Will Obamacare affect risk perception?

[donheff]

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.

Maybe, but the very high cost folks are already covered through Medicare and Medicaid, PPACA primarily adds low income working age adults and children who can't get covered (more costly) or who can't afford it (no reason to expect them to be high cost patients). Possibly a slightly higher cost demographic over all but nothing like old folks.

 

[M Paquette]

I know that when I was working, health insurance was by far the biggest inhibitor to my jumping from a relatively large business to a new startup company. Twice DW and I ran through the issues with moving to a small (5 person or less) startup, and the transfer to individual insurance with the pre-existing condition riders was the killer each time.

There are some tricks we've learned over the years, that with sufficient lead time and a bit of luck in what's offered, we could select insurance through an employer that we could thread through the COBRA/Cal-COBRA/continuation/individual policy matrix to provide coverage without any breaks. That wasn't an option that we could structure properly when the startup opportunities presented themselves, and in both cases we would have wound up on individual coverage with riders, at a fairly high expense.

The ACA terms would have made this much easier, and there's a pretty good chance the world could have had some really useful software an hardware 8-10 years earlier than when it finally arrived. Lost opportunity costs...

 

[DoingHomework]

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.

I wonder how much choice employers have. In my career I have never heard of a company employing professionals that does not offer health care benefits, usually fairly generous. It's what is needed to attract talent.

That situation is changing somewhat but I think that is largely driven by the labor market (unemployment). If you are desperate for a job you are not in a good position to negotiate for benefits. But even now there are pockets where employees have the power. We have been trying to fill several positions for a couple of years and can't meet the (high) salary demands that most candidates make. We've lost quite a few others recently to higher salaries elsewhere. And it would be unthinkable for those jobs not to have health benefits.

I'm really not in favor of a federal mandate that employers provide health coverage. But I think the mandate comes from the market rather than from government. What companies can do in times of high unemployment is entirely different from what they will be able to do when competition for skilled workers heats up.

 

[Midpack]

Maybe, but the very high cost folks are already covered through Medicare and Medicaid, PPACA primarily adds low income working age adults and children who can't get covered (more costly) or who can't afford it (no reason to expect them to be high cost patients). Possibly a slightly higher cost demographic over all but nothing like old folks.

Sharing Animorph's concern, I am not following the above post, especially the first sentence. How are ER's age 55-65 without health insurance and not meeting poverty thresholds covered by Medicaid or Medicare? And how many workers age 55-65 who would retire except they can't get private health insurance at any price (and therefore stay employed until age 65) will retire when/if PPACA permits them private coverage? I'd expect both groups will add above average medical costs/person and increase cost to all as Animorph suggested. Not being smart, asking...

However, the 6X vs 3X requirement that MichaelB mentioned above might force more of the additional cost to younger insureds if I understood it correctly.

 

[DoingHomework]

Still in the bank of my head there is always the worry that his company will end retiree insurance before I get to 65.

You should read about yesterday's appellate court ruling against Raytheon Corporation. In short, a company cannot eliminate health benefits to employees when the benefits were promised as part of an early retirement package. The elimination had to come while the employees were still working and subject to company decisions and negotiations. It could be appealed but the consequences seems to make that unlikely. So, at least if you are in the western US, it could be binding on other companies.

 

[BigNick]

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

Thanks for keeping the thread open.

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 wasn't really thinking about the SC decision. I was thinking more in terms of whether, after <whatever date>2014/2015, assuming that the system is up and running as currently planned (which will presumably depend on a favorable SC decision and the outcome of the Presidential election in November), will people discover that they don't need such a big buffer?

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.

This is what I was getting at. I see a lot of threads where healthcare costs are a massive series of question marks. I'm thinking that if someone doesn't know if they will be paying $10K or $30K/year in total for medical, to find out that it's "only" $22K will - especially for ER-mentality folks - look like $8K/year extra to put in the portfolio.

On the other hand, we have baked in most of the current cost structure.

I didn't expect that surgeons would be taking a pay cut. But ask a European what they think of US healthcare reform and pretty much all they (including me) know (or "know") about it, is that in theory there won't be as many people being refused treatment for pre-existing conditions, or simply unable to get any coverage at all. We know that in the US, you pay for what you get and (perhaps) you get what you pay for.

