Wanna-be retirees looking to leave the workforce but scared to lose their health coverage may finally feel comfortable to leave thanks to the Affordable Care Act.
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A new report finds the availability of insurance for this group on the newly-created health insurance exchanges has shown to significantly impact retirement decisions, allowing workers to leave the labor force earlier without having to worry about costly medical bills.
Goldman Sachs (NYSE:GS) released the “Labor Force Participation and the Affordable Care Act” report which estimates that the ACA’s subsidies will increase the share of workers who retire before age 65 by 2 percentage points. The report finds 19% of retirees say they would have retired sooner had they not been concerned about losing employer-sponsored insurance.
So far, more than 8 million Americans have enrolled in plans on both state and federal exchanges, according to the Department of Health and Human Services. The law mandates that every individual in the country have coverage by the end of open enrollment period, which passed on March 31, or face a fine of $95 a year or 1% of their annual income for failing to comply.
Subsidies are available for those making up to 400% of the federal poverty level, which for 2013, was about $45,000 for an individual and $94,000 for a family of four. Many experts predict subsidy levels for next year will likely not keep up with inflation within the health-care industry as premium prices are forecast to increase by double-digits.
National Center for Policy Analysis Senior Analyst Devon Herrick says it appears the report is downplaying other stats released on early retirement from the nonpartisan Congressional Budget Office earlier this year.
“They are admitting the literature is clear, and that health benefits are playing a significant role in the decision to retire early,” Herrick says. “They say it’s only about 2 percentage points. But the CBO’s most recent analysis says early retirement is at about 2 million, or nearly 2% of the labor force.”
The move may be good for those who want to move out of their current position but were holding back due to benefits concerns. It may also be a positive for job seekers as some retirees were waiting longer to leave the workforce.
“A lot of people are stuck in jobs they don’t like,” he says. “Or they want to retire, but can’t pay the $10,000 a year for health coverage. An early retiree won’t have to pay that now if health-care is available at a highly-subsidized rate. Folks may say, ‘that’s the last piece of the puzzle.’”
But the move is not a positive for taxpayers, or the overall labor market, Herrick argues.
“The downside is that taxpayers are helping pay the tab, and the economy is losing the institutional knowledge these people have,” he says.