiggerPockets Money podcast, Mindy Jensen and Scott Trench interview Matt McGough from KFF to break down the 2026 healthcare crisis and what you can do NOW to protect your early retirement. This Episode Covers: Who gets hit hardest by 2026 healthcare premium increases Exact cost projections for early retirement health insurance in 2026 Actionable strategies to prepare NOW for rising healthcare costs Which FIRE strategies still work after ACA subsidy changes Affordable health insurance alternatives for early retirees History of ACA subsidies and why they're expiring Steps to protect your financial independence from the healthcare affordability crisis And SO much more! Learn more about your ad choices. Visit megaphone.fm/adchoices

If you're planning to retire early, we need to talk about health care. Specifically, what is about to happen to your ACA premiums? Enhanced tax credits that have kept marketplace insurance affordable are potentially going to dramatically change in 2026. And for many early retirees, this could mean premiums doubling or even tripling. Today, we're breaking down who could get hit hardest, how much costs could jump, and what you need to do now to protect yourself. And welcome to the Bigger Pockets Money podcast.

My name is Mindy Jensen, and with me as always is my HealthShare's co-host, Scott Trent. Thanks, Mindy, so great to be here and thank you for ensuring that all of us know what's going on with health care in America today for the financially independent. With us today, we have a very special guest. Matt McGoff is a policy analyst at KFF, where he conducts policy research on the Affordable Care Act, also known as the ACA or Obamacare, and its effects on private insurers and enrollees as well as analyses on health spending, quality of care, access, and affordability. KFF is an independent source for health policy research, polling, and journalism. And I spent a lot of time on KFF in the last week or two trying to wrap my head around this issue. It's a wonderful, wonderful resource.

Matt, thank you so much for joining us today. And thanks for all the work you do over at KFF. Yep. Thank you for having me. Happy to be here. I thought that we could start off the discussion here by just framing healthcare in America. How do most Americans get their health care here in 2025? Most Americans receive their health insurance through their employer.

That's about half the country or about two thirds of people with insurance. Over a third or part of a public program run by the federal government. So that's Medicare, Medicaid. A really small portion of the population, about 10% directly purchased their insurance through a means such as an affordable care act exchange. That leaves about 8% of the population that's uninsured. Now the share has decreased over time since the Affordable Care Act. It was about 15% before its implementation.

And that has steadily decreased since the implementation of the Affordable Care Act and decreased even more during COVID-19 because of the safety nets, such as the creation of the enhanced premium tax credits in the Affordable Care Act marketplaces, as well as Medicaid, redetermination. But right now where we sort of stand in the state of the U.S. healthcare system is that we pay twice the average of comparable countries per capita, but our life expectancy is four years less. So it really comes down to our prices. We pay significantly more for our health care here, but it doesn't seem to be showing for quality or access. So I'm really surprised by these numbers.

You said the ACA makes up 10% of Americans have their insurance through the ACA. In the fire community that we're talking to and talking about, it's like an outsized portion of people get their insurance through the ACA. But of all Americans, 10% of them are on the ACA. Yes, that's true. This is a group of people that's disproportionately part of the fire community, you know, early retirees, self-employed people who have occupations or are part of jobs that don't offer employer-sponsored insurance. Can we get a little bit of a history lesson here? Can you give us, you know, what the intent of the ACA originally was? And can you give us a quick lesson on subsidies,

how they evolved thinking about as part of that? Of course. So, yep, for some background, the Affordable Character was signed into law in 2010. implemented in 2014. Before the ACA, there were several key issues for consumers that seemed to be emerging. So rapidly rising total healthcare costs, skyrocketing premiums, federal spending on health care was increasing drastically during the 2000s. Out-of-pocket costs for consumers were also high. There was a high on insured rate, right around 15 or 16% of the total population was uninsured. Additionally, people with private insurance lacked some consumer protection. So pre-existing conditions, weren't covered. People who had some of these conditions were denied coverage, were excluded from risk pools, had recisions.

And additionally, different insurers could pay more or separate these people into a separate risk pool just for having a preexisting condition. There were also some limitations on coverage. So there were lifetime or annual limits on how much insurers could cover. There was no out-of-pocket maximums on an annual basis. And there was little incentive for insurers to cover primary care and for conditions for conditions. care and for consumers to receive primary care. So with that said, the Affordable Care Act had three main goals. So it was to expand health coverage, bring down that uninsured rate by building on the existing

infrastructure of public and private plans in the United States and maintain the status quo. Something you often heard during that time was if you like your plan, you can keep it. Additionally, they wanted to expand consumer protections for people with insurance, protect those with pre-existing conditions, limit out-of-pocket liability, which is where we see these premium subsidies or premium tax credits come into place. They wanted to make people who receive coverage through the Affordable Care Act Marketplaces have coverage. That was more affordable and bring down the amount that they pay on a monthly basis to receive health coverage. So these premium tax credits, what they did was cap the amount that people pay based on their

income as a share of their total annual income that they pay towards their health insurance premiums on the Affordable Care Act marketplaces. You give us a lesson on the timing of those subsidies. They came later, right? So the subsidies were part of the original version of the Affordable Care Act, or at least the original formulation of them. And they were implemented in 2014 when a lot of different changes to the individual market specifically came into place.