 

[M Paquette]

How are ER's age 55-65 without health insurance and not meeting poverty thresholds covered by Medicaid or Medicare? .

Disability. Folks on Social Security Disability move onto Medicare automatically after two years. Since many disabilities are due to ongoing medical conditions, these become Medicare covered conditions.

http://www.ssa.gov/dibplan/dqualify.htm
http://www.ssa.gov/pubs/10029.html#a0=9
http://www.ssa.gov/oact/STATS/dibStat.html

Medical Disabilities:
http://www.ssa.gov/disability/professionals/bluebook/AdultListings.htm

 

[rodi]

A factor not mentioned here. Age discrimination in getting a job. Yeah, yeah... this is a board about retirement... but we all have peers in the over 50 crowd who aren't FI yet.

I have several friends who were laid off from my megacorp who've been able to get by doing contract work. All of them are high tech/engineer types. But the contract gigs are paying less than pre-recession. They can't afford the high risk pool and cobra has run out. Their employers seem willing to convert younger contract workers to full employees w/benefits... but not so willing to convert anyone over 50.

Sure this is anecdotal rather than empirical. But for my friends/former co-workers - it's pretty consistent. If you're over 50, they'll hire you as a contractor, but not an employee... So no employer provided plans.

I'm not sure how the ACA will help - since it lacks cost controls. But it helps those who have pre-existing conditions. One of my friends was turned down for health insurance because he's on cholesteral meds. So even fairly common/benign issues can get you denied coverage on the individual market.

 

[DoingHomework]

A factor not mentioned here. Age discrimination in getting a job. Yeah, yeah... this is a board about retirement... but we all have peers in the over 50 crowd who aren't FI yet.

I have several friends who were laid off from my megacorp who've been able to get by doing contract work. All of them are high tech/engineer types. But the contract gigs are paying less than pre-recession. They can't afford the high risk pool and cobra has run out. Their employers seem willing to convert younger contract workers to full employees w/benefits... but not so willing to convert anyone over 50.

Sure this is anecdotal rather than empirical. But for my friends/former co-workers - it's pretty consistent. If you're over 50, they'll hire you as a contractor, but not an employee... So no employer provided plans.

I have observed the "effect" you describe but I'm not sure I agree with the "cause" you suggest. Hiring decisions, especially for senior people, are usually made at the department or individual manager level. And, at least in the large organizations I am familiar with, a department is charged the actual cost of an employee plus some "overhead" fee that does not depend on much, perhaps job class. So any discrimination would likely not be due to higher health care costs.

I have observed that sometimes there is reluctance to hire people over 50 because they are not expected to be around for the long term. They are perceived as only being around for 5 years or so so there is no incentive to make a long term investment in them. I realize that kind of thinking is not exactly acceptable but that is what I've observed in practice. I have never heard of a concern with hiring older workers because their benefits cost more!

 

[MichaelB]

This is what I was getting at. I see a lot of threads where healthcare costs are a massive series of question marks. I'm thinking that if someone doesn't know if they will be paying $10K or $30K/year in total for medical, to find out that it's "only" $22K will - especially for ER-mentality folks - look like $8K/year extra to put in the portfolio.

Without a breakdown of what people are paying today it’s difficult to get to that. The intent appears to lead to all insurance policies being priced like current large group unsubsidized policies are priced today. Right now premiums are lower for younger people and individual policies, are higher for small group policies and older people, and are much higher for people with preexisting conditions, and all these would gravitate toward the same average premium. Simple straight line arithmetic would lead me to expect a 12% decrease in our premium, which would be nice but not like the numbers you show. Legitimate concerns about Medicare continue as well, so financial uncertainty is not completely eliminated.

As others have said, I think the PPACA will have a positive effect on employment, and give far greater flexibility to individuals and businesses. That should have an impact on total US economic activity and lead to increased competitiveness, but over a longer period of time.

Not your question, but I see health care cost control having a far greater impact on people’s personal finances, and improvement here would definitely impact the portfolios.

 

[DoingHomework]

To answer the original question posed...

Health insurance costs are the biggest unknown for us. Even though we are entitled to a retiree subsidy from a retirement plan and can buy insurance at a group rate as retirees, there is no guarantee what that rate will be. We've budgeted $25000 a year for insurance between ER and when medicare starts.

