Will 2026 Healthcare Costs Destroy Financial Independence for Millions?

Summary

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

Air Date: November 25, 2025
Hosts: Mindy Jensen & Scott Trench
Guest: Matt McGough, Policy Analyst at KFF (Kaiser Family Foundation)

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Episode Overview

This episode issues a wake-up call to those pursuing FIRE (Financial Independence, Retire Early): looming changes to healthcare subsidies may drastically increase costs for millions—especially early retirees and the self-employed. The hosts and Matt McGough (KFF) break down how expiring enhanced ACA (Affordable Care Act) subsidies could cause premiums to double or triple, explain the history and intent of those subsidies, explore political and economic ramifications, and discuss what policy change means for FIRE adherents and other ACA users.

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Key Discussion Points & Insights

1. How Americans Get Health Insurance (01:21–02:38)

• Employer-sponsored insurance: ~50% of Americans
• Public programs (Medicare, Medicaid): >33%
• ACA Marketplaces ("Obamacare"): ~10% (disproportionately high among FIRE community)
• Uninsured: 8% (down from 15% pre-ACA)
• Core issue: “We pay twice the average of comparable countries per capita, but our life expectancy is four years less.” —Matt McGough (02:16)

2. Brief History and Purpose of the ACA (03:12–05:29)

• ACA Goals:
  • Expand coverage
  • Enhance consumer protections
  • Limit out-of-pocket liability with subsidies
• Problems ACA Aimed to Fix:
  • High uninsured rate (15–16%)
  • Rising costs and premiums
  • Lack of protections for pre-existing conditions
  • No caps on out-of-pocket or annual/lifetime maximums pre-ACA

3. Evolution and Mechanics of Premium Tax Credits (05:33–07:07)

• Base subsidies present from ACA's start (2014)
• Enhanced subsidies (2021, COVID response):
  • Increased credit amounts
  • Extended eligibility above 400% FPL (Federal Poverty Line, $63,000 for an individual in 2025)
  • Addressed the “subsidy cliff”—capped payments at 8.5% of income for all ACA buyers
• “People who were just a few dollars over the line used to pay thousands more… That’s the subsidy cliff.” —Matt McGough (06:13)

4. Impact of Enhanced ACA Subsidies (07:44–08:29)

• Enhanced credits made coverage "much more affordable" (08:06)
• Marketplace enrollment doubled: ~12 million (pre-COVID) → 24.3 million (2025)
• Uninsured rates reached record lows

5. The Looming 2026 Problem (09:14–11:37; 14:44–16:34)

• Two main threats:
  • Underlying ACA premium costs are rising (26% YoY for 2025 plans)
  • Enhanced subsidies are set to expire at the end of 2025 unless Congress acts
• For a typical FIRE retiree family:
  • “Going from $200 to $1,100 a month in Colorado for the same plan. In Vermont, it can go from $400 to $2,400!” —Scott (14:20)
• The loss could be “a preposterous increase that completely blows up your plan and your family’s budget.” —Scott (15:08)
• The “double whammy”: Those above 400% FPL lose all credits AND face higher base premiums

6. Political Landscape & Congressional Stakes (16:34–19:13; 22:30–26:21)

• Only 10% of Americans use ACA exchanges, but this group is vocal and highly affected
• Congress is undecided; some predict partial extension, not full status quo (16:34)
• “I thought the ACA made up 50% of Americans. It’s 10%. That’s… nominal. Now I understand why Congress is leaning towards not extending.” —Mindy (17:03)
• Republican perspective:
  • Want to control costs and may see enhanced credits as a pandemic-only fix
  • Concerned about subsidizing high-net-worth, low-income-reporting FIRE retirees
  • Some proposals focus on tying subsidies to lifestyle/health factors, but recent GOP efforts haven't addressed underlying systemic costs (23:25–26:21)
• Democratic perspective: full extension as a “cornerstone policy”

7. Geographic Premium Disparities Explained (31:33–34:23)

• Allowed pricing factors: age (up to 3x), tobacco use, family size
• State variations: Some (like Vermont) do not "age rate" premiums; this can affect premiums dramatically
• Other drivers: number of insurers in a market (competition), local provider costs, size and health of state risk pool, presence of state "reinsurance" programs

8. Penalties & Alternatives to ACA Coverage (34:23–40:57)

• ACA's federal penalty for being uninsured is now $0, but some states (CA, MA, a few others) still levy penalties
• Alternative coverage: “Health shares” and “junk” health plans (short-term, limited coverage) are not ACA-compliant; read the fine print carefully

Memorable moment:

