A small, but growing portion of the US population participates in the health insurance marketplace, commonly known as Obamacare. This marketplace offers direct access to health insurance plans from major providers, while also providing a potential insurance premium tax credit for eligible participants, based on household income and participant age, making monthly premiums more affordable for many.
Given the continued surge in health-related costs, legislation several years ago enhanced the premium tax credit for many households; however, the One Big Beautiful Bill Act, signed in July, has eliminated this additional credit.
Today we’ll explore some of the repercussions of this decision and its impact on Wyoming individuals and families. We’ll explore some alternative paths to health coverage to help families ensure they’re sufficiently protected from the high costs of health-related incidents, and share an example of how Obamacare can still be a viable health insurance option.
THE OBAMACARE LANDSCAPE: NOW AND TO COME
Obamacare currently has around 24 million enrollees. In many cases these plans primarily serve small business owners, part-time workers who are otherwise ineligible for coverage through their employer, and pre-retirees not yet eligible for Medicare (until age 65).
In our experience, about nine out of ten Obamacare participants received some sort of premium tax credit. (Your income needs to be quite high to receive no premium assistance at all.) The average premium tax credit received nationwide in 2024 was $536 per month–a major boost to those who would otherwise have to purchase insurance directly from a provider.
Soon, premiums might get much pricier across the country. While premium tax credits aren’t going away, the enhanced credit is. Depending on incomes, net premium costs could rise by 25% to 100%, depending on income. The Kaiser Foundation estimates that premiums will increase by an average of more than 75%. This could result in a significant rise in out-of-pocket health costs, prompting many to forgo coverage entirely and leaving households vulnerable to large, uninsured medical bills they must pay themselves.
The impact on Wyoming families specifically remains to be seen, but Wyoming insurers have announced their proposed insurance rate changes among Obamacare plans for 2026. These are summarized in the table below:
These rate hikes are significant, and again, depending on one's income and age, the real “change” in what a participant actually pays may be far higher, depending on your income and age.
For example, a single 30 year-old Obamacare participant may see a 30% rate increase, but perhaps his income is low enough to still largely be covered by the premium tax credit. On the other hand, a 60 year-old, married, early retiree making a good income may have to shoulder the full brunt of these premium hikes, receiving very little tax credits to buffer the cost.
These rate increases are part of what’s playing into the 25% to 100% Obamacare premium increases noted earlier. Further, they don’t factor in the costly deductibles that need to be met with any health insurance plan, not only those through Obamacare. Wyoming hospitals, like many across the nation, are also under pressure to increase prices due to the impact of inflation on their cost of care.
In short, health insurance costs are threatening to be a major factor for Wyoming families starting next year.
ALTERNATIVES TO MARKETPLACE (OBAMACARE) COVERAGE
For those priced out of some or all of their premium tax credits due to the new law, there are still insurance options worth considering. Let’s break down a few of the most common ones we hear about, and share a few pros and cons.
Employer-Sponsored Plans
Individuals may find lower premiums and broader coverage through employer-sponsored plans. These plans benefit from employer subsidies (on average, employers cover 70% to 80% of the cost), making them generally more affordable than individual marketplace plans. This of course means someone hoping for an early retirement needs to return to the workplace, but a retired spouse with the other working until Medicare eligibility may be a viable option.
Short-Term Health Insurance
Short-term plans provide temporary coverage with lower premiums than Obamacare plans. They typically exclude pre-existing conditions and may have limited benefits, such as no maternity, preventive, or mental health coverage. These plans are best suited for healthy individuals who need coverage only for a short period or as a stopgap until more comprehensive coverage, like Medicare, is available.
Health Care Sharing Ministries (HCSMs)
HCSMs are faith-based programs where members share medical costs through monthly contributions. They are not insurance and do not guarantee payment of claims. Coverage is usually less comprehensive and may exclude certain conditions or treatments. They can be significantly cheaper than ACA plans by 30% to 60%, but carry more risk, particularly for major medical events or pre-existing conditions.
