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

[Martha]

Ultimately, it will depend on what the voters think. It's a good thing to encourage folks to save for retirement, so excluding retirement accounts makes sense from that perspective. On the other hand, the public as a whole get restless when they are barely getting by, can barely afford shoes for the kids, and are paying taxes so that people with $500K in the bank can get public assistance.
My guess is that all assets (including retirement assets and property/real estate) will probably be assessed as income-equivalent under some type of "expected annual distribution" calculation. From the taxpayer's perspective, I think that's fair, though it might end up hurting me personally.
Our policy should be that public assistance is for those who can't help themselves. On the other hand, I think everyone who qualifies under the present rules should take every penny available.

Maybe more likely only certain assets would be exempt from counting when determining eligibility, like 401ks, pensions and homes. Which would kill me as I have no home, no pension and a dinky 401k.

 

[Alan]

(Italics added) This is another unintended consequence to watch for. It's important to remember that, as much as employers (rightly) complain about the high cost of medical insurance for employees--they don't have to pay it. There's never been a law requiring employers to provide health insurance. They only do it because it helps attract employees, and because they have a "special situation" (tax breaks and the ability to buy group coverage) that allows them to buy insurance more cheaply than consumers can buy it themselves. It really is an (unfair?) advantage that allows employers to attract good employees at lower cost.

Now, if (as many believe) the exchanges become the health care ghetto where care is substandard and waits are long, employers will still retain the advantage they have today. It probably won't be worth it for them to cover retirees, but to get the best employees they might sweeten the pot with better coverage (or supplemental insurance that lifts people out of the need to rely on getting all care through the exchanges).

This is my point of view also. Even in the UK which has a government run national health care system, employers have been offering private health care insurance since the 70's (could have been earlier but this was when the first employer I worked for started offering it). To attract the best they need to distinguish themselves from the pack.

For retirees they don't have the same incentive so are more likely to stop providing their own coverage for this group.

 

[Spanky]

To attract the best they need to distinguish themselves from the pack.

How do they determine who the bests are?

For retirees they don't have the same incentive so are more likely to stop providing their own coverage for this group.

Since they are no longer useful for us, let's just stop the coverage and forget about them.

 

[MichaelB]

Thanks. When it says "Your maximum out-of-pocket costs for deductibles and co-payments would be capped at 27% of the total cost." what does "total cost" refer to?

I think it is an actuarial value – an estimated total yearly expense. The cap would be 27% of the actuarial value.
I’m sure this made everything much clearer...

Now, if (as many believe) the exchanges become the health care ghetto where care is substandard and waits are long, employers will still retain the advantage they have today. It probably won't be worth it for them to cover retirees, but to get the best employees they might sweeten the pot with better coverage (or supplemental insurance that lifts people out of the need to rely on getting all care through the exchanges).

A big assumption. Another possibility is public employees health care, Federal and some State, is moved onto the exchanges, and this enables policy offerings that are more competitive.

It was outrageous to me that the law makes it even harder to deduct individual heath premiums (raising the threshold to over 10% AGI from 7.5%).

Ditto that. A real disappointment. Together with the “Cadillac plan tax” I suspect this means the intention is to tax all health care benefits – making people aware of the real, total costs and motivating people to reduce usage.

 

[donheff]

A big assumption. Another possibility is public employees health care, Federal and some State, is moved onto the exchanges, and this enables policy offerings that are more competitive.

We did see a quote from the law from someone in an earlier post indicating that Congress critters - at least new ones - will get their plans through the exchanges. I don't know if it is in the final plan but Obama and Pelosi kept mentioning it.

 

[Rustic23]

The last I heard was that the 'staff' of the Washington elite would shop at the exchanges but not the elite themselves. i.e. the actual elected officials. It sounded believable to me.

 

[Alan]

How do they determine who the best are?

The usual way, qualifications, interviews and experience.

The best candidates will have applied to and got job offers. In evaluating the job offers candidates look at the whole package - salary, vacation, bonus levels, health insurance etc. For example I remember when my megacorp changed it's hiring offer to include an extra 10 days vacation for a degree or equivalent experience, which was particularly attractive to both new graduates and experienced professionals that did not want to start again accumulating vacation.

Since they are no longer useful for us, let's just stop the coverage and forget about them.

Maybe I'm concerned about this since I am now in this situation and can see fewer reasons to continue this perk. If my megacorp does stop offering this I only hope they grandfather in those already retired. They cut back health benefits for retirees about 10 years back but only for new retirees starting at the end of the year. This actually hurt them at the time as there was a rush of very experienced people who had their "80 points" to retire before the reduced benefits kicked in.

 

[MichaelB]

section 1312: the only health plans that the Federal Government may make available to Members of Congress and congressional staff with respect to their service as a Member of Congress or congressional staff shall be health plans that are (I) created under this Act (or an amendment made by this Act); or (II) offered through an Exchange established under this Act (or an amendment made by this Act).

