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Older Americans may have to postpone retirement under Republican health bill

MarketWatch logo MarketWatch 3/8/2017 Robert Powell
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The House Republican bill to replace the Affordable Care Act (ACA) would allow insurers to charge older workers health insurance premiums five times as much as younger ones and give states the option to set their own ratio, according to published reports. 

Under the ACA, also known as Obamacare, plans can charge their oldest customers only three times the prices charged to the youngest ones.

Given that possible change, experts say pre-Medicare workers are likely to stay in their jobs longer to keep their employer-sponsored health insurance, even though they may be ready to retire in other ways — financially and emotionally, for instance — to retire.

“It seems entirely plausible that the new rules would discourage older workers from retiring or going out on their own to start a new business — if it means giving up employer-sponsored health coverage,” said Tricia Neuman, a senior vice president and director of the program on Medicare policy at Kaiser Family Foundation.

Read: What the house Republican bill gets wrong about the health insurance market

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Under the House Republicans’ proposal, Neuman said adults their early 60s who are self-employed, or who retire and choose to purchase coverage on their own, could face higher premiums for their health insurance with the proposed five-to-one age bands.

But experts can’t, at present, determine what older Americans might pay under the House Republicans’ bill. “We can’t say with precision what the payment for someone after the Republican tax credit would be because there are a lot of other changes outside of the tax credit,” said Cynthia Cox, an associate director at the Kaiser Family Foundation, noting that doing away with the individual mandate, for example, would have a significant effect on premiums. “I don’t think there is a lot of reason to believe that premium would be significantly lower under this bill than under the ACA.”

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The House Republicans kept a lot of the consumer protections that make insurance under the ACA expensive and do away with the individual mandate that has a downward effect on premiums, according to Cox. “But it would take more complicated modeling to say what the net premium would be after tax credits under the GOP plan,” she said.

Read: Trump embraces HSAs as a pillar of repeal and replace but they will need work

In 2017, a 64-year-old adult making $30,000 per year would pay $207 a month for the ACA’s second-lowest-silver plan, which is the same amount for a 21-year-old.

Use this health insurance marketplace calculator.

The bottom line? “For some, retirement might not be an affordable option,” said Neuman.

Before the ACA, Neuman said, older adults had difficulty finding affordable coverage that would cover their pre-existing condition. “That led to job lock, and stronger incentives to delay retirement,” she said. “With the replacement proposal, it seems people will have access to coverage, even with pre-existing conditions, but it may not be affordable.”

Among other things, Neuman said the Congressional Budget Office (CBO) and Joint Committee on Taxation (Joint Tax) will need to consider this in their estimate, and will also take into account incentives for employers under the proposed bill. “We’ll have to see what they say,” she said.

Smaller tax credits

Carolyn McClanahan, a certified financial planner with Life Planning Partners, also said it’s likely that older Americans will have to keep working under the ACA replacement law, but that it will depend on the credits. “Basically the answer will vary based on the person,” she said.

For her part, Neuman said those with low or moderate incomes would get smaller tax credits than those offered under the current ACA plan to help cover expenses, according to Neuman. This report from Kaiser illustrates premium tax credits under the House Republicans’ plan for 60-year-olds by income.

Of note, some 9.9% of Americans ages 35 to 64 had no health insurance coverage according to this report.

If the current Congressional proposal increases costs to older workers to the high level that it appears to, it will definitely lead to ‘job block’ of older workers staying in jobs for the health insurance, said Katy Votava, president of Goodcare.com. “There is evidence that the ACA has contributed to job growth for younger workers by relieving ‘job block’ of older workers,” she said.

Echoing the sentiment of Neuman, Votava also said it would discourage older workers who are planning to leave their current employer to start a small business. “They will be less inclined to do so because they will face even higher health-care costs as a sole proprietor or very small business,” she said. “People over 50 have become strong contributors to small business formation. This proposal will stymie the growth of small businesses as well.”

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