NCPA - National Center for Policy Analysis


May 13, 2010

There are 78 million baby boomers and a very large number of them have retirement on their minds.  If the past is a guide, more than 80 percent of them will retire before they become eligible for Medicare (at age 65).  Although about one-third of U.S. workers have a promise of post-retirement health care from an employer, almost none of these promises are funded and are likely to be broken in whole or in part, says John C. Goodman, President, CEO and the Kellye Wright Fellow of the National Center for Policy Analysis. 

As a result, millions of retirees will find themselves buying their own insurance in the individual market.  There they will face some unpleasant realities, which for many of them may come as a shock: 

  • Whereas employers typically pay about 75 percent of the premium at work, these retirees will have to pay 100 percent of the premium out of their own pockets.
  • Whereas the share of premium paid by employees tends to be the same -- regardless of age -- individual insurance premiums for, say, a 60 year old tend to be five times higher than for a 20 year old.
  • Whereas employers are forced to accept employees into their health plans and charge the same premiums regardless of health status, people in the individual market typically face medical underwriting and may be charged higher premiums because of a health condition, face exclusions or be denied coverage altogether; or, if they are forced into a risk pool, they may face waiting periods as well as higher premiums. 

Unwise public policies will make these problems even worse.  And far from correcting these mistakes, ObamaCare promises to pile new problems on top of existing ones, says Goodman. 

In general, tax law, labor law and employee benefits law favor the active employee and discriminate against the retiree, says Goodman.  The obvious solutions to these problems are to allow: 

  • Employers to contribute (say, to a retiree's Health Savings Account) any contribution the employer can afford to make.
  • Retirees to pay their share of premiums with pretax dollars.
  • Active employees and their employers to save tax-free -- knowing that they will face the problem of post-retirement care. 

Yet precisely because these solutions are obvious, direct, simple and workable, they are nowhere to be found in ObamaCare, says Goodman. 

Source: John C. Goodman, "Early Retirees," National Center for Policy Analysis, May 12, 2010. 

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