If you’re planning to retire before 65, health insurance is usually the biggest open question between your last paycheck and Medicare. For most Californians in that gap, the answer is Covered California — and for 2027, the rules around financial help have changed in a way that makes income planning more important than it has been in years.
How Covered California works
Covered California is the state’s Affordable Care Act marketplace. When you leave your employer plan, you can buy an individual or family policy there from any of 12 carriers. Pre-existing conditions are covered, and losing employer coverage is a qualifying event, so you can enroll any time of year — not just during open enrollment.
The part that surprises most retirees is that financial help is based entirely on income, not assets. Your savings, your home, and your IRA balance don’t matter. What matters is your projected household Modified Adjusted Gross Income (MAGI) for the coverage year.
If you qualify, a premium tax credit caps what you pay for a benchmark Silver plan at a set percentage of your income — roughly 2% at the bottom of the range, rising to 10.2% for households between 300% and 400% of the federal poverty level. The credit is paid directly to the insurer each month, and lower-income households also unlock “enhanced Silver” plans with much lower deductibles and copays.
Two more things to know. First, the credit is reconciled on your tax return: it’s advanced based on your estimate, and if your actual income comes in higher you repay some or all of it on Form 8962 (if lower, you get the difference back). Second, coverage ends at Medicare. Enroll in Medicare the month you turn 65 and cancel the Covered California plan, because subsidies stop once you’re Medicare-eligible.
What counts as income
MAGI for Covered California includes wages and self-employment income, pensions, IRA and 401(k) withdrawals, Roth conversions, interest, dividends, capital gains (including gains from rebalancing), rental income, and tax-exempt municipal bond interest. It also includes all of your Social Security benefits — even the portion that isn’t taxable.
What doesn’t count: Roth IRA withdrawals, HSA withdrawals, withdrawals of principal from a taxable brokerage account, and simply spending down cash savings. That distinction is the foundation of most early-retirement health insurance planning.
2027 income limits for financial help
The figures below are the top of each income range, based on the 2026 federal poverty level guidelines ($15,960 for one person, $21,640 for a couple), which apply to 2027 coverage. Add $5,680 for each additional household member.
| Income (% of FPL) | 1 person | 2 people | What you get |
|---|---|---|---|
| Under 138% | Under $22,025 | Under $29,863 | Medi-Cal |
| 138% – 150% | $23,940 | $32,460 | Maximum credit + Silver 94 |
| 150% – 200% | $31,920 | $43,280 | Credit + Silver 87 + California state help |
| 200% – 250% | $39,900 | $54,100 | Credit + Silver 73 |
| 250% – 400% | $63,840 | $86,560 | Premium credit only |
| Over 400% | Over $63,840 | Over $86,560 | No federal credit |
The subsidy cliff is back
From 2021 through 2025, enhanced federal credits removed the 400% income cap and limited everyone’s premium to 8.5% of income. Those enhancements expired at the end of 2025 and Congress did not renew them, so for 2026 and 2027 the hard cliff is back: earning even one dollar over 400% of the poverty level means losing the entire credit. For a couple in their early 60s, that can mean $20,000 or more a year in premiums.
California expanded its own subsidy program to $300 million for 2027, which helps households under 200% of the poverty level and makes $0-premium Silver plans available to many of them. It does not, however, fill the gap above 400%.
Planning ideas for early retirees
Manage the income number, not just the tax bill. In the years between retirement and Medicare, drawing from cash and Roth accounts can keep MAGI under a target line. Pre-tax withdrawals and Roth conversions still have a place, but they need to be sized deliberately — a conversion that looks smart from a tax-bracket standpoint can cost more in lost subsidies than it saves.
Watch Social Security timing. Because every dollar of Social Security counts toward MAGI, delaying benefits until 65 or later keeps income low during the Covered California years and increases your lifetime benefit at the same time.
Harvest gains carefully. A large one-time capital gain — selling a rental, a concentrated stock position, or a big rebalance — can push you over the 400% line for that year. Where possible, spread those events across years or time them for a year when you’re already over the line.
Report income changes promptly. Updating your estimate with Covered California during the year avoids a repayment surprise at tax time.
Key dates
Open enrollment for 2027 coverage runs November 1, 2026 through January 31, 2027. Enroll by December 31 for coverage starting January 1. Outside that window, retiring, losing employer coverage, or COBRA ending gives you 60 days to sign up.
If you’re within a few years of retirement and want to see how your withdrawal plan lines up with these limits, that’s exactly the kind of question a first conversation is for.
This article is for educational purposes and is not tax, legal, or insurance advice. Figures reflect Covered California and IRS guidance for the 2027 plan year as of October 2026 and are subject to change; verify current eligibility at CoveredCA.com.
