Early Retirees With Obamacare Plans Face Uncertain Future

Those in their fifties and sixties with health coverage through the Affordable Care Act may get hit the hardest by a repeal.

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Adults who are ages 55 to 64 and covered by a marketplace insurance plan created by the Affordable Care Act could be hit hard by a repeal of the health care law and various replacement proposals. About 4.5 million Americans in this age range could have lost coverage under a law approved by Congress last year and vetoed by President Obama, according to the nonpartisan Urban Institute. Congress is considering similar legislation now as part of the drive to repeal Obamacare. It would end premium subsidies for people buying coverage on health care exchanges, eliminate Medicaid expansion and dismantle individual mandates to buy coverage. House and Senate committees are also considering replacement bills.

Older adults who are approaching Medicare age are more likely than younger adults to suffer from preexisting medical conditions and pay higher insurance premiums. The ACA includes several provisions aimed at these adults who need to buy coverage in the individual marketplace, such as early retirees and the self-employed.

The health care law prohibits insurers from charging the oldest adults more than three times what they charge the youngest adults. Because the law requires that everyone enroll, younger, healthier persons in effect subsidize the costs of older, sicker persons. The leading Republican proposals to repeal the ACA would either end this “age rating” or allow insurers to charge older policyholders up to five times as much as younger ones. If this happens, “the people most adversely affected would be those in the 55-to-64 range,” says Paul Van de Water, a senior fellow at the Center on Budget and Policy Priorities.

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Legislation introduced by Rep. Tom Price (R-GA), who is President Trump’s choice to head the Department of Health and Human Services, would prohibit insurers from excluding those with preexisting medical conditions—as long as an applicant had 18 months of “continuous coverage.” Someone who moves or loses a job, with a small break in coverage, could be charged a 50% surcharge on standard rates.

But without age rating or a mandate to lure in younger workers, those standard rates, even for those who don’t have a break in coverage, could rise significantly. Plus, insurers would no longer be required to offer policies with a full range of benefits. “This is the age when people start getting high blood pressure and high cholesterol,” says Karen Pollitz, a senior fellow at the Kaiser Family Foundation. An insurer could offer comprehensive coverage to an older person, she says, but the cost could be prohibitive.

Price’s legislation also would replace subsidies with tax credits based on age, not income, to be used to buy any policy. Those 50 and older would get a $3,000 credit. For many with moderate income, that could fall far short of current federal help. Consider a 64-year-old widow in 2017 who has $40,000 in income. Under the ACA, she receives a federal subsidy of $6,284 for a comprehensive plan and still shells out $3,876 in premiums, according to Kaiser’s health insurance marketplace calculator.

Susan B. Garland
Contributing Editor, Kiplinger's Retirement Report
Susan Garland is the former editor of Kiplinger's Retirement Report, a personal finance publication whose subscribers are retirees and those approaching retirement. Before joining Kiplinger in 2006, Garland was a freelance writer whose work appeared in the New York Times, the Washington Post, BusinessWeek, Modern Maturity (now AARP The Magazine), Fortune Small Business and other publications. For 12 years, Garland was a Washington-based correspondent for BusinessWeek, covering the White House, national politics, social policy and legal affairs. Garland is a graduate of Colgate University.