These enhanced versions of the subsidies came around a little bit later during COVID-19, as part of this broader safety net that Congress and the Biden administration wanted to put in place to keep as many people as possible insured during the global pandemic. So these enhanced subsidies did two things. They increased the amount of premium tax credit for people who were previously eligible for those subsidies, but it also increased eligibility to those who were more middle income, those who are above 400% of the federal poverty line, which for an individual in 2025 is about $63,000 in annual income. It used to be that if you made a dollar over 400% of the

federal poverty line, you were automatically ineligible for all premium tax credits that lower the amount that you pay on a monthly basis for your health insurance. So the end result of that was people who are making, you know, just a couple dollars less than you, but happened to be under 400% of the federal poverty line, we're paying thousands of dollars less towards their health insurance premium every year compared to someone who was just making a few dollars more than them. We called that the subsidy cliff. So this enhanced premium tax credit, one of the things it did was remove the subsidy cliff and cap all payments for everyone on the Affordable Caract marketplace at 8.5% of their annual income going towards their health insurance premium.

When I run calculations in various parts of the country, the subsidies are quite generous, frankly, in a lot of cases. It makes it almost a no-brainer to be a part of the exchange program. if you are earning something below 400% of the federal poverty level, right? Like it's a pretty material thing. In Colorado, you know, family making $90,000 a year will get 80% of their premiums covered on a bronze or silver plan. And it makes it you don't have to do math about insurance for, I think, many people in that bucket.

Now, that changes once you get well past those income thresholds. But do you agree with my assessment on there that these are fairly generous subsidies? It can't characterize like how generous necessarily they. are, but I will say that the enhanced premium tax credits have brought many people into the marketplaces over the last few years. It's made insurance a lot more affordable. People who were previously having to foot the bill of a full cost of an insurance plan, these enhanced tax credits lowered that amount for them and brought them into the marketplace.

We've seen marketplace enrollment double from around 11 to 12 million prior to the COVID-19 pandemic to about 24.3 million in 2025. So certainly all signs are that people believe these premium tax credits have now made health insurance more affordable. And it's also brought down the uninsured rate in the United States to some of the lowest levels that we've seen. So Scott, Matt can't characterize it, but I can characterize it. Matt touched on it a little bit. It's like going from I'm paying the entire amount of the entire premium to I'm paying more like what I would pay as an employee. Most employees, I would say, have some skin in the game when it comes to paying their premiums. The company's cost is $1,800, but you'll pay $200.

So it's bringing it more in line like that is my understanding. But I think people have started to take this as, you know, oh, I don't have to pay these high rates anymore. And they're counting it, especially people in the fire community, they're counting on it as how they're going to pay for their health insurance. it's moving forward. There's two problems here, right? One is the base cost of the underlying health insurance is going up. The premiums costs are going up, I think, 26% year over year for Affordable Care Act plans. And the second component that's underlying this is that the enhanced premium tax credits, which you can think of as is the super duper tax credits that don't have that cliff problem that we just have talked about. It's up in the air about how they're going

to get extended, who is going to get them, and how Congress is going to decide how to handle that. Can you, one, tell me if I've got the framework right here, Matt. And then second, can you explain what's going on in each of those two categories? Yeah, absolutely. I would say you have the framework correct. There's, I think, two numbers that are being thrown around as different increases. They're fundamentally characterizing different things with the Affordable Care Act marketplaces. So premiums unsubsidized in the marketplace are rising much more than we've seen over the last few years,

the most since the heart of the repeal and replace effort in, like, 20, 2017, 2018. There's a lot of different reasons for this, but in actuality, it comes down to political uncertainty. And this is reflected in a few different reasons that insurers have given as to why there are increasing rates this year. So tariffs are one reason that insurers are increasing rates. Additionally, when there was uncertainty over the summer about the passage in the one big beautiful bill act and its provisions, as well as executive order or rule that the centers for Medicaid and Medicare services put out that affected the affordable care marketplaces in some different niche ways.

But the sort of biggest policy driver of the increase in the unsubsidized premiums that we're seeing is the expiration of these enhanced tax credits. And they're raising premiums about four to five percentage points more than we would otherwise see. However, it's probably most pertinent to talk about the actual impact on what consumers pay. Well over 90% of consumers on the Affordable Carrecht marketplaces receive some amount of premium tax credit that lowers the amount that they pay towards their health insurance premium every month. Of these consumers, because of the loss of the enhanced premium tax credits, they're going to see what they pay on an annual basis increase on average by $1,000 or 114%, virtually overnight come January 1st. We have to take a quick ad break, but while we're away, we would love it.

