Will Obamacare affect risk perception?

[BigNick]

I notice that a lot of people in "Do I have enough?" threads state that uncertainty over health care costs is one of the big factors preventing them from being sure that they can pull the trigger safely.

Presumably there are likely to be other Americans, not necessarily with FIRE plans, who are also conservative about spending (or putting money in tied-up investments) for similar reasons.

Does this mean that if Obamacare is upheld and implemented (from 2014, I believe), that there is likely to be an increase in either consumer spending and/or stock purchases, as people perceive a reduction in uncertainty? (Or, of course, the opposite, if people don't trust the new system.) Has any research been done on this? (And most importantly: is it priced in? )

 

[MichaelB]

Hi BigNick. Implementation of the PPACA is not likely to have a big impact on spending or economic growth, even if it does reduce uncertainty for many. It would reduce the need for some people to work and make it easier for others to change jobs, which might have a positive impact on employment.

 

[nun]

I live in MA and we've had Romneycare for a few years. Nobody can be refused care and 98% of people are covered, but it doesn't make paying for insurance any easier or take away the worry of massive annual cost increases. So MA is now proposing to limit annual increases to premium growth to be state GDP plus 0.5%.

"The approved bill, for the first time in the nation, establishes a statewide health care cost growth goal for the health care industry equal to the projected growth of the state’s gross state product (GSP) plus .5 percent from 2012 to 2015 and equal to the state’s GSP beginning in 2016."

My insurance premium only went up 1.43% last year so costs do seem to be coming under control and MA is really incentivising the patient to use lower cost hospitals for many procedures.

Breaking: Mass. Senate Passes Historic Health Care Cost-Cutting Bill | CommonHealth

 

[2B]

At the risk of my comment being perceived as political which I don't intend it to be.....

I am one of the many people that has the cost and quality of health care right up there among my major retirement concerns. Unfortunately, I do not see anything in what is normally referred to as Obamacare that addresses the cost of health care to anyone but the lower income levels. Many middle Americans will still be unable to afford health care but now we get to "fine" them for it. Also, our Federal government has done something which both parties have repeatedly done in the past which is to create an obligation for the individual states to pay for it without significant new Federal dollars. Quite honestly, the states are already teetering under the other costs they must bear. For the Feds to magically say "health care be granted" to many lower income people puts an immense burden that I feel will crush many states.

This was done by tying it into Federal Medicare. The states are being blackmailed with the threat of losing their Federal Medicare dollars if states don't add this new heath care mandate to it.

Yes, a lot of the rhetoric is political posturing but I don't hear California shouting how they can add it to their budget.

My opinion is this whole issue is a long way from settled. We currently have a mess. The SCOTUS can do whatever they do and we will still have a mess. The current health care law (IMHO) still needs some serious work.

 

[donheff]

I think the availability of health insurance with no preexisting conditions will remove a very large uncertainty from prospective ER candidates (and anyone else considering a job change) and that is a huge plus. On the other hand, we have baked in most of the current cost structure. As 2B says whatever the Supreme Court does we will still have a mess. So there is not likely to be a major change in spending/saving patterns. I'm looking forward to the "where do we go now" thread after the SC decision but I suspect it will get porky'd pretty fast.

 

[marko]

I might be missing something but from what I see, Obamacare, Romney care (I live in Mass), or the current system are all pretty much the same except for 'where the money goes'.

Under each system, if you can afford to buy insurance you do.

Setting aside the 'fine' aspect, if you can't afford insurance, the gov't will 1) pick up the tab for insurance or 2) pick up the tab for the medical/hospital/Rx bill.

Not sure this is 'progress'....but I'm only on page 6 of the the 32,000 page O'care bill, so I could be wrong.

 

[marko]

In answer to the OP, I think the Obamacare question is baked in already. Employers have already figured out if they will provide it for their employees or 'send them out in the street' to get their own.

Without doubt however, there are several other regulatory uncertainties that are clearly stopping employers from hiring.

As evidenced by several threads on this site, additional uncertainty resides particularly within the investment taxation realm and personal tax areas.

We have no idea how dividends will be taxed and/or if those under the $250K level will be included in the 'elimination of the BTC'...i.e. will those making $65K AGI (and their dividends) go from the 15% to 28% bracket.

I expect that as soon as the uncertainty is gone, the markets will jump. Big time.

 

[MichaelB]

This is an interesting thread and if it stays on topic can lead to a lively and informative discussion.

 

[H2ODude]

I wish I KNEW how it would effect me and DW. I don't have the stomach to research the whole thing, and know the "devil is in the details" which I probably wouldn't understand! At this point, my impressions are primarily from sound bites and short articles, which is no way to plan a retirement. Hence I'm just taking a very conservative approach to healthcare. At 61 we'll be paying $1,022 a month for good coverage from former employer. I know it will increase, but am hoping not too much until we slide into Medicare. My planning assumptions are that after that, our healthcare costs will be no more than what we pay now.