But that money is invested along with our other retirement investments. If a law were suddenly passed now that guaranteed that our insurance costs would be $5000 a year I don't think it would have any impact on what I did. The $20000/yr of future money freed up would stay where it is. I'd probably be relieved but I don't think I'd go out and spend it now. And once retired I don't think I'd spend it then either. I still live within my planned budget.

So even though I'd love to see less uncertainty about such a big chunk of future expense, I truly don't think that more certainty/less risk would impact my spending or investment decisions that much.

 

[nun]

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?

It only includes 1040 type income, so wages, rents, royalties, dividends, capital gains etc. They don't look at your overall assets or net worth. As I own my home I can comfortable live on under $35k/year and in that case I'd qualify for "Commonwealth Care" and I'd only have to pay $150/month.

Here's the application form.

http://www.mass.gov/eohhs/docs/masshealth/appforms/mbr.pdf

 

[BigNick]

Simple straight line arithmetic would lead me to expect a 12% decrease in our premium, which would be nice but not like the numbers you show.

My understanding was that people have a fair idea what their insurance will cost, but seem to be including a large "fudge factor", apparently (again, it seems to me) because of a perceived lack of confidence in whether or not their insurance will, in fact, pay out for /a/ whatever condition they end up with and/or /b/ however long it takes.

 

[Animorph]

Maybe, but the very high cost folks are already covered through Medicare and Medicaid, PPACA primarily adds low income working age adults and children who can't get covered (more costly) or who can't afford it (no reason to expect them to be high cost patients). Possibly a slightly higher cost demographic over all but nothing like old folks.

I would think all of the state high-risk pools would be moving over to normal insurance coverage. Plus a bunch of "self-insured" people who perhaps have pre-existing conditions that precluded private insurance and didn't want to pay the high-risk pool prices.

 

[marko]

It only includes 1040 type income, so wages, rents, royalties, dividends, capital gains etc. They don't look at your overall assets or net worth. As I own my home I can comfortable live on under $35k/year and in that case I'd qualify for "Commonwealth Care" and I'd only have to pay $150/month.

Here's the application form.

http://www.mass.gov/eohhs/docs/masshealth/appforms/mbr.pdf

So in Mass this is a great program for those of low income, where the taxpayers (commonwealth care) pick up your premium.

If you're a couple and make $75K, you have to come up with $12K a year of added insurance expense...(or move 15 miles north to NH).

More interestingly, the couple break for "comm care" is $65K but the state won't let you deduct the $12K that would bring a $75K family under the wire.

Also, Mass won't let you deduct the $12K from your State income tax.

 

[2B]

I would think all of the state high-risk pools would be moving over to normal insurance coverage. Plus a bunch of "self-insured" people who perhaps have pre-existing conditions that precluded private insurance and didn't want to pay the high-risk pool prices.

Unfortunately, I suspect it will be more the other way. I suspect that the "regular" insurance without limitations for pre-existing conditions will be priced closer to the high-risk pool prices. It may not be as bad for the 20 somethings but I expect it to be true for the 50+.

 

[photoguy]

A few posters in this thread have said that PPACA won't increase affordability or reduce uncertainty around costs for healthcare. However, I don't really understand this position since it includes caps at about 10% of income (tables go up to 400% of FPL). In addition there is the limit that different age tranches can't cost more than x3 and that medical loss ratio can't exceed 80%.

Are folks who are saying that there will still be large cost uncertainty expecting income well beyond 400% in ER? or do they see the capped cost as too high? What am I missing?

 

[Gearhead Jim]

I didn't read every post, but Obamacare will make me more worried about the future and less likely to spend freely on discretionary items.

We are getting into a situation where massive tax increases and/or entitlement means-testing will be necessary. Either one will cost me a lot of money.

 

[Midpack]

A few posters in this thread have said that PPACA won't increase affordability or reduce uncertainty around costs for healthcare. However, I don't really understand this position since it includes caps at about 10% of income (tables go up to 400% of FPL). In addition there is the limit that different age tranches can't cost more than x3 and that medical loss ratio can't exceed 80%.

Are folks who are saying that there will still be large cost uncertainty expecting income well beyond 400% in ER? or do they see the capped cost as too high? What am I missing?