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Audible has been a core part of my routine for more than a decade. I started listening years ago to make better use of drive time and workouts, and it stuck. At this point, I've logged over 229 audiobook completions on Audible alone, and I still regularly re-listen to the highest impact titles. Lately, I've been listening to Bigger Leaner Stronger for Fitness, the Anxious Generation for Parents, the Anxious Generation for Parents, parenting perspective and several Arthur Brooks audiobooks that have been excellent for mental well-being. What makes Audible so powerful as its breadth. Beyond audiobooks, you also get Audible originals, podcasts, and a massive back catalog across business, health, parenting, and more, all accessible in one app. If you're looking to turn everyday moments into real progress, Audible has been

indispensable for me over over 10 years. Kickstart your well-being journey with your first audiobook free when you sign up for a free 30-day trial at audible.com slash bp money. Right. Matt's about to return with some premium points on health insurance. Welcome back to the show. So in practical terms, you know, this means that a lot of people, especially in the fire community, a lot of people are able to control the amount of income that they realize so that they can maximize this benefit. And for a family of four in a place like Colorado, that could mean going from very little like 100 or 200 bucks a month to $1,000 or $1,100 a month for the same coverage for our bronze ACA plan. And Colorado's got it good. In a state like Vermont, for example, that same plan,

that same type of coverage could cost you $2, $2,500 a month for that same family. And going from $400, perhaps, in premiums that you're paying out of pocket with subsidies in place to $2,400 a month, That's just a preposterous increase that completely blows up your plan and your family's budget. Can you explain what is going on on a state-by-state basis with these premiums? Why are they so different in these different states? Before I get into that, actually, I think it's important to notice that I did characterize these two increases as being fundamentally different, but there is a population that is disproportionately part of this fire community that will face a double whammy of both of these increases. And that's these people that existed right above or beyond the subsidy cliff that we had mentioned earlier.

They will lose all access to any amount of enhanced premium tax credits and thus will both see an increase in the amount that they pay just by the loss of these tax credits, but also experience this year-over-year change in the unsubsidized premium, that 26%. They are included in that 114% national average that KFF has that we have put together. but they also are set to really be the ones to experience the higher range of premium increases. There's one condition we have to put in here. If Congress does not extend the subsidy, that's all it comes in place. And I think it's safe to say, I think I would bet on there being some form of extension that plays out. I would probably not bet at this point on it being the status quo is maintained for another year.

But I do, I think it would, I find it unlikely. I would imagine it's unlikely that it will just be a complete shutoff. and going back to that cliff scenario. I mean, you can't comment on that. Mindy, what do you think? Until Matt said that it was only 10% of Americans on the ACA, my thought was it's got to be political suicide to not extend these because it doesn't matter your political affiliation.

You are on the ACA. I thought the ACA made up like 50% of Americans. It's 10%. That's a pretty nominal amount. And now I understand a lot more clearly why, why Congress is currently leaning towards not extending them. I don't agree with it, but I understand why it's not such a big deal to them. It's a big deal to the people that are getting it.

Because like you said, Matt, you're going from paying like, you know, about $300 a month with your premium tax credits and your enhanced premium tax credits. And you're going to be going from 300 to $1,800. And you keep hearing people say, oh, premiums have gone up 26%. And you're like, mine went up like, I don't know how to do that math, five times or whatever. So more than six times. That's my mind up 600%. So what are you talking about 26%.

But that was really helpful for the way that you describe that. I characterize myself generally speaking as a political moderate, at least when it comes to the philosophy behind these things. So I'm going to piss off everybody with this observation here, which is that there's reasonable debate on this subject about what to do with these subsidies on both sides, right? On the one hand, it seems crazy to allow premiums to just skyrocket and then allow this concept of adverse selection

to take all the healthy people out of the marketplace, driving up the costs for the people who really depend on this and leave them out to dry. On the one hand, that seems kind of crazy. On the other hand, the policy in practice is allowing many people, like those in the fire community who are multi-millionaires, to have their health care subsidized by the people who are earning higher incomes or paying taxes on a full component.

So this is not like one side is completely right and the other is wrong here. I think in a black and white context, I think there's room for people that are not, completely attached to one party's philosophy on this to see the problem here and not be able to instantaneously see a great solution to the challenge here. So I don't think in this particular issue, it can be this side's evil, this side's good on it. I think it's a really tough issue to address and unpack. I think it's important to note 10% is, you know, it pales in comparison to the amount of people that receive coverage through employer-sponsored plans. But I do think

there's important things to note when it comes to this is, you know, I mentioned earlier that there's been over doubling and of enrollment in the Affordable Care Act marketplaces. Those have really been concentrated in states in the South that are red-leaning or firmly red when we think of like presidential elections. So Texas, Florida, South Carolina, these are the states that have really driven uptake in the Affordable Care Act marketplaces and have driven this increase. They've seen like a doubling or tripling in their enrollment in the individual market. over the last few years because they have so many people who make too much to qualify for Medicaid because they have a lower eligibility threshold for Medicaid eligibility because they haven't

expanded it up to 138% of the federal poverty line and they also maybe don't have an employer offering of health insurance for them. In some congressional districts in this area of the country, over 20, up to 30% of the constituents now have an individual market plan. So in some areas, that we would typically think of as leaning red, some areas of Florida and Texas, there's a very sizable portion of the population, one that could certainly swing election results that have coverage through the Affordable Care Act marketplaces.