"If you have a pre-existing condition, anything related to that may not be covered. If you have an ER visit, you could be footing the bill for a large portion. These short-term plans may not be as generous as they seem." —Matt (40:25)

9. Potential for an ‘Insurance Death Spiral’ (41:55–44:25)

• If younger, healthier people leave due to cost, only high-risk remain, pushing premiums up in a negative feedback loop
• Matt’s assessment: ACA markets have stabilizers and are unlikely to collapse entirely (“death spiral” unlikely but 4 million could lose coverage if enhanced credits expire)

10. Immediate To-Do’s for Listeners / FIRE Community (48:01–50:16)

• If you're facing these increases:
  • Consult an insurance broker or agent to explore every ACA and non-ACA option
  • Consider downgrading to a bronze plan (but be prepared for higher deductibles—average $7,000)
  • Have enough savings to cover large out-of-pocket events (“Medical debt [is] a very pervasive issue in America.” —Matt 49:34)

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Notable Quotes & Memorable Moments (with Timestamps)

• “We pay twice the average [healthcare spending] of comparable countries per capita, but our life expectancy is four years less.” —Matt McGough (02:16)
• “People have started to take this as, you know: 'Oh, I don’t have to pay these high rates anymore.' ...especially people in the FIRE community—they’re counting on [ACA credits].” —Mindy (08:29)
• “If Congress does not extend the subsidies... going back to that cliff scenario... that could completely blow up your plan and your family’s budget.” —Scott (16:36)
• “The problem is not unique to but is particularly acute in health insurance: adverse selection.” —Scott (29:19)
• “The ACA is awesome. But also these subsidies were never invented for the FIRE community.” —Mindy (28:09)
• “Millions of Americans... will have to do math on this subject for the first time because they can't afford it in the first place. And for the FIRE community, our privilege is being able to do that math...”—Scott (36:09)
• “These health shares, short-term limited duration plans, may be seen as a viable option... but do not have the same protections as ACA-compliant plans.” —Matt (40:04)
• “I do not think the intent of the policy underlying all of this is to subsidize multimillionaires... I think it’s a bad plan to rely on that 100%.” —Scott (52:27)
• “It could be a FIRE killer.” —Scott (54:58)

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Major Action Items & Takeaways

For FIRE Pursuers and Early Retirees

• Don’t rely solely on ACA subsidies for your retirement health plan
• Prepare for sharp premium increases in 2026—potentially 2x, 3x, or more
• Alternative plans (health sharing ministries, high-deductible major medical) may be necessary but carry greater risks and exclusions
• Consult with brokers/agents before open enrollment to understand your state’s specific options
• Build a larger emergency fund for out-of-pocket risks—max out HSA contributions where possible
• Monitor Congressional action closely; changes may happen late and with only partial relief

For All Listeners

• If you’re self-employed, a small business owner, or a gig worker—pay attention to how ACA subsidies affect your situation
• Remember the broader context: 90% of Americans are NOT on the ACA; but the impact is life-changing for the 10% who are

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KFF Resources

• “Go to kff.org, where you’ll find all the information you could possibly want on US health policy.” —Matt (50:49)
• "The news division, survey research, calculators—it's world-class." —Scott (51:35)

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Final Thoughts (Hosts, 52:16–56:46)

• Scott: Be cautious. Health care costs are growing faster than inflation, and the FIRE community especially may be caught off guard. Don't plan on ACA subsidies "in perpetuity" as a multi-millionaire with low reported income.
• Mindy: 10% of Americans on the ACA was "shocking"; FIRE community needs to budget for much higher premiums going forward and consider uncomfortable alternatives.

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In Summary

If you’re planning your financial future around early retirement, the next couple years will bring a seismic shift in healthcare expenses. The time to run your numbers and prepare alternatives is now.

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For more in-depth, neutral information on health policy and ACA calculations, visit kff.org.

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End of Content Summary.

Transcript

[A]

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 your. Hello, hello, hello and welcome to the BiggerPockets Money Podcast. My name is Mindy Jensen and with me, as always, is my Health Shares co host, Scott Trent.

[B]

Thanks, Mindy. So great to be here. And thank you for ensuring that all of us know what's going on with healthcare in America today. For the financially independent with us today we have a very special guest. Matt McGough 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.

[C]

Yep, thank you for having me. Happy to be here.

[B]

I thought that we could start off the discussion here by just framing healthcare in America. How do most Americans get their healthcare here? In 2025?

[C]

Most Americans receive their health insurance through their employer. That's about half the country, or about 2/3 of people with insurance. Over a third are 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 purchase 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 US 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.

[A]

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.

[C]

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 are have occupations or are part of jobs that don't offer employer sponsored insurance.

