May 2, 2013
Health Reform May Impact Your Finances
Getting or keeping health insurance is central to many of the major decisions that working Americans make.
Canadian and European governments provide universal health care to their citizens, but this country has relied heavily on employers for health insurance, and only about two-thirds of them provide it. It’ll be fascinating to see how health care reform changes our decisions about work, starting a business, college, and individual finances when more Americans have access to coverage in 2014.
Research years ago established the influence of employer health insurance on the workplace. When employees are covered at work, job turnover is lower – workers know health care is a big thing to give up. There’s also newer evidence that people on the disability rolls, who receive health care as part of that federal benefit, are more likely to go back to work if they live in a state with better access to health insurance in the private market.
Retirement is another big decision driven by one’s health insurance options. Medicare eligibility at age 65 can trigger the decision, new research shows: people working for employers without any health benefits for their retirees are more likely to retire at 65, according to a paper by economists Norma Coe of the University of Washington’s School of Public Health and Matt Rutledge of the Center for Retirement Research at Boston College, which supports this blog.
“We interpret this finding as evidence that Medicare eligibility persuades people to retire, because they can begin receiving federal health coverage,” Coe and Rutledge write.
People select their retirement dates for a host of reasons: fed up with work, physically unable to work any longer, yearning to travel, or finally able to afford retirement after paying off the house. The most common retirement age, hands down, is 62. But age 65 is also popular.
Financially, the decision to retire by age 65 may not always make sense for a U.S. population that is living longer, hasn’t saved much, and could use the bigger monthly check that comes with delaying Social Security benefits a little longer. An early retirement date is a decision that can reduce a retiree’s financial well-being for decades.
A key reason Medicare coverage often serves as a retirement trigger is that, right now, obtaining coverage elsewhere is difficult given that employer health coverage for retirees has been declining. Such coverage plummeted to only one in four large companies last year, down from two out of three in 1988, according to the Kaiser Family Foundation, a health research institute. Health benefits are even rarer at small companies.
But Medicare may not maintain its influence on the retirement decision forever. If the Affordable Care Act, after its full implementation in 2014, provides more access to reasonably priced health coverage outside of the employer-employee relationship, then we may not see so many people holding out for Medicare. At that point, your 65th birthday may be just another date.
How does health care coverage influence your work and personal finances? Readers can email their thoughts in the comment field provided below.
Full disclosure: The research cited in this post was funded by a grant from the U.S. Social Security Administration (SSA) through the Retirement Research Consortium, which also funds this blog. The opinions and conclusions expressed are solely those of the blog’s author and do not represent the opinions or policy of SSA or any agency of the federal government.