Additionally, there are downstream effects of these price increases that we could see raising prices across the board for people on all markets of health insurance. So if more people become uninsured, which the Congressional Budget Office estimates, will be an increasing an share population of four million people because of the expiration of these enhanced

premium tax credits, that means more people when they have a medical emergency or going to the emergency room without health insurance coverage. Under U.S. law, those people have to be seen and stabilized. And that care can go uncompensated, which means that hospitals are the ones that are footing the bill of that care. And that drives up costs for everyone, people with employer-sponsored insurance in some areas of the country where there might be a disproportionate population that are uninsured, that could cause a hospital to close its doors, which means that it, again, raises prices for everyone because of consolidation. It's also important to note that, you know, the Affordable Care Act marketplaces, we're seeing that it's 10% of the population right now,

but there have been reports that that number is, you know, much higher. A lot of people use the affordable care act marketplaces as a sort of transition health plan between jobs. So, you know, this is a point in time to estimate right now, but a lot of people have come to rely on it over the last few years. And lastly, I would just say to touch on the fact that some people who are millionaires might be getting subsidized coverage, if there are people who are, you know, in the hundreds of thousands of dollars in annual income, um, that are receiving subsidies, it's very, very few people, all payments towards your health

insurance premium on the affordable character marketplaces are capped at 8.5% of people's income. And it would be likely be that, you know, the total amount that someone pays towards their health insurance premium, if they make a million dollars a year is far less than 8.5% of their income. So they would be ineligible for subsidies in that case. I think I understand what the Democrats want in this negotiation, which is an extension of the enhanced premium tax credits. I don't fully understand what the Republicans want from a policy perspective. However, I do believe that, you know, talking to a Republican, you know, one of the themes, one of the philosophies that would come to define their position is this problem around American health care where I think 75 to 90%

of American health care costs are related to chronic illnesses. And a huge percentage of those chronic illness costs are derived from lifestyle factors, including diet and exercise and tobacco use, those kinds of things. And I think people have a problem with subsidizing folks who are incurring costs related to those issues that might be derived from their lifestyle choices. Is that being addressed in Republican policy discussions here or with any of the proposals coming from Congress? Yeah. When we're sort of looking at both sides here, for the Democrats, I think it is expected

that they would want a full extension of them. They see these enhanced premium tax credits as being integral to the marketplaces. They've been around for now about half of the marketplace's lifetime. And they see that a lot of people, a lot of the 22 million people who receive subsidized coverage on the Affordable Care Act or Obamacare exchanges will be priced out. And they are hoping to protect this group of people from skyrocketing premium payments next year if they are to expire. But yeah, what Republicans have wanted, and they maybe have been, there's been a little bit more division because there are some Republicans who want some form of extension of these enhanced premium

tax credits because they see a sizable portion of their constituency has now come to rely on the Affordable Care Act exchanges over the last few years. Some of them want some form of extension. Other ones believe that this was just, it's supposed to be a temporary fix, a temporary safety net during the COVID-19 pandemic, to keep people insured during a global pandemic. You know, if they got sick,

they had some form of insurance to protect them. And they see it as really expensive. The, an extension of these enhanced premium tax credits would cost about $30 billion annually over the next 10 years. They also see it as not addressing the underlying issue of high healthcare costs in the US, because the government is just putting the bill of these premium tax credits and limiting the amount that the different consumers are paying.

I think that there's a few things to note here is about half of people on the Affordable Care Act exchanges are associated with a small business. Our gig workers, they have come to rely very heavily on this. People in occupations that we typically think of as being in Republican areas of the country or in Republican congressional districts, farmers, ranchers, about a quarter of them receive their health coverage through the affordable Affordable Care Act exchanges. What this underscores is that while no Republicans voted for the passage of the Affordable Care Act in 2010, their constituents and their states have

really come to rely on a disproportionately benefit from the eight affordable care act marketplaces and the enhanced premium tax credits over the last few years. I don't understand the ins and outs of the congressional debate very well. I get the Democrats want to extend the subsidies. But my My impression is, or what I believe to be true is if you asked a right-wing, you know, a person listening to Bigger Pockets Money, what the position is in a philosophical sense, it's, hey, 75 to 90%, depending on which estimate you want, of health care costs in the United States, are related to chronic illness that are directly correlated with or related,

attributable to lifestyle factors, lifestyle decisions. Is that concept being brought to the table by, Republicans in this debate as part of this discussion in a way that you know of? You know, not that I've heard of. That side probably points to statistics that around 5% of the population of the highest spenders on healthcare, you know, make up over 50% of total health care spending. So those are certainly related. Any policies that have been proposed by the GOP over the last few months don't really

seem to get at this underlying issue of high health care costs in the U.S. What we're talking about are people who are already retired. So their income is actually very low compared to their net worth. Their net worth is millions of dollars, but they have the ability to manipulate their income through Roth conversions or strategic stock sales so that their income stays at or below that 400% of the federal poverty level, ensuring that they get the full subsidy. So these subsidies weren't created for multiple. multi-millionaire early retirees to have lower cost health insurance.

