Will the new healthcare law make it easier for me to retire early?

[midlifeguy]

Hi all -

I considered posting this in the Health Forum, but I thought it was a pretty universal question. I'm nearly 40, live in NY, have a good financial situation (2M portfolio and paid off house), and have considered biting the bullet and retiring early, or semi-retiring. My biggest worry through this decision-making process has been healthcare, as I have had nightmares of my indvidual policy premium spiralling upward from its current $1,000 per month to $2,500 per month over the next eight or ten years. Given the passage of healthcare reform on Sunday, should I relax now? I have tried to get as much detail about the law as possible, and I know there aren't as many cost control measures in there as most people wanted (public option being the main one), but it does seem like early retirees (who don't have their healthcare covered by their former employer) now have more protection both in terms of premium/out-of-pocket caps, no need to worry about losing insurance due to getting sick, etc. I have 25 years to go before Medicare - yikes - so I'm hoping I can get by without some kind of health insurance catastrophe now that the insurance world has changed. So my question is: Do you all feel like these reforms are GOOD, BAD, or NEUTRAL for early retirees? Thanks.

 

[W2R]

If I were in your shoes, I would be taking a "watch and wait" approach right now. A lot of the stuff in the health care bill does not take place immediately. Plus, you will probably want things to be in place and to have the kinks worked out, so to speak, before you retire. And finally, there will probably be additional bills changing and refining some of the things in the health care bill. Once things have settled down and everything is working, you can read about experiences other early retirees are having and you will be able to tell more about how this bill could affect your retirement plans.

In the long run (5-10 years), I think this bill will probably be a great help to you but I would not break my neck running to HR to turn in one's retirement papers quite yet.

 

[chinaco]

IMO - Reform will be good for people that ER. Especially if one has or acquires health problems. Health care cost was one of the biggest personal risks to an individuals financial well being.

Health care cost/inflation is another matter. Containment of cost/inflation will be the next big issue.

 

[charlie]

With respect, I would suggest that this topic be moved to the political forum. There are very strong feelings on both sides of this issue and this thread will get nasty quickly, IMHO.

Cheers,

charlie

 

[Westernskies]

With respect, I would suggest that this topic be moved to the political forum. There are very strong feelings on both sides of this issue and this thread will get nasty quickly, IMHO.

Cheers,

charlie

Porky Pig reads this forum, too.

 

[seabourne]

In general, from my reading of the bill, yes, it will probably help. Mostly because of reducing a number of the uncertainties related to buying individual insurance, which is the major health shift in early retirement as I see it. It won't necessarily be cheap - time will tell what all the changes will result in the individual cost of insurance, but the certainty of being able to buy it, having no lifetime payout cap, and subsidies/limits on the cost for lower income should narrow the scope of outcomes enough, even if at some cost, that it should help with early retirement.

other effects overall are a much broader debate and various things will change even before a lot of this comes into effect, but in regard to the limited question, I suspect that it will significantly help early retirement.

 

[audreyh1]

You no longer have to worry about lifetime caps and pre-existing conditions and losing insurance because you get sick. And by 2014 there will even be a national group insurance option available to us ERs who don't have coverage through an employer or former employer. And these are all a big deal and do remove a lot of the scary uncertainties that have existing for us who are too young for medicare.

But I am still expecting premiums to continue to go up until I see otherwise. So you had better still budget plenty for insurance premiums.

Audrey

 

[mostlydone]

It's also worth pointing out that NY is a guaranteed issue state already so at the margin will be impacted less by the changes in the bill.

 

[Coach]

There is one section -- which has been discussed a bit elsewhere -- that until 2014 has the government providing some relief to companies that provide coverage to retirees between 55 and Medicare age. This seems designed to encourage companies to provide insurance for early retirees, which I think is a significant incentive to early retirement. But perhaps the goal is more more employment-related, opening up slots for new hiring.

Coach

 

[skyvue]

I was going to post pretty much the same question. Seems this could enable me to retire a year or two earlier.

 

[target2019]

The big benefit for us is that my pre-existing condition does not lock us into wife's medical insurance until I reach medicare age. She will be able to take her pension, and move to another job. We can leave the bad tax situation in NJ too. There are very attractive employment moves I can make now.

 

[midlifeguy]

Charlie - I hear you on the political stuff, but I for one never go into the political forum, so hopefully people can simply comment on the bill as passed and its implications for early retirement rather than expressing political views.

All - so far from your comments it seems the result is a net improvment in the ease of retiring early. Neutral at worst.

 

[LARS]

It's also worth pointing out that NY is a guaranteed issue state already so at the margin will be impacted less by the changes in the bill.

This has been my question: should those in states that aren't "Guarenteed issue" (i.e. state requires already that insurance take anyone irrespective of health) expect to see their premiums skyrocket as all states become "take all"?

As to the original question, I agree with other posters that the best approach is to wait and see how it plays out over the next year or so. I don't think anyone knows yet the full ramifications.

 

[clifp]

Charlie - I hear you on the political stuff, but I for one never go into the political forum, so hopefully people can simply comment on the bill as passed and its implications for early retirement rather than expressing political views.

All - so far from your comments it seems the result is a net improvment in the ease of retiring early. Neutral at worst.

Probably true, but don't forget the expectation (CBO) is that insurance premiums will increase by 10-15% for individual purchasers. So the law probably helps in that the chances of a facing a financially disaster due to medical cost is lowered. However, an increase in health care insurance cost for those of us who don't get sick will make it somewhat harder to retire early. And of course if you need $250-300K to live on you will be paying higher taxes. (Probably not a big issue for most board members )

Obviously, this is still mostly speculation at this point.

