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Candace Scholz, CFP®, MS, MHA
Recently, the Affordable Care Act (ACA), first passed in 2010, has been in the news due to the debate surrounding the extension of the Premium Tax Credit (PTC), a refundable tax credit aimed at making health insurance more affordable for those at certain income thresholds who do not have access to either an employer-sponsored health plan or a government plan such as Medicare, Medicaid, Children’s Health Insurance Program (CHIP), or Tricare. The ACA also included certain enhanced subsidies as part of the PTC. These enhanced subsidies, originally set to expire in 2022, were extended through 2025 by the Inflation Reduction Act of 2022. However, the enhanced ACA subsidies expired at the end of 2025, which is likely to lead to increases in health insurance costs for many Americans unless Congress takes further action.
Who Qualifies to File for the Premium Tax Credit?
To be eligible to receive the standard PTCs that were not subject to expiration at the end of 2025, taxpayers must meet the following requirements:
- Purchase a health insurance plan through the Health Insurance Marketplace;
- Meet certain income requirements (generally, your income must be 100–400% of the federal poverty line, or FPL)
- 100% of FPL for 2026 is $15,960 in annual income for a single individual, increasing by $5,700 for each individual in the household;
- 400% of FPL for a single individual would be $63,840.
When you apply for a plan, you submit an estimate of your income for the coming year. The Health Insurance Marketplace then calculates the amount of your PTC based on your income and the cost of certain benchmark plans in your geographic area. You can either have your PTC sent directly to your health insurer to reduce the amount of premiums you must pay, or you can claim the credit when you file your tax return, using Form 8962.
How Are High Earners Affected by the Expiration of Enhanced Subsidies?
Temporary enhancements to the PTC functionally eliminated the 400%-of-FPL rule, permitting those with income above that level to qualify for subsidies if their benchmark plan premium exceed 8.5% of estimated modified annual gross income (MAGI). However, the expiration of these enhanced subsidies at the end of 2025 likely means that higher earners without access to a company or government plan (such as certain self-employed individuals and those in early retirement who have not reached the Medicare qualification age of 65) will likely be required to pay more out-of-pocket for health insurance coverage.
What Are Other Health Insurance Options for High Earners?
1. Apply through the Health Insurance Marketplace. Your PTC may be reduced or you may not qualify , but you will still have access to the various marketplace plans. Depending on your health and the likelihood of plan utilization, you may wish to select a plan with lesser benefits and a higher deductible; you would still have coverage in the event of a disastrous need, but your monthly premiums could be more manageable.
2. Consider a high-deductible health plan (HDHP) in conjunction with a health savings account (HSA). This combination offers tax advantages for those with higher incomes. Contributions to the HSA are tax-deductible, and balances within the plan grow without taxation. Further, funds may be withdrawn at any time on a tax-free basis if they are used to pay for qualified healthcare expenses such as deductibles, co-pays, and prescriptions. Because the companion health plan has a high deductible, out-of-pocket premium payments are more modest. Balances in the HSA may be rolled over from year to year.
Aspen Wealth Management works with clients to assess their entire financial situation. This includes careful consideration of not only investments, but also risk management needs such as those included in health insurance. If you are feeling uncertain about your health insurance coverage, reach out to an Aspen advisor. Our team is dedicated to excellence and is committed to providing advice, guidance, and services that place your best interests at the center of every recommendation. Rather than focusing on selling products, we focus on helping you achieve your most important financial goals with clarity and confidence.