These subsidies were created for working class Americans who don't have access to health care. Here's a way to be able to afford them. I was telling the story to Scott yesterday. I remember having insurance pre-ACA. And I worked for a company that didn't offer health insurance. I found an insurance broker who would be able to give me a policy. I think I was like 23 at the time. she said, well, your policy if you want to cover pregnancy is X, but your policy if you want to

exclude pregnancy is Y. And it was like $700 a month versus like $125. And I went with the no pregnancy coverage because I figured if I got pregnant, then I would just, you know, marry the guy that got me pregnant and then I would have health insurance because that's how it worked in my mind at the time. But I remember these, like you couldn't have preexisting condition. So if you had a pre-existing condition, it wasn't covered for the first year or it wasn't covered ever. And having things like that excluded, I mean, there are people who have, you know, asthma is a pre-existing lifelong condition. You're just never going to cover my asthma. That's, you know, that's expensive. You're never going to cover any asthma-related issues. So if I have to go to

the hospital because I can't breathe, all of a sudden, I'm footing the bill for that entire thing. And on the one hand, okay, that's kind of stinky, but that's just my lot in life. And I, just need to account for that by having a really big emergency fund. But on the other hand, having this ACA where now everything's covered and nobody can tell me, no, I'm not going to cover your asthma. You know, if you go to the hospital, we'll cover that. It's so nice to know that 15,000 is my out-of-pocket maximum. I mean, there's ways around that. It's really, really squidgy. You can pay 15, you can pay more than 15,000 out-of-pocket. But, you know, there's now a cap. And before there wasn't a cap, the ACA is awesome.

but also these subsidies were never invented for the fire community. I also want to add in here that everything that we're talking about comes down to a problem that is not unique to, but is particularly acute in health insurance, which is this concept of adverse selection. A young, healthy man, for example, who is 25, 26, 27 years old is very unlikely to need health insurance. Their costs per year for health care, likely to be very low, less than a thousand bucks most years. Many of them may not choose to go see the doctor. I didn't see the doctor every year when I was

in my 20s on there. And so this insurance concept for them, it's a bad bet. It's a bad, it's bad, it's bad math. There's bad expected value math for this person in a general sense to participate in a broad plan. Age is the single biggest correlate to health insurance costs, but other things like tobacco use, chronic illness, those types of things are also major ones there. And that's the question here, right? If everybody's on their own and the market is allowed to operate, independently of government oversight. Then of course, health insurance pools are going to aggregate the people who are lowest risk and they're going to pay the least, and the people who are the highest risk who are most likely to need health insurance are going to pool together. And that's

going to be very expensive or untenable for them. And that's the challenge is how does America think about that problem here? And we can't agree as a country about what the right approach is here. I do want to get back to this question, though, because that I asked earlier around This problem is going to be most acute in specific geographies over the next year. In Colorado, the cost for health insurance for that family of four, like I mentioned, is $1,000 for someone in my $1,100 or so. But in Vermont, it can be $22,000 to $2,400 for the same coverage, right? So my counterpart in Vermont is going through this challenge is going to have a very different

conversation. It's going to be really hard, even if they're totally uncomfortable with going without insurance or they're totally uncomfortable with the idea of a health share, or they're totally uncomfortable with other options, they're going to consider them if their cost goes from $400 to $2,400 a month. And in Colorado, maybe more people are like, you know what, I can, I don't like paying an extra $700 a month, but that's not going to completely kill my budget. Can you explain why the costs are so dramatically different across geographies in this country?

Yeah, I think along with this conversation, it's good to take a step back and talk about how different insurance plans are priced in the U.S. and how that varies upon a couple different factors. So when we talk about how premiums are set in the ACA marketplaces, we're really talking about the rules that insurers have to follow when they price coverage. So under the ACA insurers cannot vary premiums based on someone's health, medical history, and they can't, you know, charge more if a person has a chronic condition. But there are a few factors that they are allowed to use, and these are ones that shape unsubsidized premiums. So the first factor is age, insurers can charge older adults up to three times as much as younger adults. And this is one of the biggest

drivers in variation in the sticker price of coverage. They can also vary it based on tobacco use. So smokers can be charged up to 50% more. Although not every state follows this. Additionally, with age, different states can have different ways to rate with age. Some states don't rate at all with age, which Vermont is one of them. And is one reason why when we look at an average insurance cost, Vermont might seem a little bit higher, but for a 60-year-olds, they actually are going to be paying less in Vermont than they would in many other states because that's not an age-rated state. Family size also matters too. A family of four pays more than an individual because each covered person is counted separately in the premium calculation. And like I said, current

health status is not allowed to affect premium. Someone with diabetes or cancer pays the same premium as someone who's healthy as long as they're the same age, live in the same area, and choose the same plan. Before the ACA, some of these people may have been denied coverage, but now they have guaranteed issue to make sure that even if they're previously diagnosed, they can still be covered. Beyond these individual factors, there are market level forces that influence how high premiums are before subsidies applied. So plans are offered with, in a state at the county level. So if you drive across the border to a different county in a state, that same plan may not be offered. It also could be offered, but at a different price.

