When the Affordable Care Act (ACA) was implemented in 2014, researchers wondered if the controversial health care reform legislation would start to reduce labor supply, as having an alternative to employer-based health insurance could make older workers more likely to retire.
A new study finds …not so much. At least not yet.
The results of a University of Michigan Retirement and Disability Research Center study suggest that for Americans approaching retirement, the Affordable Care Act achieved its primary goal of increasing health insurance coverage without the unintended consequence of reducing labor supply.
That key finding is significant, because Baby Boomers who are not financially prepared to retire need to be working longer (and building up that 401k!) rather than retiring sooner to improve their retirement outlook.
The working paper, “Is the Affordable Care Act Affecting Retirement Yet?” by researchers Helen Levy, Thomas Buchmueller, and Sayeh Nikpay, said they failed to find any effect of the Affordable Care Act’s coverage provisions on the labor supply of older adults, despite earlier research consistently predicting it would.
Why no effect? The researchers have some ideas.
“One possibility is that even though the ACA coverage provisions have now been in effect for more than four years, the political uncertainty surrounding these programs continues to discourage older workers from counting on them when making career decisions,” the working paper says.
It goes on to note that after the failure of very high-profile attempts to repeal the entire law in the summer of 2017, the Trump administration continues to take steps that create uncertainty about the law’s future. For example, in late 2017 the Department of Health and Human Services announced its willingness to consider Medicaid work requirements, and older workers are not necessarily exempt from such requirements.
In the case of marketplace coverage, the Trump administration has taken a variety of steps—most recently, announcing the discontinuation of risk adjustment payments to health insurance plans—that guarantee that concerns about the stability of the nongroup market remain in the headlines.
Coverage up, but retirement age not down
The study found that insurance coverage of Americans ages 50 through 64 increased significantly after the ACA, with the uninsured rate dropping from 16% in 2013 to 12% in 2014 and 10% in 2015 and 2016.
But when the researchers tracked the older workers for several years, they found no evidence that they started retiring at a faster pace in the wake of ACA changes. Even among individuals ages 62 through 64, who are eligible to claim early Social Security benefits but are not yet age-eligible for Medicare, suspected to be the most likely to reduce labor supply in response to the new ACA programs.
“We find no changes in labor supply of older Americans either in response to subsidized marketplace coverage, which became available nationally in 2014, or in response to the expansion of Medicaid eligibility in some states but not others,” the paper says. “We fail to find labor supply effects even for subgroups with less than a high school education or those with fair or poor health, who might have been expected to have a greater labor supply response.”
Whether the ACA will ever achieve political stability, and whether having done so it might lead older Americans to retire sooner, remains to be seen, the authors note, while also considering that it might be too soon to determine a definitive impact.
“This failure to find an effect of the ACA on retirement is very surprising in light of a well-established literature suggesting that health insurance has historically been an important determinant of retirement,” the paper says. “However, retirement behavior may take time to respond to new policies, and these studies may simply have been done too soon to find anything.”
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