Direct Primary Care (DPC) + Catastrophic Coverage
Direct Primary Care arrangements allow patients to pay a flat monthly fee for unlimited access to primary care services. Pairing DPC with a short-term policy can help cover hospital-level expenses. This approach provides predictable costs for routine care while maintaining some protection against large, unexpected medical bills.
RECONSIDERING OBAMACARE THROUGH THE TAX SAVING LENS
Some or none of these alternate paths to health care may resonate with you, but they all come with tradeoffs, particularly for early retirees not yet eligible for Medicare, or self-employed individuals who lack group coverage.
But there is a vital aspect of Obamacare that often goes underappreciated, or completely missed.
You understand by now that the amount of your Obamacare premium tax credit is based on your income–the higher your income, the lower your premium tax credit, until you’re completely phased out from any credit. Specifically, the government looks at something called your Modified Adjusted Gross Income, or MAGI. This takes your total income from wages, annuities, dividends, interest, capital gains, and IRA distributions, and adds in other components like non-taxable Social Security and interest from tax-free bonds.
Are there ways to reduce your MAGI for purposes of increasing your premium tax credit and thus lowering your Obamacare premiums? Yes, and in turn, you can lower your tax bill as well.
Take a look at the sample 1040 tax return below (click to enlarge). Note line 11, which shows Adjusted Gross Income. That’s the number at issue here, but notice lines 7, 8 and 10. These lines highlight areas of potential “loss” which could reduce your income in the IRS’s eyes, and increase your premium tax credits.
Do you have some poor performing investments in a non-retirement account that you’d like to sell? These can generate a capital loss (Schedule D - line 7), and reduce your MAGI. Do you have investments in this account that are “flat” as far as their performance? These could also be sold, resulting in funds to meet your cash flow needs, but no increase in taxable income. Do you have an expensive piece of equipment to buy for your ranch or small business? This could reduce your business income (Schedule 1 - line 8) and reduce your MAGI. Did you contribute to an IRA or eligible Health Savings Account? That’s another reduction of your MAGI.
Example: Tom and Jan Smith have retired early and are both three years away from Medicare eligibility. Their current income situation is as follows:
Wages (part-time) = $12,000
Interest and Dividends = $3,000
Social Security = $40,000
Pension = $60,000
IRA Distributions = $35,000
Their total income is $150,000. Tom and Jan sold some land a couple of years ago, and have kept the $100,000 proceeds in a taxable investment account of stocks and bonds.
After running the numbers through Marketplace, the best plan option for them results in a $2,925 premium tax credit on a low deductible insurance plan, but their monthly premiums are still $812 per month. They’d like to find some ways to lower these premiums.
Tom and Jan decide to discontinue their IRA distributions, and instead strategically begin drawing from their taxable account of stocks and bonds. Because of the nature of this account, they can sell some investments at little to no gain, thus reducing their income in the IRS’s eyes. They end up with $10,000 of long-term capital gains from their investment account. Furthermore, they decide to contribute their part-time wages to an IRA and HSA in Tom’s name–$6,000 to each. This eliminates another $12,000 of taxable income.
What’s the result? Their total income is now $113,000. Their premium tax credit increased to $3,166, and their monthly premiums decreased from $812 to $571 (a $241 monthly savings). But that’s not the only savings they experienced. By lowering their Adjusted Gross Income, their total income taxes owed went from $14,325 to $7,036–a 50% reduction! All in, the Smith family has saved a whopping $10,181 in income taxes and otherwise missed premium tax credits.
I hope this article has been helpful. Wyoming retirees not yet on Medicare face tremendous headwinds due to the recent cuts to Obamacare tax credits and the unique health care challenges faced by a small state like ours. We’ll know more about what things look like come open enrollment in October, but at Hale Financial, we’re concerned for our clients and our community. That being said, other coverage options exist. Weighing their pros and cons will be essential, as will considering the benefits that still remain by utilizing Obamacare, as long as you’re willing to be strategic tax-wise to lower your premiums. As we’ve illustrated, this can result in tremendous income tax savings as well.
For help considering your health insurance needs in light of rising costs while also finding ways to reduce your lifetime tax burden, please contact us for a free 30 minute Discovery meeting.