PERACare vs. ACA Marketplace: 2025 Edition

I’ve written previously about health insurance in retirement (and 2024 post) for members of Colorado PERA. As we are now in open enrollment for 2025, I thought I would update with 2025 numbers. But first, a little background.

PERACare is health insurance that PERA retirees can get through PERA. It is guaranteed issuance (which was very important before the Affordable Care Act, and still very nice now) and is even partially subsidized as part of your retirement benefit. But it’s still pretty expensive. Now that the ACA has come along, getting coverage on the ACA marketplace is also on option for PERA retirees, but one that some folks don’t really know much about. The ACA marketplace is also subsidized but, in the past, it was only for lower-income folks (up to 400% of the poverty line). Above that, you paid full price. So for many with decent incomes in retirement (decent benefits from PERA) they had too high of an “income” to get the ACA subsidy, so PERACare was often the better deal.

But then along came the American Rescue Plan Act which substantially enhanced the subsidies for 2021 and 2022 due to the pandemic. Then came the Inflation Reduction Act which extended those enhanced subsidies through 2025.

As a result, even folks with a good PERA pension still qualify for a subsidy that keeps their premiums no more than 8.5% of their income. For many, that makes getting insurance through the marketplace less expensive than through PERACare. (Note that for people with very high incomes that 8.5% of income ends up being more than their premium at some point, so there would be no subsidy.)

So let’s take a look at 2025 numbers to see if the ACA marketplace is still better than PERACare (at least for us as representative PERA retirees; everything below is for covering two of us with no dependents). I’ll show two example below, one for the Kaiser HDHP offered by PERACare (and the marketplace), and one for United Healthcare (UMR). Just for reference, here are the breakdowns in the number of PERA pre-Medicare retirees who currently choose each option (last year’s numbers, but still should be fairly close, other than there is only one UMR plan now, PPO #1 was discontinued).

We prefer the Kaiser HDHP plan, both because we have been very happy with Kaiser and because we want to be able to contribute to an HSA. The plan offered under PERACare is a “silver” level plan and is very similar to one of the silver plans offered on the ACA marketplace (with the marketplace silver being slightly better). I’ve also included a bronze plan as that’s the one we’ve chosen for ourselves.

It’s always tricky when comparing plans because the various provisions don’t always match up exactly. But, in general, I would suggest that the silver plan through the ACA marketplace is better than what’s offered through PERACare and would cost us $2,976 less per year. (The one exception might be if you have expensive specialty prescription drugs, as PERACare doesn’t have a “hole” in coverage for prescriptions.) We’ve chosen to go with the bronze package, which is slightly higher deductibles and coinsurance than the silver package (although total out of pocket is the same as PERACare silver), but saves us $7,560 in premiums per year.

A quick note about subsidies. Under PERACare, if you are pre-Medicare your subsidy can be up to $230 per month with 20 or more years of service. If you have less than 20 years, it’s prorated. For my wife and I, that means that the above premium for PERACare is after $460 in subsidies (as we both get the $230). For ACA subsidies, it depends on your income (see the table earlier in this post), and our income is likely higher than most PERA retirees because we both have very good PERA pensions plus I make a little bit teaching classes and from book sales. The average PERA retiree has less income than we do so their ACA subsidy would be even higher than what we are getting. In other words, the savings for the average PERA retiree is likely greater than what is shown in the table above (because the PERA subsidy is fixed but the ACA subsidy varies by income).

While we’ve chosen Kaiser HDHP, the UMR (United Healthcare) National PPO is the most popular pre-medicare plan for PERACare retirees (likely because it’s less expensive and is nationwide, whereas Kaiser is only available in limited locations). It’s a bit more difficult to find an ACA plan that matches exactly with the National PPO, but here’s a comparison of one (also United Healthcare) that’s pretty close. (I didn’t do a bronze comparison for this one.)

Again, arguably, the ACA plan is better and costs $1,332 less per year (and, for the average PERA retiree, the savings would be even higher than that because their income is likely lower than ours).

So if you are a PERA retiree that hasn’t reached Medicare age (PERACare once you are on Medicare is a different calculation) you should at least explore the marketplace as an alternative to PERACare. Many folks will be able to save anywhere from $1,000 to $10,000 a year in premiums for about the same level of coverage.

Postscript: Just to clarify, this is not PERA’s “fault” that they are more expensive. They cannot access the ACA subsidies, and the PERACare subsidy is fixed by state law. And it’s important to note that the current enhanced subsidies will expire after 2025 unless Congress passes something.