Other factors that potentially affect the price of an unsubsidized premium is just how many insurers compete in the market. If there's more insurers, there's more competition, which is likely to drive down different premium costs. Additionally, how much providers like hospitals or physician groups charge in that region. Additionally, the overall health and size of the risk pool, a lot of states with really high premiums think Alaska, Wyoming, West Virginia, have really small populations and thus really small populations. the Affordable Care Act marketplaces. Another factor that can affect the cost of insurance is whether states have reinsurance programs to help offset very high cost claims. So all of these together determine the full unsubsidized premium. And then we apply that federal premium tax credit that adjust what people actually pay based on their income. There was a penalty if you didn't

have insurance. That was to encourage everybody to get on the ACA. And then the federal penalty was not removed, but it was dropped to zero, so it was removed. I don't understand why they didn't just remove it all together, but maybe that's so they could introduce it back again if it didn't work out. But it seems like because there's no penalty to not having insurance, people can just skip the insurance or they can go, like, does a health share count as insurance for this context? Like if I opted for a health share instead of health insurance, does that count and then I don't

have to pay the penalty? I do want to chime in that there are two states. that do give you a penalty if you don't have insurance, right? I think it's Massachusetts and California. Is that correct, Matt? There's more. But it's, I mean, it's hard to find this information, even with Google. Google's great, except they keep spitting out all this information that's, like, sort of true.

I think what you're speaking to is that one of the key principles, actually, of the Affordable Care Act was budget neutrality through these penalties, fees, and taxes that was supposed to offset this increase in spending on premium tax credits and through the expansion of Medicaid to population. up to 138% of the federal poverty line. These are all things that, you know, through whether it be court cases or through executive action, bringing down the penalties to zero, have just not come to pass, actually. But yes, you're correct. I don't have the states right off the top of my head, but there are some states that still require individual coverage. And there are other states that have really, they have what's called a basic health plan

to try and fill the gaps of people being uninsured to. So the ACA created a lot of different flight. at the state level to create these laboratories of experiments or whatever the term is, to try different policies to fix a lot of the issues that the ACA wanted to solve. I'm going to spit out a conjecture here. You can comment on the parts that you're allowed to comment on here, Matt. I love the neutrality. America is facing a situation where about 10% of its citizens are on a plan that's going to be impacted by the decision about how or whether to extend these enhanced subsidies.

Americans pay way more than most other countries for health insurance in health care health care in a general sense. That number is growing much faster than inflation. In 2025, it's projected to increase by about 7.1% national health expenditures to aggregate amount of money this country spends on health and on health care. And yet that is disproportionately impacting the unsubsidized premiums for the average ACA plan participant. The cost out of pocket if no action is taken by Congress is not going to be this 26% lift in premiums. It's going to be well over 100% lift for the average plan participant who is receiving a material amount of subsidies. And that problem is going to be felt disproportionately and most acutely

in specific states that have whatever combination of challenges that they have that cause the premiums to be higher for individuals in that state. That can vary by your situation. But I think the bottom line from all of that is millions of Americans, tens of millions of Americans are going to be forced to do math on this subject for the first time. And it's going to be, it's a requirement because they can't afford it in the first place. And for the fire community, our privilege of being, you know, fairly wealthy is being able to do that math from an expected value perspective about how and whether to be participate in this plan. And the Congressional Budget office is suggesting that as many as four million people are going to shift out of these plans

next year if the subsidies aren't extended. So this is not like me, you know, prophesizing a doom and gloom. This is a, this is an official government body that has done the research on this. It's saying, no, millions of people are going to flee these plans, these ACA plans. So that brings us to the alternative. What are the alternatives today? What do these four million, five million people go to if not an ACA plan? You know, that four million are, is just people who will become uninsured. So those are people who, you know, might be disproportionately younger, healthier, relatively lower costs. They use less care in a given year. They can assume the financial risk of no longer having any health coverage. Some people where it's likely those who are relatively

older who may have a chronic condition maybe aren't as risk or less risk-averse. They may stay on the health insurance coverage and they have no other option, but to just foot that extra bill and pay that extra amount. So obviously that four million people, there's additional people who may decide to go back to a less affordable employer option. These people also may decide to switch jobs. We know that about half of people on the Affordable Care Act marketplaces either work for a small business, own their own small business, or are self-employed and part of the gig economy.

These people may decide to switch jobs, give up the small business, close its doors, give up the flexibility that comes with gig work, just so that they're they can have an affordable employer offer. This could also affect occupations that we know just proportionately rely on the individual market. So we know over a quarter of farmers and ranchers receive health coverage through the Affordable Care Act marketplaces. So that could be an occupation that could be affected.

Those people may switch jobs just to have an affordable employer option. A fear for farmers in this country, huh? Let me ask you this. Is KFF allowed to comment? Do you have any data? Do you have any observations at all around the alternatives to traditional health insurance that are popping up like health shares, like crowdsourced healthcare and those kinds of things? You know, these health shares short-term limited duration plans, commonly known as junk health

plans, may be seen as a viable option because they have a lower cost premium, especially for people who don't maybe have that many health conditions. These can be really attractive. these plans do not have the same protections as Affordable Care Act compliant plans. They are not compliant with the Affordable Care Act. And thus, if you have a preexisting condition, anything related to that may not be covered. If you have an emergency room visit, potentially you could be footing the bill for a large portion of that.