[B]

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 and came about as part of that?

[C]

Of course. So yep, for some background, the Affordable Care act 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 health care 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 uninsured 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 rescissions, and additionally, different insurers could pay more or separate these people into a separate risk pool just for having a pre existing 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 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. Initially 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 on the 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.

[B]

Can you give us a lesson on the timing of those subsidies? They came later, right?

[C]

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. Sort of 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, were 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 these, 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 Care act marketplace at 8.5% of their annual income going towards their health insurance premium.

[B]

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, 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 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?

[C]

I can't characterize, like, how generous necessary 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 ins 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.

[A]

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 $1800, but you'll pay $200. So it's, 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 moving forward.

[B]

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 the super duper tax credits that don't have that cliff problem that we just 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?

[C]

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 characteriz 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 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 they're 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 act 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 4 to 5 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 Care act 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 a annual basis increase on average by a thousand dollars or 114 virtually overnight come January 1st.

[A]

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[B]

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[B]

All right, Matt's about to return with some premium points on health insurance. Welcome back to the show. So in practical terms, 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 24, 2,500amonth for that same family. And going from 400, perhaps in premiums that you're paying out of pocket with subsidies in place to 2,400amonth, that's just a preposterous increase that completely blows up your plan and your family's budget. Can you explain what is going on a state by state, state basis with these premiums? Why are they so different in these different states?

[C]

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.

[B]

There's one conditional we have to put in here. If Congress does not extend the subsidies, that's all 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, I find it unlikely, I would imagine it's unlikely that it will just be a complete shut off and going back to that cliff scenario. I mean, you can't comment on that. Mindy, what do you think?

[A]

Well, until Matt said that it was only 10% of Americans on the ACA. My thought was it's gotta 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 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. 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 1800. And you keep hearing people say, oh, premiums have gone up 26%. 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, that was really helpful to. For the way that you described that.

[B]

I characterize myself generally as being 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 multimillionaires, 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.

[C]

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 actor 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 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 uninsured population of 4 million people because of the expiration of these enhanced premium tax credits, that means more people, when they have a medical emergency, are going to the emergency room without health insurance coverage under US 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 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 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. If there are people who are, you know, in the hundreds of thousands of dollars in annual income that are receiving subsidies, it's very, very few people. All payments towards your health insurance premium on the Affordable Care Marketplaces are capped at 8.5% of people's income. And it would 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 the that case.

[B]

I think I understand what the Democrats want in this negotiation, which is a 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 talking to a Republican, 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, 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?

[C]

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. You know, 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, 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. You Know, some of them want a, 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 with high health care costs in the US because the government is just footing 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, are gig workers. They have come to rely very heavily on this people and occupations that we typically think of as, as being more in Republican areas of the country or in Republican congressional districts. Farmers and ranchers, about a quarter of them receive their health coverage through the 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 and disproportionately benefit from the Affordable Care act marketplaces and the enhanced premium tax credits over the last few years.

[B]

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 impression is, or what I believe to be true is if you asked a right wing person listening to biggerpockets 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 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.

[C]

That I've heard of. That side is probably points to statistics that around 5% of the population of the highest spenders on healthcare, you know, make up 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.

[A]

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 conversion 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 multimillionaire 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 1 25. And I went with the no pregnancy coverage because I figured if I, 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 pre existing conditions. 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, hospital will 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.

[B]

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 healthcare are 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, you know, in my, in my 20s on there. And so this insurance concept, for them, it's a bad bet. It's bad math. It'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 late load the least. And the people who are the highest risk, who are the most likely to need health insurance, are going to pull 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, is 1,000 bucks for someone in my 1100 bucks or so. But in Vermont, it can be 22 to 2,400 bucks for the same coverage. Right. So my counterpart in Vermont who's 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. Month. And in Colorado, maybe more people are like, you know what? I can, that's. I don't like paying extra 700 bucks 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.

[C]

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 US and how that varies upon a couple different factors. So we talk about how premiums are set 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 adults. And this is one of the biggest drivers and 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 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 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 in a state at the county level. So if you drive across the border to a different Cal estate, 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 on 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 adjusts what people actually pay based on their income.

[A]

There was a penalty if you didn't have insurance that was to encourage everybody to get on the aca. And then the Fed 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 altogether, 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.

[B]

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?

[A]

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.

[C]

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 too. So the ACA created a lot of different flexibility 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.

