The sound you hear could be baby boomers revving their early retirement engines.
Insurance providers and financial planners expect the Affordable Care Act to encourage a flood of workplace departures from the 50-to-65 age group, which accounts for about 43 million members of the U.S. labor force.
That’s because those not yet eligible for Medicare “won’t be hostage to your employer or your spouse’s employer anymore,” said David Power, a broker with PowerGroup in Overland Park. “The health care shackles are off.”
Obamacare will allow anyone, regardless of pre-existing conditions, to buy health insurance. It’s also expected to lower premium costs for the boomer age group, perhaps by hundreds of dollars a month compared with comparable coverage they would buy on their own, assuming they could get it.
“Boomers win in two ways: Their insurance will be more affordable, and they can get it,” said Ron Rowe, a vice president at Blue Cross and Blue Shield of Kansas City. “We’ve said all along that there will be winners and losers under the ACA, and this demographic is a clear set of winners.”
Barbara J. McMahon, a certified financial planner with Innovest Financial Partners in Kansas City, said many of her clients were waiting for public health insurance exchanges to go live Oct 1.
“Don’t ask me to tell you who they are, because they don’t want their bosses to know they’re considering retiring, but they’re just waiting for the numbers,” McMahon said. “They’re waiting to see the prices before deciding to retire.”
An employee’s cost of coverage in an employer-sponsored health plan may still be the best deal. And premium costs alone won’t be the thing that keeps someone on the job or gives a shove out the door. But brokers expect more cost shopping among older workers.
In the Kansas City area, consumers will see plan options posted on the federal health care marketplace by Blue Cross and Blue Shield and possibly by other insurers who have yet to announce participation. Until the information is posted, the exact rates and coverage options for Missouri and Kansas consumers won’t be public.
In states that are operating their own exchanges and already have revealed plans and pricing, premiums have been a pleasant surprise to many older comparison shoppers.
Avalere Health, a research firm, looked at 12 states’ exchanges and found about $615 a month in premium costs for a mid-level coverage plan for a 60-year-old. But analysts warn that there will be wide ranges of costs depending on where people live.
There will continue to be private, individual insurance options with insurers that aren’t participating on new marketplaces. For many, 2014 premium costs remain to be determined.
But financial planners such as McMahon say potential retirees, who have been paying COBRA costs of, say, $1,500 a month, are eager to see the alternatives. COBRA allows former employees to continue on their employers’ health plan for a limited time by shouldering more of the cost.
And another potential benefit remains to be discovered: Retirees whose income drops to a certain level may be eligible for government subsidies to help cover the cost of buying insurance through the marketplaces.
The devil, of course, will be in the details. Whether older people continue to see an insurance price break in subsequent years will depend on having enough younger people buy insurance.
Last week’s news headlined two more large companies — Time Warner and IBM — jettisoning retirees from their employer-sponsored health plans, but authorities agree that trend affects only a small percentage of early retirees. Far more in the too-young-for-Medicare age group have been on their own for health care expenses anyway.
According to a 2012 report by the Employee Benefit Research Institute, fewer than 1 in 5 Americans worked in companies that offered retiree health benefits. Generally, only the largest employers and unions have included retirees in their health plans, and the share is dwindling rapidly.
“It’s very, very, very rare to have retiree health care in companies with under 500 lives, and that’s where most of Kansas City — and America — works,” Power said.
J. Michael Brewer, president of Lockton Benefit Group in Kansas City, said: “Companies have been getting out of retiree medical plans for years. So the big thing has been underwriting, and now that’s gone.”
Underwriting is industry speak for pricing or denying health insurance based on age and health. The health reform law mandates changes in the way that insurers band, or group, premium prices.
Traditionally, insurers grouped people in seven or more bands, with the most expensive group being considerably more expensive than the least expensive. That generally meant that older people — with more health issues — cost far more than young, healthy ones.
The Affordable Care Act requires insurance companies to price policies in only three bands.
“At least at the outset, prices are locked in, and people in their 50s and 60s may actually see their rates go down,” said Brian Johnston, a health care attorney at Polsinelli in Kansas City. “The rates will be capped at three times the cost of the lowest premiums, but that still may be lower than the (current) multiples based on age.”
Analysts note, though, that many older Americans — particularly those who are old enough for Medicare — are reform opponents. Many Medicare recipients fear their benefits will be cut to pay for the Affordable Care Act.
AARP, which supports the act, has been sending out educational materials, telling members that their Medicare coverage is stable for next year.
Though the act doesn’t directly affect Medicare benefits paid to individuals, it does cut reimbursements to health care providers and insurers. That could have the effect of crimping some care availability to Medicare recipients if providers back out of participating.
Some critics of the act also say the marketplace, or exchange, plans may be affordable but probably won’t be very good in terms of benefits offered. Supporters counter that there will be a range of plans offered, from Medicaid-like basic to “Cadillac” plans.
The Kaiser Family Foundation, a leading research organization on health care reform, has published an online calculator that can help people learn whether they might be eligible for income-based subsidies if they buy coverage on the marketplace.
Financial planner McMahon said she’s urging her retiree and would-be retiree clients to take time — plenty of time — to go to such sites and analyze their options after the marketplaces go live.
“If you’re thinking about retiring, or you’ve been retired without planning to, you haven’t had time yet to work through all the facts,” she said. “You need to make good decisions based on fact, and it will take time to sort it out.”