Healthcare Costs are Changing... Are You Prepared?

By: Ashley Guapo

Health insurance is one of the largest expenses for families and can play a crucial role in financial planning. The Affordable Care Act introduced the Health Insurance Marketplace, allowing families without access to employer sponsored plans to find and purchase plans. Although this has provided access to health insurance for millions, the costs are dependent on income, tax credit qualifications, and constant changing rules set by Congress. The rules have drastically changed this year, and many are now feeling the impacts.

Until 2026, Americans have enjoyed health insurance marketplace "enhanced subsidies" created during the pandemic and implemented by the Inflation Reduction Act. The subsidies kept premiums at a maximum of 8.5% of household MAGI, regardless of income levels. Therefore, even middle- and higher-income earners above the 400% Federal Poverty Level (FPL) qualified for subsidies. The “lower monthly premium" on the marketplace is a discount provided by the IRS, called a Premium Tax Credit. The government pays a large portion of your bill directly to the insurance company every month, based on your FPL.

However, that extra federal funding expired on December 31, 2025, and Congress did not pass a renewal. This caused the health insurance market to have much stricter rules and higher costs, reverting to the 2010 Affordable Care ACT (ACA). This included the return of the “subsidy cliff". So, if your household income unintentionally crosses the 400% threshold, you lose 100% of that financial aid. Because the "caps" on repayments have also expired this year, crossing that line means the IRS will require you to repay every dollar of that monthly discount when you file your 2026 taxes in early 2027. This predominantly impacts self-employed individuals and early retirees as they do not have access to employer sponsored health coverage.

Link to the Covered California Program Eligibility by FPL for 2026

Without employer sponsored coverage, self-employed individuals are common customers of the healthcare marketplace. Their financial situation is more complex as their income can vary and is unpredictable. The marketplace requires that you state your income at the time of applying. Overestimating income could mean missing out on subsidies they qualify for, meanwhile underestimating income means repaying the IRS come tax season for the excess subsidies you received. However, the marketplace does allow for income updates to be made throughout the year. These individuals should plan to make contributions to a SEP IRA, Solo 401(k), and HSA as all reduce MAGI and get them closer to being eligible for those on the cusp of the 400% FPL threshold. Self-employed individuals can deduct healthcare premiums for federal taxes, effectively lowering their MAGI even further.

Early retirees are another group for whom insurance planning should be a component of their financial plan. Those who retire before 65 face a gap between years of affordable employer-sponsored coverage and Medicare eligibility, resulting in significant and underestimated healthcare expenses. However, early retirees have a better ability to control and predict their income. Individuals who retire early are likely to be eligible to take penalty-free distribution (age 59 ½) from IRAs or Roth IRAs, begin collecting social security benefits (age 62), and other sources of predictable income like part-time jobs or rental income. All these income streams have different tax implications. Without a proper withdrawal plan, transactions like taxable IRA distributions, realizing capital gains, or Roth conversions can mistakenly push them over the 400% FPL threshold and eliminate any subsidy eligibility.

The expiration of subsidies enhancements has drastically changed how healthcare can impact families’ financial future. Healthcare is not just about picking a plan. It now plays a role in tax, cash flow, and retirement planning. Understanding the qualifications for subsidies, monitoring income, and planning for taxable events are an essential component of holistic financial planning so more people can have access to affordable healthcare.

Gerber Kawasaki Wealth & Investment Management is an investment advisor located in California. Gerber Kawasaki Wealth & Investment Management is registered with the Securities and Exchange Commission (SEC). Registration of an investment advisor does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. Gerber Kawasaki only transacts business in states in which it is properly registered or is excluded or exempted from registration. A copy of Gerber Kawasaki Wealth & Investment Management 's current written disclosure brochure filed with the SEC which discusses, among other things, Gerber Kawasaki Wealth & Investment Management's business practices, services and fees, is available through the SEC's website at: http://www.adviserinfo.sec.gov .

Ashley Guapo  is a Financial Advisor of Santa Monica, California-based Gerber Kawasaki Inc., an SEC-registered investment firm with approximately ~$4.78B billion in assets under management and assets under advisement as of 06/30/26. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor. No strategy assures success or protects against loss. Readers shouldn't buy any investment without doing their research to determine if the investments are suitable for their situation. “All investments involve risk and one should consult a financial advisor before making any investments. Past performance is not indicative of future results."