 

[2B]

I wish I KNEW how it would effect me and DW. I don't have the stomach to research the whole thing, and know the "devil is in the details" which I probably wouldn't understand! At this point, my impressions are primarily from sound bites and short articles, which is no way to plan a retirement. Hence I'm just taking a very conservative approach to healthcare. At 61 we'll be paying $1,022 a month for good coverage from former employer. I know it will increase, but am hoping not too much until we slide into Medicare. My planning assumptions are that after that, our healthcare costs will be no more than what we pay now.

I'm planning on the Texas High Risk Plan +20% for retirement health care with Medicare after that. I think that, if anything, Obamacare can possibly lower my costs (or not) but it could also get the ax by SCOTUS. I think anyone that is doing serious planning based on their interpretation of Obamacare is living on another planet.

 

[nun]

As an MA resident I have no worry about getting health insurance if I leave work, however, I still worry about being able to pay for it. MA has an excellent website that guides you through the available plans

https://www.mahealthconnector.org/portal/site/connector/

so it's easy to buy a plan and you know what you are getting. But cost is still the issue. If you are single and earn less that $35k/year you qualify for a MA subsidized plan, but over that and you are looking at $400/month in premiums for a plan for a $2k/$5k plan.

So the worry of getting care is gone, but not the worry of paying for it. However, I'm a UK citizen so I can always move back to the UK and get NHS care which would cost zero out of pocket as it's funded from general taxation. Comparing taxes on my retirement income I will actually pay a little less tax in the UK than in the US/MA so I'll have to pay the difference to the US, but I'll save around $5k in health insurance premiums.....so in MA I worry only about paying for healthcare, not availability, but in the UK I would have none of those worries.

 

[2B]

But cost is still the issue. If you are single and earn less that $35k/year you qualify for a MA subsidized plan, but over that and you are looking at $400/month in premiums for a plan for a $2k/$5k plan.

You have a much cheaper option than I do. Every state has some version of a high risk plan but the rates are based on the assumption that you can't get anything else which is true if you go to the high risk plan. I'll be paying approximately $7,500/yr for each mine and DW's health insurance. He'll then have deductibles of $5,000 (I think). These are individual policies so they are only useful if you have something major happen to you.

 

[george76]

If you are single and earn less that $35k/year you qualify for a MA subsidized plan, but over that and you are looking at $400/month in premiums for a plan for a $2k/$5k plan.

Do you know if they include gains from IRA's as earnings for this calculation? Or is it only your official taxable income from the 1040 for that year? In other words, if you are an early retiree, could it be a pretty good chance that you could get a subsidized plan?

 

[Animorph]

I agree it removes the uncertainty of being able to get coverage when retiring, but not necessarily the cost. However, we still don't know what our taxes are going to be next year, much less throughout retirement, nor how equities and bond will perform. HI is just one of many uncertainties.

 

[MichaelB]

You have a much cheaper option than I do. Every state has some version of a high risk plan but the rates are based on the assumption that you can't get anything else which is true if you go to the high risk plan. I'll be paying approximately $7,500/yr for each mine and DW's health insurance. He'll then have deductibles of $5,000 (I think). These are individual policies so they are only useful if you have something major happen to you.

Only 34 states have high risk pools, and not all of them are open. You can find details by state here High Risk Pool Eligibility - Kaiser State Health Facts

 

[FUEGO]

Does this mean that if Obamacare is upheld and implemented (from 2014, I believe), that there is likely to be an increase in either consumer spending and/or stock purchases, as people perceive a reduction in uncertainty? (Or, of course, the opposite, if people don't trust the new system.) Has any research been done on this? (And most importantly: is it priced in? )

It may make a difference on the margins. But for most middle and upper class Americans it won't change much. For those who already have insurance, they probably won't see a lot of changes.

The biggest benefit will be for the lower income levels and for families with lots of kids (subsidies are tied to family size).

Personally, obamacare will accelerate my FIRE plans. I have 3 kids so we can earn quite a bit from investments and still get free or dirt cheap (~$1000) health insurance. It will also allow me and/or DW to go part time and not worry about paying tons for health insurance or being denied/partially excluded due to pre-existing conditions.

Another big group this will benefit are self employed people. I could see many people currently stuck in crappy jobs just for health insurance being freed to go out and start a small business or become self employed.

This could benefit the health care industry. More supply of medical insurance could lead to increased consumption. If the market meets the demand, that could lead to more health care workers, more medical offices and hospitals, etc. Assuming the market thinks the demand will be there long term (a tricky bet given the fiat nature of the demand creation).

However I don't see the impact on the economy as anything sufficiently important as to warrant changing my investment plans.

 

[Midpack]

This is an interesting thread and if it stays on topic can lead to a lively and informative discussion.

+1. The members have stayed on (this) topic before, hopefully this thread will be another example.

I read all these threads with great interest, health care is our biggest concern/unknown. (Selfishly I guess) I don't see where PPACA provides any benefit to early retirees (55-65) who are already able to buy health insurance on the open market (ie, Anthem). Like others have said, it's going to be very expensive no matter what kind of policy we choose, we can either pay high premiums and low out of pocket costs or vice versa (and hope our good health continues). Also like others have said it seems some uncertainty will be reduced or eliminated (admittedly good for those who benefit) but costs may increase as well, already beyond affordable for many.

