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“Hardworking American taxpayers should not be forced to subsidize health care for people who are ineligible under federal law.”
That’s Treasury Secretary Scott Bessent, announcing proposed rules on Oct. 14 to tighten who can get the premium tax credit, the subsidy that lowers the cost of health plans bought through the Affordable Care Act marketplaces (1, 2).
Beginning in 2027, the Treasury says, the rules would ensure subsidies “go only to Americans who qualify under federal law.” They would also add “new verification criteria for any advance PTC payments” (1).
I’ve been a CPA since 1981, and I don’t have a problem with checking eligibility. Subsidies should go to the people the law says should get them.
But if you retired before 65 and buy your own coverage until Medicare kicks in, I’d argue the verification rules aren’t your biggest risk. A change that’s already law is.
Starting with tax year 2026, the IRS says, “There is no repayment cap” on subsidies you got but weren’t entitled to (2). And open enrollment for 2027 coverage starts Nov. 1 (3).
Here are 5 things early retirees need to know.
1. What the new rules would do
The proposals are just that, proposed. According to the Treasury, they would restrict the credit to “U.S. citizens, U.S. nationals, and certain lawfully present noncitizens” and apply eligibility checks and new verification criteria (1).
The Treasury says changes to marketplace procedures are expected to be addressed in separate proposed rules from the Department of Health and Human Services (1).
The release also cites the Centers for Medicare & Medicaid Services’ announced removal of more than 760,000 unverified enrollees from ACA rolls (1). If you’re eligible and your paperwork is in order, the practical step is simple: answer any request for documents quickly.
2. The bigger catch: no more cap on paying it back
Here’s how the subsidy works. You estimate your income when you sign up, and the government pays part of your premium to your insurer in advance based on that guess (2). At tax time, you settle up.
For years, the amount many people had to pay back if they guessed too low was limited.
The 2025 tax law known as the One Big Beautiful Bill changed that by “removing the limitations on repayment of excess advance payments,” the IRS says (5).
The IRS puts it plainly: “For tax years after 2025, you must repay the full amount by which your advance credit payments exceed your Premium Tax Credit” (2).
And “This amount is added to your total tax liability, which will reduce your refund or increase your balance due” (2).
Say your advance payments come to $6,000 more than the credit you actually qualify for. You’d owe the whole $6,000 back with your tax return.
That’s the kind of surprise that’s worth planning around before you pick a plan.
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3. More of your retirement income counts than you might think
This is where early retirees can get tripped up. The marketplace’s definition of income isn’t the same as what you’d guess.
According to HealthCare.gov, you should “Include both taxable and non-taxable Social Security income” (4).
You should also “Include most IRA and 401k withdrawals,” though not qualified distributions from a designated Roth account (4). Capital gains count, and so does tax-exempt interest (4).
So a big IRA withdrawal or selling stock at a gain can push your income higher than you estimated. My read: if you’re living on a subsidy, map out the year’s withdrawals before you make them, not after.
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4. Report income changes as they happen
If your income jumps midyear, don’t wait until April to deal with it.
The IRS says that “Notifying the Marketplace about changes in circumstances as soon as they occur” lets your advance payments be adjusted, which “will decrease the likelihood of a significant difference” at tax time (2).
That’s cheap insurance against a big bill: a quick update to your marketplace account.
5. Shop again starting Nov. 1
HealthCare.gov says open enrollment starts Nov. 1. If you “Enroll by December 15,” your coverage starts Jan. 1 (3).
Don’t just let last year’s plan renew. Update your income estimate for 2027 carefully, and compare what you’d actually pay.
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My honest take
Bessent’s point is fair. Taxpayer-funded subsidies should go to people who qualify.
But for early retirees, the bigger risk isn’t a new verification form. It’s guessing your income wrong in a year when the law no longer limits what you have to pay back.
Get the income estimate right, update it when life changes, and the subsidy does what it’s supposed to do: get you to Medicare without wrecking your budget.
Sources: 1. U.S. Department of the Treasury; 2. IRS; 3. HealthCare.gov; 4. HealthCare.gov; 5. IRS
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