Here is a hypothetical scenario: Let’s say Joe is 62 years old and works for a company that has great health insurance options at very little cost to him and his wife. Joe is ready to retire and spend more time pursuing other interests and passions, but he is afraid he won’t qualify for (or can’t afford to pay for) health insurance for them. Joe has plenty of resources to retire today, yet he continues to work because he’s concerned about the health insurance conundrum.
Does this sound familiar? As a financial planner working with clients who are trying to transition into retirement, this is a very real and common concern. However, this concern is not an accurate reflection of the facts on the ground.
How did we get here?
Historically, our health insurance has been tied to our employers dating back to one event – World War II. (The New York Times gives a fascinating walk down health insurance memory lane). In short, it all goes back to money. And if you tried to get coverage on your own, companies could exclude you for pre-existing conditions and other risk-related factors. So, if you lost your job or wanted to retire or start a business before age 65, there was a real risk that you may not qualify for health insurance. This all changed in 2010 with the passing of the Patient Protection and Affordable Care Act of 2010, aka, Obamacare or Affordable Care Act (ACA).
The main purpose of the ACA was to lower federal spending on health care while decreasing the number of uninsured. One of the strategies to achieve this goal was to create an exchange for individuals to shop for their own individual health insurance. These exchanges provided a marketplace where consumers can compare different coverage options and costs. And here’s the kicker: Under this new law, health insurance companies can’t refuse to cover you or charge you more just because you have a pre-existing condition, and depending on your income (not assets), you may be eligible for government subsides. This new requirement changed the game for all of us. Individuals who once had no options now have some. And for those who deal with existing health issues, you have a new life at least in terms of health insurance eligibility. And what about costs? Well the costs are coming down for the federal government.
So, what does this mean?
Well, for Joe it means he now has options as he doesn’t have to wait until age 65 when he becomes eligible for Medicare. He can go to www.healthcare.gov and enter a few pieces of information and he’s got a list of health insurance plans to consider. And most importantly, Joe is no longer tied to his employer and is free to move about the world uninhibited by the health insurance conundrum.
If you or someone you know is still slaving away at the salt mine just to maintain health insurance, please reach out and let’s further discuss.
Michael Baughman, CFP®
Senior Financial Advisor