Rising Health Costs Leave Less Money In Early Retirees’ Pockets

Don and Debra Clark of Springfield, Mo., are glad they have health insurance. Don is 56 and Debra is 58. The Clarks say they know the risk of an unexpected illness or medical event is rising as they age and they must have coverage.

Don is retired and Debra works part time a couple of days a week. As a result, along with 20 million other Americans, they buy health insurance in the individual market — the one significantly altered by the Affordable Care Act (ACA).

But the Clarks are not happy at all with what they pay for their coverage — $1,400 a month for a plan with a $4,500 deductible. Nor are they looking forward to open enrollment Nov. 1. They must choose a new plan, because their current insurer is no longer going to offer the one the Clarks have now.

"This has become a nightmare," said Don Clark. "We are now spending about 30 percent of our income on health insurance and health care. We did not plan for that."

Karen Steininger, 62, of Altoona, Iowa, said her ACA coverage not only gave her peace of mind but also helped her and her husband, who is now on Medicare, stay in business the past few years. But they, too, are concerned about rising costs. The Steiningers are self-employed owners of a pottery studio. Their income varies year to year. They now pay $245 a month for Karen's subsidized coverage, which has a $4,500 deductible. Without the government subsidy, the premium would be about $700 a month.

"What if we make more money and get less of a subsidy or just if the premiums increase a lot?" Karen Steininger asked. "That would be a burden. We'll have to cut back on something or switch to cheaper coverage."

Her premium subsidy is separate from a program also offered under the health law that helps very low-income people pay for out-of-pocket expenses. Those cost-sharing-reduction subsidies are what President Trump recently announced he is dropping.

The experiences of the Clarks and the Steiningers illustrate how the ACA's promise of easier access to affordable health insurance for people who retire early and the self-employed are under threat. Also at risk: a reduction in "job lock."

In the run-up to the law's passage in 2010, then-President Barack Obama spoke often of older workers hanging onto jobs they no longer wanted just to keep their health insurance. Before the ACA, one in four 55- to 64-year-olds either couldn't get coverage at all or could not afford it, according to AARP. Insurers were allowed to deny people coverage outright and charge people over age 55 five to 10 times more than a younger person. The ACA restricts that to three times more and bars insurers from charging people of any age with preexisting conditions more.

Trends in employer-sponsored retiree coverage added to job lock. Only 1 in 4 companies with 200 or more workers offered coverage to early (pre-65) retirees in 2017 compared with 66 percent of firms in 1988, according to the Kaiser Family Foundation.

"The aging but pre-Medicare population was our major reason to support the ACA then and it still is now," says David Certner, director of legislative policy at AARP.

Policy experts say the lingering effects of the 2008-09 recession, plus other economic and social forces, make it difficult to say with certainty just how many 55- to 64-years-olds were liberated from job lock by the ACA.

Data also show substantial benefits of the law to the self-employed in this age group. For example, 18 percent of people ages 55 to 64 who were still working in 2015 got coverage through the ACA marketplaces, up from 11.6 percent in 2013, according to an analysis of Census Bureau data by the Employee Benefit Research Institute.

But today's retirees and self-employed business owners find themselves especially vulnerable to rising premiums, high out-of-pocket costs and insurer turnover associated with coverage in the individual market.

"These are the people in their late 50s or early 60s who don't qualify for government subsidies because their incomes are too high, they retire early or have their own businesses," says Kevin Lucia, a health insurance specialist and research professor at Georgetown University’s Health Policy Institute in Washington, D.C. "They are also more likely to have preexisting conditions and thus high expenses."

Premiums rose an average 22 percent nationwide in 2017. Some states saw premiums rise 35 percent or more. In addition, deductibles and out-of-pocket costs increased, too, and many more people switched to plans with deductibles of $4,000 or higher to keep monthly premiums manageable.

In some states, premium increases for 2018 are, indeed, looking ominous. In Florida, for example, regulators announced late last month that rates in the ACA exchange in that state could increase by an average 44.7 percent. In Indiana, officials said increases would range from 20 percent to 48.3 percent for the three insurers serving the individual market. The danger is that such increases, two years in a row, will lead fewer people to buy coverage.

Steven Findlay, Kaiser Health News

Kaiser Health News, a non-profit health newsroom is an editorially independent part of the Kaiser Family Foundation.