With Obamacare on the Ropes, Workers are Rethinking Early Retirement

Love it or hate it, one possible result of repealing Obamacare may be a decline in the number of Americans who can retire early.

Workers who reach 65 become eligible for Medicare, but some get retiree coverage from former employers before they reach that age.  Few companies, however, offer medical insurance to retirees, especially among small businesses. If early retirees are poor enough, they may be able to qualify for Medicaid. But to retire early, everybody else would need to turn to the individual health insurance market. If the subsidies and protections put I place by the Affordable Care Act is repealed, health care coverage will become more difficult to obtain, and provide lower benefit suites than today.

That means that if the A.C.A. is scrapped, retiring early would become less viable for many Americans.

This outcome is known as a job lock — the need to stay in a job to receive health insurance. One of the arguments in favor of the A.C.A. was that it would end up reducing or eliminating job lock for American. With repeal of the law on the agenda of Congress and the White House, there is renewed concern about how health insurance could affect employment and retirement decisions.

These relationships have been analyzed at length by scholars. Not every study presented evidence of job lock in the pre-Obamacare era, although the majority of high-quality studies have. That’s the conclusion of systematic reviews conducted by the Government Accountability Office and many health economists.

As people age and begin approaching retirement, of course, they’re more prone to illness and high health care costs.  For that reason, employment-based insurance is especially valuable to older workers — so much so that most studies document that it’s a large factor in making retirement decisions. One study indicated that workers whose employers offered retiree health benefits were 68% more likely to retire early than those who didn’t have access to that coverage.

Another study found a smaller effect: 47%. But that study also showed that workers in poor health who had retiree health benefits were 88% more likely to retire early as opposed to workers in a similar situation without retiree health benefits. Both those studies used information that’s now several decades old. But a 2014 study that incorporated more recent data — though still pre-Obamacare — also found that retiree health benefits encourage early retirement. The inference from these studies is that coverage options in the A.C.A. marketplaces would similarly encourage early retirement.


Pushing back retirement because of health benefits is just one type of job lock. Another example: Many studies show a higher likelihood that spouses will keep working if their partners do not have employer-based family coverage. Other studies show that workers with cancer often continue working if that’s the source of their health insurance.

Two studies led by Cathy Bradley of Virginia Commonwealth University looked at working women with breast cancer. Both studies showed that those who depended on their employment for coverage were more likely to remain working.

If we weren’t mired down by job lock, Americans would likely have greater job mobility and entrepreneurship. According to one analysis, 2 million additional workers would change jobs if it weren’t for job lock — presumably opting for work that was more satisfying or better suited to their personal desires. One study found that 25-to-55-year-old married men with no other coverage options are 23% less likely to change jobs as those who have alternatives.

All of these studies indicate that job lock would be reduced if we had better access to high-quality, affordable coverage outside work. Whether Obamacare offered this is certainly up for debate.  But many policy analysts predicted that the A.C.A. would alleviate job lock. An analysis by the Urban Institute, completed before the health insurance reforms went into place, calculated that the self-employed would go up by about 1.5 million individuals as a result of the law. And in 2014, the Congressional Budget Office anticipated that the A.C.A. would reduce the size of the labor force by at least two million people by 2024.

One post-A.C.A. study found that the provision ensuring coverage for those with pre-existing conditions increased job mobility for parents with sick children. And in the months after the insurance market reforms rolled out, voluntary part-time work increased and growth in the total workers over age 55 slowed, both consistent with alleviation of job lock.

According to a review of scientific papers by economists Jean Abraham and Anne Royalty at University of Pennsylvania’s Institute of Health Economics, few other studies have provided home-run evidence that the A.C.A. lessened job lock or had other impacts on the labor market. For instance, studies have not shown that allowing children to stay on their parents’ insurance until age 26 has impacts the labor market decisions among those young adults. Nor have they found that the A.C.A. increased early retirement or employment more generally.

One reason studies might not have pinpointed any impact on job lock could be because the law is still quite new, and there isn’t sufficient data for researchers to tease out all its repercussions. It could also be that the law has been under siege on multiple fronts since passage, making its status uncertain. That instability alone could have raised doubts among workers about the wisdom of counting on it as a substitute for employer-offered coverage.

But with all this contending date, one thing is clear: with A.C.A. on the chopping block, people considering early retirement may need to think again.

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