 

[plex]

In terms of health insurance premium increases, for those who have incomes that have incomes in ER that are too high to have premium caps and possibly subsidies, the benefits will be a mixed bag. There will be substantially more certainty about having insurance, but health insurance premiums will probably be higher. For those with incomes that allow them to at least receive the premium caps, there are really no downsides at all for them, they will probably be able to retire that much sooner without exception.

 

[Animorph]

I'll be moving from DW's job-based insurance to individual insurance when she retires, any year now. At least I won't have to make her wait 10 years until I reach Medicare age. I have a few health issues that may or may not be enough to make insurers reject me currently. Now we should be in good shape in 2014 at least.

I would expect that if I had no issues and DW has no issues, then it may have been less costly for individual insurance than it will be now that we have to pay for a wider pool of people. But I can live with that.

Given the larger pool of people being insured, I would assume the premium increases will be less volatile and more predictable after everything kicks in. I'm hoping I'm a little ways into the subsidy income levels to help out.

 

[Rich_by_the_Bay]

I think the state-based exchanges are supposed to provide access to coverage for those otherwise unable to join an employment-related group. But I have been unable to determine the timing of this, not to mention the cost.

In the end, the Act will make insurance available where it is not currently so. If you are thinking of ER in maybe 3 or 4 years I would guess you will be able to purchase health insurance. But if you want to jump sooner, you'll need to look at individual policies, joining groups if you can, etc. Just an educated guess.

 

[wildcat]

Hi ML. In case you don't already know, NY is a GI state so it sort of has already taken a step towards the bill that has been passed, at least at the state level. NY premiums are already pretty high, especially depending on where you live in the state - namely NYC rates

I work in the individual market (which we are modeling to be hit pretty hard) and my belief is that it will be a wash or slightly positive for some FIRE cases as some noted.

My quick guess:

Cons
Higher rates for policies
Higher taxes to pay for the reform
Portfolio will have to be able to cover the above

Pros
Access to healthcare
Reduces the possibility of having one of those black swan health related events that could wipe you out

 

[jdw_fire]

i dont know how good it will be for ERs (or anyone for that matter) since i think there is a large probability that the part of the law that requires all people to buy health insurance will be judged to be unconsitutional. then the rest of the provisions of the law will raise the cost of insurance for everyone since the insurance companies wont get all those "new customers" (the ones that are healthy and very profitable for the insurance companies) that were gonna provide the business that was supposed to offset the added costs of insuring those people that they now wont insure. so instead of the cost of health care (including the cost of the insurance) going down it will go up significantly. not to mention the cost to the tax payers of this very large new entitlement, a double whamy to the people who are already insured right now.

 

[plex]

Well, the way our legal system works, you can call anything unconstitutional and attempt to sue based on that. Health insurance is actually already mandated in a number of states by state law, and most states have some form of mandatory insurance (such as auto), so...I wouldn't jump to the conclusion it is likely unconstitutional just because it is mandatory, that is quite a reach.

 

[landover]

Hi ML. In case you don't already know, NY is a GI state so it sort of has already taken a step towards the bill that has been passed,..................
Cons
Higher rates for policies
Higher taxes to pay for the reform

Rates should go down in GI states because now there will be more people (healthy) buying ins. not just people who have some medical condition?

 

[Lazarus]

Well, the way our legal system works, you can call anything unconstitutional and attempt to sue based on that. Health insurance is actually already mandated in a number of states by state law, and most states have some form of mandatory insurance (such as auto), so...I wouldn't jump to the conclusion it is likely unconstitutional just because it is mandatory, that is quite a reach.

Not a reach at all.

Amendment 10 - Powers of the States and People. Ratified 12/15/1791.

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

The Federal Government simply does not have the authority.

Individual States are free to do what they like in this matter.

The car insurance is not a fair comparison. If you don't drive you don't have to pay for it. You are not fined if you don't by a car.

A Constitutional amendment could be made that would allow the Federal Government to mandate healthcare.

All that being said the Federal Government does many things not strictly in the Constitution like Social Security. It will probably stand.

 

[rpow53]

Just keep in mind that taxes are going up on everything. Healthcare is going to change as we know it. Going to the doctor will not be like it is now. be prepared for a mass mentality when you are treated. get ready to accept less in treatment. you will no longer be an individual. retirement is not going to be what it used to be. the government will control all your money and health care. they will decide where you live and when you die.

 

[donheff]

Amendment 10 - Powers of the States and People. Ratified 12/15/1791.

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

The Federal Government simply does not have the authority.

Except the states do have the inherent power to promote health and provide for the general welfare and have exercised it in the commercial health insurance arena. And the Federal Government trumps that through the Commerce Clause. Beyond that, the Feds have the power to levy taxes and spend funds "for the general welfare."

It will be interesting to watch the legal battle unfold but it sounds like the legal academic money is on this program passing muster.

 

[midlifeguy]

Landover - I was thinking the same thing, and as a New Yorker, I hope you're right. My individual policy is 1200 per month right now and I've been told by agents that that's standard in New York because of guarantee issue. So if every (healthy, young) New Yorker is forced to buy insurance, and if the exchanges end up going across state borders to bring in other giant pools of healthy customers, I don't see how New York premiums (and those in any other GI state) could NOT go down.


Rpow53 - sounds like you should go to the political board.