Well, for sure, members of congress. All Federal employees - not sure.

 

[HsiaoChu]

If you are worried about supply of doctors, hospitals, and nurse outstripping actual demand then you should ER in a place where 90% of the people there already have healthcare. This would be a place where 40% of the population is already retired and the other 60% work in professional jobs which provide healthcare.

There are places like that..... And I think that they will show up more.

But while I'm recommending it for anyone who is really worried about it, I feel uncomfortable in doing so because it seems to say that you should find an elitist place to live where people are not affected by any of this. For example: Move to Los Alamos,NM or West Chester,NY......

Unfortunately not all of us can afford to actually do that.

Z

 

[donheff]

The last I heard was that the 'staff' of the Washington elite would shop at the exchanges but not the elite themselves. i.e. the actual elected officials. It sounded believable to me.

The quote from MichaelB specifically says "Members" and staff.

 

[MichaelB]

Thanks. When it says "Your maximum out-of-pocket costs for deductibles and co-payments would be capped at 27% of the total cost." what does "total cost" refer to?

See here

What is actuarial value and how does it affect premiums? The actuarial value of a health insurance policy is the percentage of the total covered expenses that the plan would, on average, cover. For example, a plan with a 70% actuarial value means that consumers would on average pay 30% of the cost of health care expenses through features like deductibles and coinsurance. The amount that consumers pay would vary substantially by the amount of services they use. The current Congressional health reform bills specify benchmark levels of coverage for the purposes of premium subsidies using actuarial values. Under both the House and Senate bills, as well as the President's proposal, subsidies would be tied to plans with an actuarial value of 70%, with additional assistance provided for cost sharing based on income (with amounts varying among the proposals). Insurers would have to cover a defined set of health care services and cap the total amount of cost sharing required of consumers at defined levels, but could otherwise vary the structure and degree of cost sharing so long as minimum actuarial value thresholds are met. The illustrative premiums used in the calculator are estimated based on 2009 costs for a single 40 year old, and vary by actuarial value as follows: $2,850 for a 60% actuarial value plan and $3,500 for 70%.
Frequently Asked Questions
Health Reform Subsidy Calculator -- Premium Assistance for Coverage in Exchanges/Gateways

Can't get any more clear than that

 

[Rustic23]

I see what it says, now anyone want to take bets on when they will amend the bill to exclude them?

 

[ERD50]

section 1312: the only health plans that the Federal Government may make available to Members of Congress and congressional staff with respect to their service as a Member of Congress or congressional staff shall be health plans that are (I) created under this Act (or an amendment made by this Act); or (II) offered through an Exchange established under this Act (or an amendment made by this Act).

Well, for sure, members of congress. All Federal employees - not sure.

But w/o reading through x,xxx pages, how do we know that there is not some 'special' plan 'created under this Act' just for Congress?

-ERD50

 

[Rustic23]

Erd50,
It's that last (or an amendment made by this Act)

 

[FinanceDude]

Hopefully from the inflated salaries that the CEO's and higher management have....the pharma company can afford the $90 billion.

Uh ok.........

 

[MichaelB]

But w/o reading through x,xxx pages, how do we know that there is not some 'special' plan 'created under this Act' just for Congress?

-ERD50

Uh - you only have to read section 1312. Specifically pages 157 and 158.

 

[donheff]

I read somewhere in this thread (I believe it was here - search doesn't seem to work) that AT&T is posting a big accounting hit to pay for its costs under the health care bill. I expect that real problems of this sort will come up but I also expect them to get distorted to "prove" problems with the legislation that are not real. I just read his about the AT&T maneuver that is being exploited in that fashion:

"Under the 2003 Medicare prescription drug program, companies that provide prescription drug benefits for retirees and employees have been able to receive subsidies covering 28 percent of eligible costs. AT&T got $1.3 billion in government subsidies - meaning they spent roughly $4.64 billion on prescription drug benefits. Under the 2003 law, they could deduct from their taxes the entire amount they spent, PLUS the subsidy. So in addition to the $1.3 billion they got from the government to help pay for retiree drug benefits, they wrote off $5.94 billion on their taxes. The new law states that they can now only deduct the amount they actually spend. So, what AT&T did yesterday was make a NON CASH accounting charge against a perceived future loss of tax deductions through Medicare subsidies.
​

So the awful "problem" with the bill in this case is that one form of socialized, big-gov health care largess that the complainers would never support in the first place has been taken off the table and companies (correctly, in my view) reflect that on their statements.

 

[samclem]

I read somewhere in this thread (I believe it was here - search doesn't seem to work) that AT&T is posting a big accounting hit to pay for its costs under the health care bill. . . So the awful "problem" with the bill in this case is that one form of socialized, big-gov health care largess that the complainers would never support in the first place has been taken off the table and companies (correctly, in my view) reflect that on their statements.