 

[landover]

This is an interesting thread and if it stays on topic can lead to a lively and informative discussion.

What are the chances of Obamacare survival after 2012. In case of the change in leadership, I think Obamacare will still be there, may be a little changed to look like Romneycare?

 

[MichaelB]

What are the chances of Obamacare survival after 2012. In case of the change in leadership, I think Obamacare will still be there, may be a little changed to look like Romneycare?

We should probably not pursue this aspect because it is more of a political discussion. Besides, there's plenty to discuss just staying with implementation of the PPACA.

 

[ratto]

so it's easy to buy a plan and you know what you are getting. But cost is still the issue. If you are single and earn less that $35k/year you qualify for a MA subsidized plan, but over that and you are looking at $400/month in premiums for a plan for a $2k/$5k plan.

So the worry of getting care is gone, but not the worry of paying for it.

Maybe this is another reason why it pays to stay low under the radar by hitting ER early?

Another big group this will benefit are self employed people. I could see many people currently stuck in crappy jobs just for health insurance being freed to go out and start a small business or become self employed.

+1

This could benefit the health care industry. More supply of medical insurance could lead to increased consumption. If the market meets the demand, that could lead to more health care workers, more medical offices and hospitals, etc. Assuming the market thinks the demand will be there long term (a tricky bet given the fiat nature of the demand creation).

OTOH, it got to have some moderation. We already have a lot of health care consumption and a significant health care labor force in this country. In a purely hypothetical (worst) case scenario, if everyone in US is employed in health care industry, and everyone has insurance and just keeps perpetually providing & consuming medical services, will this system be healthy? Having an affordable health insurance is one thing, staying healthy to keep the overall system cost down is another factor we can not ignore.

 

[MichaelB]

I read all these threads with great interest, health care is our biggest concern/unknown. (Selfishly I guess) I don't see where PPACA provides any benefit to early retirees (55-65) who are already able to buy health insurance on the open market (ie, Anthem). Like others have said, it's going to be very expensive no matter what kind of policy we choose, we can either pay high premiums and low out of pocket costs or vice versa (and hope our good health continues). Also like others have said it seems some uncertainty will be reduced or eliminated (admittedly good for those who benefit) but costs may increase as well, already beyond affordable for many.

I see two areas that will affect us pre-Medicare ERs. One is policy pricing. Right now policies are priced by age group at 5 year steps with a steep curve, so for the same policy, a 60 year old can expect to pay 6x the rate as a 25 year old. That is reduced to 3x in the PPACA, meaning the premium for our age group could fall more than 10% if nothing else changed. Second, the deductible expense for individual rises from 7.5% to 10% of income, making the after tax cost higher.

Edit: sorry, I forgot the link. Kaiser Foundation PDF summary of the law http://www.kff.org/healthreform/upload/8061.pdf

 

[Katsmeow]

I think the big way that the Act affects early retirees is removing accessibility to insurance as a concern. When DH retired, he could keep health insurance as an early retiree which also insured the kids and me. That allowed to ESR and work very part time to the point I wouldn't be eligible for health insurance at work. And, if I want, I can fully retire and still have health insurance.

Still in the bank of my head there is always the worry that his company will end retiree insurance before I get to 65. And, of course, if he had not have had retiree insurance available then I might not have ESR'd at all.

We see people here all the time under 65 who would like to retire, can afford expensive insurance but can't find anyone who will provide it. Obamacare would let those people retire.

 

[Independent]

If I understand the question in the OP, it's "Will consumer spending or common stock prices change based on the SC decision on Obamacare?"

I can't see either happening. Even if the decision settled the issue, I think too few people are sufficiently concerned about their medical insurance costs/availability to move the dial on either aggregate consumer spending or stock indexes. Further, the SC decision won't settle the issue, it will still be a political battleground for a long time.

Some individuals will have more confidence in retiring or changing jobs. I don't think those numbers are dramatic enough to move the market, either.

 

[Midpack]

I think the big way that the Act affects early retirees is removing accessibility to insurance as a concern. When DH retired, he could keep health insurance as an early retiree which also insured the kids and me. That allowed to ESR and work very part time to the point I wouldn't be eligible for health insurance at work. And, if I want, I can fully retire and still have health insurance.

Still in the bank of my head there is always the worry that his company will end retiree insurance before I get to 65. And, of course, if he had not have had retiree insurance available then I might not have ESR'd at all.

We see people here all the time under 65 who would like to retire, can afford expensive insurance but can't find anyone who will provide it. Obamacare would let those people retire.

You may not have been addressing my post/question, but FWIW it was...

(Selfishly I guess) I don't see where PPACA provides any benefit to early retirees (55-65) who are already able to buy health insurance on the open market (ie, Anthem).

...and I realize our eligibility could change between now and age 65, in which case your post would indeed apply.

 

[Animorph]

I would think that if an ER can get private insurance today, PPACA might result in a price increase as less healthier people are added to the insurance rolls. Although all the pricing rules may mitigate that. On the other hand, I'm still trying to get DW to retire before we develop health problems that might make us currently uninsurable. We can get to 2014 with COBRA, but PPACA is looking pretty shaky now.