One of the main provisions of the Affordable Care Act prohibits insurers from denying coverage to those with pre-existing conditions, making it much easier for older workers to find their own coverage. And that could mean those workers might be leaving the work force earlier than expected.
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“In the past, many older employees under age 65 made a conscious decision to continue working even if they could afford to retire because they knew they would be covered by their group employer insurance policy,” says Amy Gordon, employee benefits attorney at McDermott Will & Emery in Chicago. “But now they have the exchanges, and we could see a flood of workers retiring.”
The law makes people much less dependent on employers for coverage, says Dr. Keith Cantor, CEO of Greenbox Foods. The increased availability of getting health insurance will make it easier for employees to change and leave jobs without having the big question of how they are going to find coverage hanging over their heads.
In the past, many workers continued at their jobs until they became Medicare eligible at 65, to remain on their company’s health-insurance plan, creating the so-called “employment lock.”
“They will now leave the comfort of sharing risk and underwriting and will move to the exchanges because the barriers of gaining coverage on their own at that age have been removed,” says Gordon.
The federal and state marketplaces are structured to favor older enrollees, which could make walking away from employer coverage more appealing, particularly those eligible for subsidies and without children younger than 26.
As a cost-cutting measure, some cities, including bankrupt Detroit, that have offered early retirees in the past continued health insurance have moved those individuals onto the exchanges with a set subsidy.
According to research, the president’s signature law could lead between 530,000 to 940,000 Americans to stop working, which would bring an estimated decline in the aggregate employment rate of as much as 0.3 to 0.6 percentage points.
Experts agree that Medicare coverage is superior to the majority of plans of the exchanges, but the option to enter retirement before 65 is tempting and could create a shift in the insurance industry. “Historically, Medicare has been secondary and group health plans have been retirees’ primary coverage, but if they go to the exchange, Medicare will become the primary insurer and it will tax the Medicare budget.”
Cantor says this potential added burden to Medicare’s budget could lead to reduced doctor care and availability.
“We are seeing this now with Medicaid; when a system starts getting overloaded, that means the government starts paying less money for procedures and visits which means two things: we take on more patients, meaning shorter visits to make up the lost revenue or stop accepting patients on these plans.”
Gordon adds that if the exchange’s insurance pools become too saturated with older customers it could cause prices to increase. “If costs go up significantly, and insurers are looking to make a product attractive without losing their shirts, there could be a reduction in provider compensations and more providers could decide not to accept exchange coverage and force people to pay out of network.”
Stephen Daley, chairman of the Employee Benefits and Executive Compensation Practice Group at Bond, Schoeneck & King, isn’t worried about a flood of older workers leaving their jobs and entering the exchanges -- yet.
“These marketplaces are still young and don’t have a track record right now. Future workers might be tempted to leave the workforce early, but right now I just don’t see that happening with these exchanges not being tested this early on.”
The struggling labor market might welcome a flood of baby boomers leaving the workforce and potentially opening up positions for younger job seekers. “It all depends on whether employers decide to fill the positions. If so, it would create a good opportunity for younger workers to get jobs,” says Gordon.