One Big Beautiful Bill Act HSA Changes for Early Retirees

The One Big Beautiful Bill Act, signed into law in July 2025, is changing health insurance options across the country. If you’re planning to retire before you’re eligible for Medicare, several of these changes could affect your plans, including who can use a Health Savings Account (HSA), how marketplace subsidies work, telehealth coverage and Direct Primary Care (DPC).

Not every change is good news, but one of the biggest is a clear win: many more people can now use an HSA. Here’s what changed and how it fits into your health coverage before 65. For the bigger picture on coverage options, see Health Insurance for Early Retirement.

Bronze and Catastrophic Plans Now Qualify for HSAs

Starting January 1, 2026, Bronze and Catastrophic plans are treated as HSA-eligible high-deductible health plans (HDHPs), even if they don’t meet the traditional HDHP rules. IRS guidance (Notice 2026-5) confirms this applies to these plans whether you buy them on the marketplace or off-exchange.

That means early retirees can pair a lower-cost plan with the triple tax advantage of an HSA.

How It Worked Before 2026

Before this change, only plans that met strict IRS deductible and out-of-pocket limits qualified as HDHPs. Those plans often had very high deductibles, sometimes with out-of-pocket maximums close to the deductible, and many people didn’t see meaningful premium savings in return.

Bronze Plans

Bronze is one of the four marketplace metal tiers (Bronze, Silver, Gold and Platinum). Bronze plans usually have the lowest premiums of the four, with higher deductibles and cost-sharing. They give you solid protection against major medical costs. Learn more about the tiers in Marketplace Metal Tiers.

Catastrophic Plans

Catastrophic plans are generally limited to people under 30, but people of any age may qualify with a hardship exemption. In 2025, CMS expanded that exemption to include people who can’t get premium tax credits because of their income, which can include early retirees with income above the subsidy limit.

Catastrophic plans have very low premiums and high deductibles and are designed for worst-case scenarios. Coverage before the deductible is limited, but they cover preventive care and at least three primary care visits a year before you meet your deductible.

The HSA Triple Tax Advantage

HSAs offer three major tax benefits:

• Tax-deductible contributions: Your contributions lower your taxable income, and they also lower your Modified Adjusted Gross Income (MAGI).
• Tax-free growth: HSA funds can earn interest, and many HSAs let you invest part of your balance. Growth isn’t taxed.
• Tax-free withdrawals: Money you take out for qualified medical expenses is tax-free and penalty-free.

Unused funds roll over from year to year, so you never lose them. After age 65, you can also withdraw money for non-medical expenses without the 20% penalty. You’ll just pay regular income tax on it, much like a traditional retirement account. That makes the HSA one of the most tax-efficient accounts available.

Why a Lower MAGI Matters for Early Retirees

ACA premium tax credits are based on your MAGI. Because HSA contributions lower your MAGI, they can help you qualify for a larger tax credit and a lower monthly premium. Depending on your income, that can be worth thousands of dollars a year.

This matters even more now that the enhanced subsidies are gone and the subsidy cliff is back. If your income is close to the limit, an HSA contribution could be what keeps you eligible for help. Learn more in The ACA Subsidy Cliff Is Back.

2026 HSA Contribution Limits

The IRS sets HSA contribution limits every year. For 2026, the limits are:

• $4,400 for self-only coverage
• $8,750 for family coverage
• An extra $1,000 catch-up contribution if you’re 55 or older

That means a family plan holder who is 55 or older could contribute nearly $10,000 in 2026. (If both spouses are 55 or older, each can make a catch-up contribution, but each needs their own HSA to do it.)

One important note as you approach 65: once you enroll in any part of Medicare, you can no longer contribute to an HSA. If you delay Medicare and sign up later, Part A coverage can be backdated up to 6 months, so plan to stop contributions ahead of time. Our Turning 65 guide covers the timing.

Enhanced ACA Subsidies Have Expired

While the new law expands HSA access, it arrives as marketplace subsidies are shrinking.

The enhanced premium tax credits created by the American Rescue Plan Act and extended by the Inflation Reduction Act increased subsidy amounts and removed the income cap for eligibility. Those enhanced credits expired at the end of 2025. The original ACA premium tax credits are still available, but people with income above 400% of the federal poverty level no longer qualify.

Many people want the enhanced credits back. In January 2026, the House passed a bill to extend them for three years, but as of November 2026 the Senate has not acted, so no extension is in place. Because of this, many marketplace enrollees are paying significantly more, and coverage can be much more expensive for early retirees.

Stricter Income Rules for Subsidies

The law also tightens the rules around marketplace subsidies:

• No more repayment cap: Starting with the 2026 tax year, if you underestimate your income and receive too much in advance premium tax credits, you have to repay the full excess when you file your taxes. Before, repayment was capped for many households.
• More verification ahead: Starting in 2028, the law requires more up-front verification of eligibility before advance tax credits are paid.

Make sure your income estimate is accurate, keep your household information up to date and report changes promptly. This is especially important for early retirees whose income can change from year to year due to withdrawals, Roth conversions or the sale of a home.

HSAs and Direct Primary Care

Direct Primary Care is a membership model. Instead of billing insurance, you pay your doctor a monthly fee for direct access to primary care. Services often include office visits, sick visits, routine and preventive care and some basic lab work, depending on your agreement.

DPC isn’t insurance and doesn’t cover major medical expenses like hospital stays or surgery. That’s why it’s often paired with a Catastrophic or Bronze plan.

The new law makes that combination more appealing. Starting in 2026, having a qualifying DPC arrangement no longer prevents you from contributing to an HSA, and you can use HSA funds tax-free to pay your DPC membership fees. To qualify, the fees can’t exceed $150 a month for an individual or $300 a month for a family.

Telehealth Before the Deductible

Another change that’s easy to overlook involves telehealth. The law permanently allows HSA-eligible plans to cover telehealth and other remote care before you meet your deductible, without affecting your HSA eligibility. This applies to plan years beginning on or after January 1, 2025.

Without this rule, people with high deductibles could have to pay the full cost of a virtual visit until they met the deductible. Now your plan may cover telehealth sooner, which can help you treat minor conditions, get prescriptions and avoid more expensive urgent care visits.

Don’t Forget About Prescriptions

Catastrophic and Bronze plans can leave you paying more for prescriptions before the deductible. Before you choose one of these plans, look at what your medications will cost. Discount programs such as GoodRx, SingleCare, NeedyMeds and RxAssist, low-cost pharmacy programs and pharmaceutical assistance programs (including state programs) can help lower your costs.

Get Help With Early Retirement Health Insurance

The right plan and HSA strategy depends on your income, health and retirement timeline. Our licensed brokers can compare marketplace and off-exchange plans in your area and help you find the best fit, at no cost to you. Get your free quotes or call us at (866) 260-9829.