CHICAGO – Workers dreaming of early retirement are getting the jitters as Washington debates replacing the Obama-era health care law with a system that could be a lot more expensive for many older U.S. citizens.
The uncertainty over the cost of coverage in the individual market has caused some in their 50s and early 60s to put plans on hold. Others who already left jobs with health benefits before reaching Medicare age are second-guessing their move to self-employment.
With her mobile home paid off, social worker Mary Lytle-Gaines planned to retire next year and work part time.
“My job is very stressful. And my grandson is going to be 8. It would be sweet to spend more time with him,” said the 61-year-old from Wood River, Illinois, near St. Louis.
Now with insurance premiums possibly rising for her age group and income level, “I doubt I’ll retire.”
The Republican plan to replace the Affordable Care Act was still being tweaked Wednesday and may provide more help to older people than the version scored by the Congressional Budget Office last week. That analysis found a 64-year-old earning $26,500 would pay $14,600 out of pocket for insurance under the GOP plan, compared with just $1,700 under “Obamacare.”
The Republican proposal would allow insurers to charge older customers five times as much as younger ones, while cutting the size of tax credits for many. A last-minute revision by House GOP leaders may allow the Senate to provide additional tax credits for baby boomers but there are no guarantees.
“While it’s unclear how the revision will actually change the subsidies, it is almost certain that the combination of those two factors is going to result in a pretty meaningful increase in costs” for pre-retirement Americans, said labor economist Craig Garthwaite of Northwestern University’s Kellogg School of Management.
“The young and the rich are going to be the winners,” Garthwaite said. The GOP plan “transfers resources from the poor and the sick to the healthy, young and rich.”
Cathy Beluch retired in 2015 from a job at a leading financial services firm to launch her own leadership coaching business. The 56-year-old from Hoboken, New Jersey, took the plunge knowing she could shop for coverage on the health exchange.
Beluch pays $650 a month for a health plan with a $2,500 deductible. She earns too much to qualify for a subsidy. Her health insurance costs are high, but she believes she will be worse off under the Republican proposal.
“It’s frightening to think about what’s going to happen now,” Beluch said. “I’d be reckless to not be concerned about it.”
Geoffrey Zimmerman of Walnut Creek, California, is rethinking his plan for dealing with expected family health issues. The 54-year-old financial planner has been saving aggressively, knowing his 46-year-old wife’s rare genetic bone disease will likely lead her to stop working sooner than most people.
The couple’s health coverage is now through Lynn Zimmerman’s job as a speech pathologist. They had hoped to be “work optional” in six years, he said, but that hinged on affordable coverage.
“I may need to work longer to maintain health coverage until Lynn reaches Medicare age so that we’re not financially going to cripple ourselves,” Zimmerman said.
Others said the situation for early retirees isn’t any more precarious than it has been under the Affordable Care Act with premiums rising and insurers exiting the individual market because of financial losses.
“The reality is people were already jittery about health insurance and early retirement. It’s not like health insurance is cheap for early retirees under Obamacare,” said Ed Vargo, a financial planner in Cleveland. “The promise of affordable health care under Obamacare never materialized” for many people.
Still, Vargo is advising people eyeing early retirement to take a “wait-and-see approach.”
Financial planner Amy Jo Lauber has been comforting a client, a 56-year-old single woman near Buffalo, New York, who had planned to retire this spring and live on investments and savings. The client, a programmer analyst who works 50 hours a week, also dreamed about working part time or going back to school.
Her biggest hesitation had been health insurance because she had a good plan through her employer, Lauber said. Before the November presidential election, she priced out plans on the health care marketplace and talked to an insurance navigator about her choices.
She found she would qualify for a subsidy that would make coverage affordable at $250 a month. She even set a date for telling her boss, a date which has come and gone. She will wait and see what happens next.