2026 Health Insurance Hike Sparks Concern Among Early Retirees: ‘We Cannot Afford This’

Health insurance costs are set to rise, with more than 300 ACA marketplace providers proposing premium hikes averaging 20% for 2026. Since premiums increase with age in most states, early retirees not yet eligible for Medicare may find coverage even harder to afford.

For people who already can’t afford health insurance, the increase will put health care further out of reach. Since premiums are based on age in most states, this could create a substantial problem for early retirees who hoped to leave work before they qualify for Medicare.

Health Insurance for Early Retirees

Most people become eligible for Medicare at age 65. If you retire earlier, you’ll need other health insurance to fill the gap. Early retirees have numerous health insurance options, but not all are affordable or long-term.

• Health Insurance Marketplace: Under the ACA, you can buy health insurance without medical underwriting, so you can qualify even with pre-existing conditions. Losing job-based coverage triggers a 60-day special enrollment period to sign up for an ACA plan. After that, you can change coverage during annual open enrollment (Nov. 1 to Jan. 15) for the following year. 
• Spouse or partner’s health insurance plan: Employer-sponsored health plans often allow employees to add their spouse, domestic partner, or dependent children to their coverage. If the spouse or partner retires before the policyholder does, they may have the option to continue the coverage.
• Retiree coverage from a former employer: Some employers continue to offer health insurance to their retired workers, though this is much less common than in the past. 
• COBRA: The Consolidated Omnibus Budget Reconciliation Act (COBRA) enables employees with an employer-sponsored health plan to continue their coverage after leaving the job. Those who qualify for COBRA can extend their coverage for a limited period and often must pay the entire premium out of pocket.
• Medicaid: Low-income retirees may qualify for Medicaid. States administer Medicaid benefits based on federal requirements. Medicaid is not as widely accepted as Medicare or private insurance, so enrollees may need to change their primary physician.

Early Retirement Realities

Allison Tom (55) and her husband, Dylin Redling (54), retired early in 2015. To share what they learned, the couple wrote Start Your F.I.R.E. (Financial Independence Retire Early): A Modern Guide to Early Retirement. 

They now buy Silver Plan health insurance coverage through the California ACA Marketplace, and pay $158 per month after subsidies. It’s covered major care like cancer treatment and surgeries, with no premium hikes since they retired.

However, with a 10.3% average increase expected in California, they are unsure how it will affect their premiums or subsidies.

“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.”

Mississippi resident and semi-retired registered nurse Peggy Farris (63) hasn’t had health insurance for two years. Though she tried to get coverage through the ACA, she was told it would cost more than $1,000 a month to cover herself and her husband.

“We cannot afford this,” she said. 

Her former insurer has proposed a nearly 25% rate increase in 2026, but this is a moot point for Farris.

“I can’t even afford the insurance premium as it was,” she said. 

Her only focus now is caring for her adult son with Down syndrome, who has coverage 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 reason costs may rise: The enhanced ACA premium tax credit from the American Rescue Plan is set to expire after 2025. These expanded subsidies lowered premiums for millions, primarily by removing exclusions for higher earners. Now, no matter your income, premium payments are capped at 8.5% of household income. Without an extension, many early retirees could see their costs jump. 

Besides the tax credits expiring, insurers have cited several reasons for the proposed rate increases.

• Cost of care and increased use: Doctor services and hospitalization costs increase annually.
• Inflation: Overall economic inflation can increase administrative and operating costs.
• Labor costs: Labor shortages have contributed to increased costs, as have hospital acquisitions and mergers.
• GLP-1 medications: Costly drugs such as Ozempic and Wegovy, used to treat diabetes and obesity, have become increasingly popular. This has prompted some insurers providers to discontinue coverage for certain medications, which could affect up to 45.8 million people under 65.
• Tariffs: Recently imposed tariffs may increase the cost of medical supplies and some drugs, leading providers to further increase premiums by an average of 3 percentage points.

Smaller health risk pool: Insurers speculate that if the tax credits expire, it will prompt some relatively healthy policyholders to drop their marketplace coverage, leaving providers with a less healthy—and more expensive—policyholder base. As a result, they will increase prices for remaining policyholders.

How to Manage Costs

Early retirees are facing a challenging insurance landscape. These tips can help them manage costs, even if tax credits expire.

• Carefully research all insurance options: Early retirees should check the marketplace annually to shop for the most cost-effective option. They should not automatically renew in the same plan, especially given the rise in costs.
• Consider a high-deductible plan (if healthy): A high-deductible health plan (HDHP) charges a lower monthly premium, but in exchange people owe more out-of-pocket when they need care. Healthy retirees could potentially save money using an HDHP, though people with medical issues would likely prefer a plan with more generous coverage.
• Save through an HSA: If you join an HDHP, you are eligible to save through a health savings account (HSA). This account lets you put money aside with tax breaks for future health care expenses, such as deductibles, copayments, and prescriptions. However, you can’t spend the HSA funds on insurance premiums. If you had an HSA from your past job, you could turn to those funds to help cover costs during early retirement. 
• Plan ahead for seeking care. Where you get care can make a big difference in cost. Ensure that you stay in-network with providers, as this reduces the out-of-pocket charge. If possible, research the costs for procedures at different facilities. You should also aim for treatment at outpatient facilities rather than the hospital when possible.  
• Invest in good health: By taking care of yourself, you can avoid costly medical issues later. Investing in preventative care can catch health issues early, before they become more serious. Take care of ongoing issues. Your plan may offer financial incentives for taking healthy steps, such as joining weight loss or smoking cessation programs.