[B]

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 sitting facing a situation where about 10, 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 and healthcare. 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 healthcare. 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 probably 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're, they can't afford it in the first place. And for the fire community, our privilege of being fairly wealthy is being able to do that math from an expected value perspective about how and whether to participate in this plan. And the Congressional Budget Office is suggesting that as many as 4 million people are going to shift out of these plans next year if the subsidies aren't extended. So this is not like me prophesying a doom and gloom. This is an official government body that has done the research on this is saying no, millions of people are going to flee these plans, these, these ACA plans. So that brings us to the alternative. What are the alternatives today? What do these 4 million, 5 million people go to if not an ACA plan?

[C]

You know, that 4 million 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 4 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 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 can have an affordable employer offer. You know, this could also affect occupations that we know disproportionately 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 you know, that could be an occupation that could be affected and those people may switch jobs just to have an affordable employer option.

[B]

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 alternative to traditional health insurance that are popping up like health shares, like crowdsourced healthcare and those kinds of things?

[C]

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. But these plans do not have 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 pre existing 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 know, you still want some form of coverage and it's not going to be a marketplace plan, you really need to read the file fine print and understand what you're signing up for. Because these short term plans may not be as generous as they seem.

[B]

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 talked about? You can't charge more than three times as much for older adults, for younger adults. You can't, you can't deny pre existing conditions. There are some of those things that prevent plans of lower cost from emerging for young healthy folks, for example. Is that true?

[C]

Yeah, there's different. The Biden administration took different executive action and rulemaking to try and 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 more typical health plan.

[B]

I will conjecture here because I know you can. I don't want to put you in a position. You've been wonderful with all this. Thank you. And you were very clear about. This is like the neutral. The neutral position is wonderful and all this. But I'll conjecture here. Right. Let's say we don't extend these subsidies or we modify them in such a way that in that encourages all or much of that population of 4 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 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 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?

[C]

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 Care act 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 shut off the marketplaces and so on. There will be a point of stabilization. You know, the Congressional Budget Office is estimated that 4 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 allow 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, if it, if they do expire.

[B]

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[A]

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[B]

So what can somebody do in the face of these rising premiums here? As a consumer that is contemplating a plan on the Affordable Care Act 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 multi millionaire early retirees. There's a component of self insurance that isn't that I'm inherently comfortable with there right? I'd be comfortable With a plan, for example, that allowed me to pay the first 10 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 multi hundred thousand 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?

[C]

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 healthcare 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 great 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 $7,000 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, you every time you go to the doctor, you're going to be having to pay more for a copay or co insurance. But you just have to make sure that you have enough and savings to be able to meet these medical costs and not fall into medical debt, which is a very pervasive issue in America.

[B]

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, think overviewing the situation and given 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.

[C]

Yeah, it was a pleasure. Thank you for having me.

[B]

Matt. Where can people find out more about you and can you tell us more about KFF and what you do over there?

[C]

Yes. So KFF is a nonpartisan health policy information organization. I work in our policy analysis division, which is, 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 U.S. health policy.

[B]

It really is just absolutely incredible what you guys have put [e-mail] and I've used a lot of those resources in the last few weeks preparing for this interview here. And to check out 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, learning more about the this and do it more, more self education on the topic. Go to kff.org it's it's incredible what they get, what they put out here.

[A]

All right, Matt, thank you so much for your time today and we'll talk to you soon.

[C]

Thank you.

[A]

All right, Scott, that was Matt McGough 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.

[B]

These people from these think tanks are so good. I mean like this the last time we had someone that was this knowledgeable about a specific area of policy was Preston Cooper when he talked about college. Similar kind of concept here. Man, this guy is an all star. That was fantastic. 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 faster 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 multiplier thresholds. 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 built base built up around them.

[A]

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 we started doing this episode, Scott?

[B]

Well, I knew that from the the research to prep for the episode. But yes, that surprised me when I initially researched this is is, you know, how for, 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, a superstar expert from a think tank that does crazy amounts of research and data on policy analysis to even comprehend the issue and really get under the underlying causes that are driving this outcome that is so acute for 30 million people, 22 million of which receive heavily subsidized ACA premiums.

[A]

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.

[B]

Is it a fire killer? Right. That's the question. And I think the answer is if your requirement is to have insurance and not you're not comfortable with alternatives. Yeah, it could be. This is a real challenge and I think, I think it is not appropriate to plan on them continuing in perpetuity if you're a multimillionaire there at the previous rates. I think that's a bad plan.

[A]

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 the 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.

[B]

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 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 love being on the health share compared to an insurance policy. But the math is so absurdly better that 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 in America will have to grapple with.

[A]

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 up on. All right, Scotch, we get out of here.

[B]

Let's do it.

[A]

That wraps up this episode of the Bigger Pockets Money podcast. He is Scott Trench. I am Mindy Jensen. Saying good luck, little duck.