So if you're deciding that you still want some form of coverage and it's not going to be a marketplace plan, you really need to read the fine print and understand what you're signing up for because these short-term plans may not be as generous as they seem. One question I think that comes to mind. I think a lot of people have is, why aren't alternative insurance programs popping up? And I think the answer to that is federal law says there are certain rules around insurance programs. But can you give us the biggest federal law points there?

I think that you talk about you can't charge more than three times as much for older adults, for younger adults. You can't deny pre-existing conditions. There are some of those things that prevent plans of life. lower cost from emerging for young healthy folks, for example. Is that true? Yeah, there's different the Biden administration took different executive action and rulemaking to try and, you know, kind of keep these plans siloed a little bit and make

sure they are accurately representative people are signing up for them. And I think just because a lot of people want to feel really like truly covered when they have health insurance, they go to some of these more traditional outlets to buy insurance and get a more typical health plan. I will conjecture here because I know you can't. I don't want to put you in a position. You've been wonderful with all this. Thank you. And you're very clear about this is like the neutral the neutral position is wonderful on all this. But I'll conjecture here, right? Let's say we don't extend these subsidies, we modify them in such a way that that encourages all or much of that population of four million people who may leave the exchange and go uninsured

here. And you see other folks moving to employer plans or you see other folks moving to health shares or some insurance alternatives. Well, then the obvious result of that is going to be that next year, premiums go up for everybody again in a pretty disproportionate way because the pool that's remaining is less healthy, more dependent on traditional insurance, more price inelastic, if you will, for this need of that one has in life for health care. This is a classic insurance death spiral. So does KFF have any research on the likelihood or probabilities of insurance death spirals and how that translates to costs for Americans who do depend on the plans over the next couple of years?

I would say that I don't think the marketplaces as of right now, especially with the enhanced premium tax credit, focusing just on the affordable character marketplace, it's not in a death spiral. Certainly if the enhanced premium tax credits do expire, then what's going to happen there is enrollees will be shed from the risk pools and those enrollees will likely be younger, healthier, those who can assume the risk of no longer having health insurance, which leaves an underlying sicker pool of people that insurers have to cover, which will raise premiums for everyone and which will cause more people to shed off the marketplaces and so on.

There will be a point of stabilization. You know, the Congressional Budget Office is estimating that four million people are going to leave the marketplaces and become uninsured because of this. Their predictions of total enrollment decline is not to zero. It's to a level like just under 20 million, I think. you know, there were premium tax credits in place before these enhanced versions of them came into place that allowed the marketplaces to grow and become stable. So, you know, we don't have any models or anything and say, you know, this is the percent chance that the ACA marketplace

is going to enter a death spiral. But I would just say that the different tools that are in place right now would make that, you know, pretty unlikely. And I don't think that we'll see an entire collapse of the marketplaces if the enhanced premium tax credits do expire. Although, you know, we will see a sizable portion of the ACA marketplace pool right now become uninsured if they do expire. All right, this is our final ad break and we'll be sharing more healthcare information after this. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps you see exactly

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contemplating a plan on the Affordable Care Act in the exchange. And specifically, I want to use myself and the people that are probably listening to this podcast as the example, right? People who are listening to this podcast are or intend to be multimillionaire early retirees. There's a component of self-insurance that is that I'm inherently comfortable with there. I'd be comfortable with a plan, for example, that allowed me to pay the first 10 or 25,000 or $25,000 out of pocket with no co-pays or contribution in there because I'm comfortable with that, but I cannot handle a, you know, multi-100,000 or multi-million dollar health insurance bill. Are there options for people like that in the marketplace today?

And how should someone in that situation think about navigating the next few years? Maybe the most important thing is to, if you have an established relationship with a navigator, agent, or broker, go talk to them. They're going to understand maybe your health care needs or at a very minimum be able to explain the different plan options in your area and help you choose the plan that is right for you. If you want to be protected from owing hundreds of thousands of dollars, you know, there's still a chance of that with any health issue, but I would say definitely choose an ACA compliant plan over a short-term limited duration plan. At the end of the day, people who want to stay on the Affordable

Care Act marketplaces, the reality is that there's going to be no good option. They are just going to have to pay more if they want to stay on the ACA exchanges. There are some things they can do if you're at a higher metal tier plan like a gold or silver you can drop down to a bronze plan which has a lower monthly premium but the flip side of that is that you could you know you have now face a deductible that's you know thousands of dollars more on average seven thousand dollars for a bronze deductible this last year so you could be paying more out of pocket that means that you're paying more annually you have a higher maximum out-of-pocket limit that means that you every time to go to the doctor you're going to be having to pay more for a co-pay or

co-insurance, but you just have to make sure that you have enough in savings to be able to meet these medical costs and not fall into medical debt, which is a very pervasive issue in America. It's not fun. Thank you for coming on and providing such really good information and realistic assessment of the situation here, Matt. It's not good news, but you did a wonderful job. I think overview in the situation and giving us a clear understanding of what's going on here, what the two political parties seem to want in this negotiation and what it means for the average consumer who's a participant in this marketplace right now. Thank you so much. Yeah, it was a pleasure. Thank you for having me. Matt, where can people find out more about you? And can you tell us more about KFF and what you

do over there? Yes, so KFF is a nonpartisan health policy information organization. I work in our policy analysis division, which provides information on different issues in health policy. I work on our Affordable Care Act team, but we have a team that works on virtually any topic in American health policy. We also do public opinion and survey research. We also do looks into health misinformation and trust on a national level. And we have a news division called KFF Health News, which partners with different local media outlets to cover different issues in different areas of the country. If you want to read more about health policy in the United States, you can go to kff.org, where you'll find all the information you could possibly ever want on US health policy.

