Many older Americans eagerly await their 65th birthday because it qualifies them for Medicare.
This federal health insurance program offers coverage to people who are 65 or older as well as people with certain disabilities or medical conditions.
Medicare is typically cheaper than other options, such as coverage that’s available under the Affordable Care Act (ACA) of 2010, also known as Obamacare. But for some people who work past age 65, it’s cheaper to stay on their employer’s health insurance than it is to sign up for Medicare.
This is the case for Money Talks News reader Elle F., who is still working at age 69.
The trouble is her household income dropped by half in early 2024, when her spouse retired, and her spouse won’t be eligible for Medicare until later in 2026. Thus, Elle asks Money Talks News:
“Hi. Do you have any tips for affordable health insurance to bridge when I retire but am not quite ready for Medicare? The Affordable Care Act looks back two years and my income is different now, so I cannot afford that insurance. Also, I am shocked at how expensive my health insurance will be on Medicare! Thank you.”
We asked Elle for some specifics about her situation so we could better answer her question. Elle explained:
“When I ran the numbers for ACA coverage for my spouse in 2024, it would have cost $800 a month, so I kept working and added my spouse to my insurance through work for $400 a month. Our income was cut in half, with my spouse not working, but we both receive Social Security, which has kept us afloat. I want to retire, but I’m afraid to. Checking into Medicare for sometime next year looks like it will cost us $550 each to be insured and have some dental benefits. We’re looking at Medigap plans and we also see caps on dental insurance, so know that we will be paying out-of-pocket for some things.”
Elle, this scenario is not uncommon.
Medicare premiums are typically calculated based on your income from two years prior. So if your income recently dropped, you might face higher Medicare premiums because they are based on your prior, higher income. But for people in your situation, this can be corrected, as I’ll get to in a minute.
This increased cost is called an Income-Related Monthly Adjustment Amount (IRMAA). It’s added to your premiums for Medicare Part B (outpatient coverage) and, if applicable, Part D (drug coverage) if your income from two years ago is over a certain amount.
As of 2025, the added cost for Part B can be as high as $443.90 per month — on top of the standard Part B premium.
The good news is that someone who faces IRMAAs after a drop in income can request that the Social Security Administration reduce their IRMAAs.
You do this by filling out a form called “Medicare Income-Related Monthly Adjustment Amount – Life-Changing Event (SSA-44).” As the name implies, it’s used to report a life-changing event, which includes a reduction in income.
The cost of ACA coverage, on the other hand, is not based on your past income. It’s affected by multiple factors, including your age, location, plan options and any subsidies you qualify for. ACA subsidies are based on your expected household income for the year for which you are seeking coverage.
Another factor that will affect ACA costs for 2026 is that the enhanced tax credit for premiums is set to expire at the end of 2025. This additional tax break created during the COVID-19 pandemic was designed to make ACA premiums more affordable. So its expiration means higher ACA premiums in 2026.
I recommend speaking with a Medicare representative to rerun premium costs based on your current income, and an ACA rep to rerun costs based on your expected 2026 income. You have until as late as Jan. 15 to sign up for ACA.
If you’re not quite ready to lower your income by retiring completely, check with your employer and review their health care plans. They may offer others at a lower price point than your current plan.
It’s important to consider all your options under Medicare, ACA and your employer.
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