Everything I read suggests that cost uncertainty will indeed be reduced by several PPACA mechanisms. But total cost (already much higher than any other developed country period) will be as high or more likely higher. Reducing the uninsured - folks who can't get insurance due to pre-existing conditions or other reasons and folks who can't afford insurance - would only add cost all else being equal. But there's a lot I don't know/understand still...

 

[nun]

So in Mass this is a great program for those of low income, where the taxpayers (commonwealth care) pick up your premium.

If you're a couple and make $75K, you have to come up with $12K a year of added insurance expense...(or move 15 miles north to NH).

More interestingly, the couple break for "comm care" is $65K but the state won't let you deduct the $12K that would bring a $75K family under the wire.

Also, Mass won't let you deduct the $12K from your State income tax.

The MA reforms have removed the worry about getting insurance, but the way you pay for insurance and the overall costs need to improve. I would like to see a progressive phase out of eligibility for Commonwealth Care and subsidies rather that a strict $35k income limit and obviously costs need to be controlled. The current market forces have failed to do that so maybe the new MA cost legislation will help.

As a 50 year old guy thinking of ER guaranteed access to reasonably priced insurance means one less thing to worry about which is why I'll stay MA resident as long as I'm in the USA.

 

[samclem]

A few posters in this thread have said that PPACA won't increase affordability or reduce uncertainty around costs for healthcare. However, I don't really understand this position since it includes caps at about 10% of income (tables go up to 400% of FPL). In addition there is the limit that different age tranches can't cost more than x3 and that medical loss ratio can't exceed 80%.

Are folks who are saying that there will still be large cost uncertainty expecting income well beyond 400% in ER? or do they see the capped cost as too high? What am I missing?

People recognize that:
--The PPCA does almost nothing to limit the growth of spending on medical care (expressed as a percent of GDP, if you choose). As you point out, it does attempt to limit the cost of insurance for some folks. See the problem? The money for care will have to come from somewhere. Many people with the resources to retire believe they'll be seen as a handy source of these funds. So, from a big-picture perspective the PPCA doesn't decrease my level of uncertainty.
-- Regarding the cost and availability of care for myself and my family--that's another problem. I think it might take a lot more time to see a doctor than it used to. And as waiting lists increase, the market for cash-only services will probably become more robust (a good thing, in my view, but something for which we didn't budget).

In about a month the SCOTUS will have ruled and the next phase of the transformation can begin.

 

[FinanceDude]

I didn't read every post, but Obamacare will make me more worried about the future and less likely to spend freely on discretionary items.

We are getting into a situation where massive tax increases and/or entitlement means-testing will be necessary. Either one will cost me a lot of money.

+1 Compounding the problem is virtually no politician wants to tackle the isue, for fear of losing their re-election bids. So, the problem keeps growing like a cancer..........

 

[almost there]

Obamacare Is a gonner........ movin on........

 

[2B]

Obamacare Is a gonner........ movin on........

Not that I would mourn a total wipe out by SCOTUS, there are many elements that will be highly favored by a large number of Americans. Congress will be forced to address health care.

Now if SCOTUS upholds the healthcare law, congress will be focused more on ripping out what is perceived as unworkable or unacceptable. Making workable changes will be difficult but without doing something our uncertainty will continue into the indefinite future.

It would probably be better for the process if SCOTUS does let a new congress start over. The current law was done as a total "cram down". The last minute passage in the Senate using their only means of passage (without amendment) prevented making many fixes.

Floggings will continue until morale improves!

 

[donheff]

It would probably be better for the process if SCOTUS does let a new congress start over. The current law was done as a total "cram down". The last minute passage in the Senate using their only means of passage (without amendment) prevented making many fixes.

I strongly disagree that we would be better off starting over. If the whole bit is thrown out we will probably wait another 15-20 years to get meaningful reform just as we did after the 1993 debacle. Nothing about the makeup of the current or likely future congresses indicates that compromise will be reached without drastic external pressure. We had a poll in which 75% of us concluded that it would be better to revise the PPACA than to start over. If the PPACA is as bad as many think the pressure will be intense to fix it -- but only if it survives. If SCOTUS throws out the mandate while leaving the rest intact, we could also see meaningful reform since the cost implications of no prior conditions coupled with no mandate would create intense pressure to compromise. Who knows, we might actually see something useful in the lame duck this year -- debt and health care. Wouldn't that be a change?