It really is just absolutely incredible what you guys have put together at kff.org. And I've used a lot of those resources in the last few weeks preparing for this interview here. And, you know, to check out, you know, the calculators you have here, the data sets, the visualization. It's really world-class. So thank you for what you do there. Definitely encourage folks who are curious to learn more about this and do more self-education on the topic. Go to kff.org. It's incredible what they put out here. All right, Matt. Thank you so much for your time today. And we'll talk to you soon. Thank you.

All right, Scott, that was Matt McGoff from KFF. And that was wide eye-opening. Holy cow. I learned a lot talking to him and preparing for this episode. What did you think of what Matt had to say? Grief, these people from these think tanks are so good. I mean, like this is the last time we had someone that was knowledgeable about a specific area of policy was Preston Cooper when he talked about the ROI of college. Similar kind of concept here. Man, this guy is an all-star. That was fantastic. I learned, I learned a tremendous amount on the situation. I think, unfortunately, the takeaway is plan on health care costs in the United States of America growing at a fast rate than inflation, plan on the premium costs for ACA policies growing at much faster than that,

and be prepared for the realistic possibility that policy change could impact. I think the fire community in a particularly acute way, because I do not think the intent of the policy underlying all of this discussion is to subsidize multimillionaires who are realizing small amounts of income by withdrawing from their financial asset pool at levels below various federal poverty with, you know, multiplier thresholds. Like, I just don't think that's at the end of the policy. And I think it's a bad plan to rely on that 100%. I think people should have backup plans and really factor that into their fire decision.

And I think those backup plans need to be paying much more for health insurance or taking seriously some of the non-insurance alternatives out there that can and should make you really uncomfortable, but need to have the math and the assessment and knowledge based built up around them. Yeah, I was shocked to see that it's only 10% of Americans on the ACA. And it's an outsized portion of the fire community. But, you know, another way to phrase that is 90% of Americans are not insured through the ACA. That's pretty shocking to me. I don't, did you know that before we started doing this episode, Scott? Well, I knew that from the research to prep for the episode. But yes, that surprised me when I initially researched this is, is, you know, for an

item that shut down the government, I think that explains why nobody knows what the hell is going on when it comes to ACA premiums in a general sense. The headlines in like the major newspapers don't seem to really explain the issue very well. We have to bring on a superstar expert from a think tank that does, you know, crazy amounts of research and data on policy analysis to even comprehend the issue and really get under underlying causes that are driving this outcome that is so acute for 30 million people, 22 million of which receive heavily subsidized ACA premiums. There's a lot of people in the fire community who are going to have to start thinking about how they're going to handle their health insurance. But relying on ACA subsidies to, you know,

help foot the bill, I don't think is a long-term solution. I think you're right, Scott. I think they need to start thinking about, I mean, it's going to be a line item in your budget. health insurance and a cost, and that cost is just going to be more. Is it a fire killer? Right? That's the question. And I think the answer is if your requirement is to have insurance and you're not comfortable with alternatives, yeah, it could be.

This is a real challenge. And I think it is not appropriate to plan on them continuing in perpetuity if you're a multimillionaire at the previous rates. I think that's a bad plan. I agree. I think it is a bad plan. and I think that you, the listener, needs to start thinking about different alternatives. I do see a scenario where healthy individuals are leaving the ACA and going into alternative health insurance.

I mean, Scott, you have an alternative health insurance. I have an alternative health insurance in addition to what I'm calling the catastrophic plan, the HSA, the high deductible plan that I use sporadically but not really. I use my concierge doctor service because it's cheaper. I joined a health share, right? And because I face the same problem that 22 million people in America might face if these subsidies aren't extended. I face the same problem simply by having a higher income than what would qualify for subsidies. I'm here in Colorado.

So I had to do this math. And for me, I'll say I'm not that comfortable with the health share. I don't like love being on the health share compared to an insurance policy. But the math is so absurdly better that even. Even if I assign significant double, triple the amount of risk for not having a serious claim subsidized by the health share, I still come out so far ahead. It's crazy. So I'm not comfortable with it either. And I think it's a real issue that this community and the entire self-employed community, America will have to grapple with. It is. I look forward to seeing what Congress comes

up with. That'll be fascinating. And if they come up with something completely different, we'll have to bring Matt back on. All right, Scott should be out of here? Let's do it. That wraps up. this episode of the Bigger Pockets Money podcast. He is Scott Trench. I am Mindy Jensen saying good luck, Little Duck.