AT&T, Caterpillar, Verizon, and John Deere are among the companies taking large charges against future earnings ($1 billion in the case of AT&T). The practice appears to be in compliance with existing accounting rules (and all of us should, given recent experience, appreciate it when companies are honest about their financial condition).

What's NOT "cricket" in my view, is Henry Waxman's response. He (and Congressman Stupak--hmmm) are demanding that the companies show up before a congressional committee and explain why they took these write-downs. They also are supposed to bring copies of any internal company emails seen by senior management that addressed the costs of the new law to their companies. Message: If a company does something that may reflect adversely on this new law, expect to be hauled before Congress for a public dressing-down and to have your company's communications scrutinized. Very subtle. Personally, I'm a little surprised at this move, as many in Congress are very eager to change the subject as quickly as possible.

If I were one of these CEOs, I'd wait for the subpoena.

 

[donheff]

What's NOT "cricket" in my view, is Henry Waxman's response. He (and Congressman Stupak--hmmm) are demanding that the companies show up before a congressional committee and explain why they took these write-downs.

This does seem dumb. I agree that the companies should take the write-downs. I just don't think the other side's portrayal was fair. From Waxman's behavior I suspect my side's portrayal is going to be even worse

 

[FinanceDude]

I read somewhere in this thread (I believe it was here - search doesn't seem to work) that AT&T is posting a big accounting hit to pay for its costs under the health care bill. I expect that real problems of this sort will come up but I also expect them to get distorted to "prove" problems with the legislation that are not real. I just read his about the AT&T maneuver that is being exploited in that fashion:

"Under the 2003 Medicare prescription drug program, companies that provide prescription drug benefits for retirees and employees have been able to receive subsidies covering 28 percent of eligible costs. AT&T got $1.3 billion in government subsidies - meaning they spent roughly $4.64 billion on prescription drug benefits. Under the 2003 law, they could deduct from their taxes the entire amount they spent, PLUS the subsidy. So in addition to the $1.3 billion they got from the government to help pay for retiree drug benefits, they wrote off $5.94 billion on their taxes. The new law states that they can now only deduct the amount they actually spend. So, what AT&T did yesterday was make a NON CASH accounting charge against a perceived future loss of tax deductions through Medicare subsidies.
​

So the awful "problem" with the bill in this case is that one form of socialized, big-gov health care largess that the complainers would never support in the first place has been taken off the table and companies (correctly, in my view) reflect that on their statements.

Can't companies do what they want under the current accounting laws? Non-cash accounting charges go on all the time in large firms....... Should Congress mandate they can't do anything that "might" make the Bill look less rosy? Seems like a dumb witch hunt to me, with Stupak and Waxman leading the charge. One would think Stupak should keep a VERY LOW profile these days........

 

[Westernskies]

If I were one of these CEOs, I'd wait for the subpoena.

...and then fly in on the company jet.

 

[MichaelB]

Can't companies do what they want under the current accounting laws? Non-cash accounting charges go on all the time in large firms.......

I think they were just trying to make a point.

Should Congress mandate they can't do anything that "might" make the Bill look less rosy? Seems like a dumb witch hunt to me, with Stupak and Waxman leading the charge.

So were they.

It's like having kids at home all over again.

 

[donheff]

Can't companies do what they want under the current accounting laws? Non-cash accounting charges go on all the time in large firms....... Should Congress mandate they can't do anything that "might" make the Bill look less rosy? Seems like a dumb witch hunt to me, with Stupak and Waxman leading the charge. One would think Stupak should keep a VERY LOW profile these days........

Lets be balanced. Waxman, in a move new to me, may be on a dumb witch hunt if the companies are simply taking a charge that is allowed, as it appears to me they are doing. But the first people out of the box were on the other side of the hunt, making this simple write off seem like something it wasn't.

 

[FinanceDude]

Lets be balanced. Waxman, in a move new to me, may be on a dumb witch hunt if the companies are simply taking a charge that is allowed, as it appears to me they are doing. But the first people out of the box were on the other side of the hunt, making this simple write off seem like something it wasn't.

So they are making a political statement? I wouldn't equate it to a Tea Party demonstration or a protest. There is a chance that some of the folks at those big corps are smarter than the govt folks rolleyes and maybe they are taking their medicine before things get really ugly..........

Since when is it the business of Congress to meddle in the affairs of folks that are not under TARP and broke no rules we know of? Not everyone thinks the new health bill is a cornucopia........trotting those Fortune 500 CEOs up there may make Congress look even dumber, if that is possible..........

 

[FinanceDude]

...and then fly in on the company jet.

I would ask for fighter escort, A la Nancy Pelosi..........