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One of the primary tenets of the Affordable Care Act legislation (Obamacare) is guaranteed healthcare insurance for all Americans. This insurance is expected to have lower premium rates than individually-purchased healthcare insurance policies – although the jury is still out on exactly what those rates will be. When the Health Insurance Marketplaces begin operation next month we’ll learn more about how this new health insurance delivery will be priced, compared with employer-provided health insurance or individually-purchased policies.
If the rates are dramatically lower than the individually-purchased policy, an unintended result may occur: early retirement for many. (For more on this phenomenon, see “Obamacare could encourage more early retirements from baby boomers”.)
Think about it – everyone knows at least one successful self-employed individual, and probably several, whose spouse works in a position with a large local employer (around here it’s likely the state, or a hospital or insurance company) – solely so that the couple can get health insurance at a reasonable rate.
In addition, I believe there are lots of folks out there who have the resources to retire but are (for example) only 62 years old. This leaves them in a pickle for insurance for three years, since Medicare is not available until you hit 65.
How many times have you heard this:
John is ready to retire, but keeps his full-time job at Acme so that we can have health insurance. If it wasn’t for health insurance, we’d be retired and travelling to spend time with our grandkids.
Similarly, I’ve heard this one as well:
I’ve been building this company of mine up for several years, and someday I’ll drop my old job to do this full-time. It’s hard to give up the health insurance though!
How will this impact the economy? If we have lots of folks making the leap from work at large businesses to either established small businesses, starting new sole proprietorships or retiring, I think a couple of things will happen:
- The old position that was left will be open, providing a job for some of the unemployed
- The addition of manpower into an established small business could spur additional economic growth
On the other hand, as we all know, a very high percentage of new small business enterprises fail within the first couple of years, so the economic gains might turn out to be nil. When you add in the costs that Obamacare is expected to cause many small- to medium-sized businesses to incur (via the required insurance coverage or pay a penalty provisions), the overall result may wind up being a drag on the economy. It’s going to be interesting to see how everything shakes out…
What do you think? Will Obamacare be a positive influence on the economy, or a drag? Or will it have no positive or negative effect? I’d like to hear your opinions – leave a comment below!
Sterling Raskie, MSFS, CFP®, ChFC®
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It is the uncertainty of it all that is so frustrating. Working part-time for low pay with no benefits, being widowed, and in the 60-65 age group, I find myself very concerned about being able to afford insurance going forward. It has already gone up three times in the past two years. Living close to the poverty level and struggling.
While some people accept the notion that Obamacare premiums will be lower than individually purchased plans, this is not the case in reality, for all individuals. It might be the case in certain states, and under certain circumstances. But in my state (CT), a young, healthy family (that is above the income threshold) will pay significantly more (30-60% more) for an Obamacare policy than an individually purchased policy. Many will likely opt to maintain coverage from outside the marketplace.
I think there are far more unintended consequences than people are contemplating.
Good points, Robert. And you’re probably right, there are likely to be many unintended consequences to the implementation…
jb
Hello Jim,
I, too, am watching how the Obamacare will impact all of us in the short and long term. One thing, though, is that a friend of ours previously stated that if the Obamacare passes, he may have no option but to sell his small business. One of the reasons stated was the uncertainty of premiums in this new health care plan. Recently his business was sold.
Interesting situation we are in these days.
Keep up the good work!!
Julius A (JI19)
Carson, CA