Published April 26, 2013
Thanks to the Affordable Care Act (ACA) things may be looking up for 50 to 64 year-olds who have lost their jobs or want to retire early. Boomers that fall into this age category are often caught in a financial bind and career limbo because they aren’t yet eligible for Medicare and worry about affording health-care costs.
Boomers looking to exit the workforce early often find themselves in no man’s land when it comes to health insurance: they will no longer get employer-sponsored coverage and are often priced out of the individual health insurance market before gaining guaranteed access to Medicare. Because of this lack of affordable care options, boomers remain in the workforce longer to remain covered or go without insurance—which can be costly.
But this October when the 2014 enrollment period rolls around that requires all Americans to have health insurance, doors will open for this group, exposing them to more coverage choices and, therefore, greater latitude when evaluating whether they have to continue working or retire early.
Health-care reform boots pre-existing condition coverage restrictions to the curb, and narrowed age bands and modified community ratings will smooth out the incredible age-related spikes in premium costs. Premium tax credits will help those who are strapped for income.
In the pre-ACA market, a person between 50 and 65 with some health conditions would typically be denied coverage in the individual market, or discover that their health conditions were excluded. Carriers have had a lot of leeway to determine knock-out conditions, and this unevenness throws unknown variables into the mix, says Bryce Williams, CEO of private health insurance exchange ExtendHealth.
Typically health issues are not sufficiently severe to qualify individuals for Medicaid, according to Kathleen Stoll, deputy executive director at FamiliesUSA. Still boomers would benefit from early retirement but are “scared to death” to forego the safety net of employer-sponsored coverage.
Potential early retirees are also scared of eroding their retirement nest eggs, adds Williams. Currently, on the individual market, 50 to 64 year olds face the burden of a plan price that is six to seven times what 21 to 35 year-olds pay.
Starting with 2014 premium costs, a three-to-one ACA age-band rating mandates the premium cost for early retirees cannot be more than three times the cost paid by the youngest insurance purchasers. “That’s an early retiree’s silver lining playbook,” claims Williams, noting the age-band rating mandate lowers the cost of the plan 25% to 35%. “It does not erode costs, but net-net it’s a 15% to 20% better deal post-January 2014 for a retiree in his or her early 60s.”
That being said, Stoll cautions against concern over “rate shock” for the younger population to cover the aging population. Adjusted community ratings replacing current experience ratings modify a group’s specific demographic factors like age, gender, family composition and geography narrowing the gap among banded premium levels.
In the current health-care world, premiums are not predictable, says investment advisor Carrie Coghill. This year, her company, Coghill Investment Strategies, was hit with a whopping 35% increase on premium costs based on the experience rating of some group members’ high claims experience during the preceding year.
A provision of ACA will afford a premium income tax credit for people who have income between two- and-four times the poverty level (between $47,100 and $94,200 for a family of four based on 2013 poverty guidelines). Stoll says the tax credit will work more like a subsidy rather than a tax credit because people will receive funds when they buy health insurance, not as a reimbursement after filing taxes.
These changes will allow people to manage their health more carefully, preventing a tremendous financial drag to the health system, claims Williams. “People who are under- or uninsured hit Medicare hard when they ‘show up’ with dire health conditions.”
How Starbucks Saved My Life author Michael Gill says at 63, he was uninsured when he was diagnosed with a brain tumor which required major (and costly) surgery. “I told my doctor I didn’t have insurance. That slowed him down. He was nice but said we’d ‘watch and wait’ as an alternative.”
Cases like this are common. Colorado physician Jeffrey Cain, president of the American Academy of Family Physicians (AAFP) was successfully treating a patient for diabetes and hypertension. The patient lost his job and stopped seeing Cain and discontinued his medicine. After nine months, he became eligible for Medicare, but only after he’d had a heart attack and experienced kidney failure—occurrences continuous basic primary care could have prevented, emphasizes Cain.
Tennessee physician Reid Blackwelder, AAFP president-elect, says physicians must monitor patients to make sure medications are working and therefore most physicians hesitate to write scripts for patients without seeing them. Many uninsured people cannot even afford the cost of a visit to an urgent care center and delay treatment until something terrible happens, says Blackwelder. “They end up in the ER—the worst time, the worst care, the worst cost. “Insurance is important.”
Here are some tips to help determine your medical situation in terms of retirement:
Start your research early. Early price postings will be published in June or July in a format similar to Medigap’s bronze, silver and gold offerings. Start familiarizing yourself with plan offerings.
Get the whole story. “Not understanding plan choices could scare you off,” says Stoll. Come October, benefit advisors will be “on the ground” in state exchanges, even earlier in private exchanges. Reach out to them, she advises.
Determine whether you qualify for a subsidy. Tax credits will be determined on a sliding scale. Know where you fall on the income curve. You may be eligible.
Know your state. Coverage requirements vary from state-to-state, says Williams. Your state insurance department is another good starting point to determine what your state will cover.
Run the numbers. New parameters around the premium cost line item will help with planning, says Coghill. Don’t act on emotion. Review your assets—they have to last for your lifetime.