How Coming Health Insurance Exchanges Will Drastically Impact Career And Retirement Decisions


just a few months, open enrolment begins for individual health insurance on the newly launching health insurance exchanges, and with it comes the onset of a new era in health insurance. While the general media focus has been on the penalties associated with the new individual insurance mandate, the reality from the planning perspective is that the new health insurance rules – including guaranteed access to coverage without any health underwriting – will drastically impact client financial planning decisions.

After all, separating health insurance from employment status by ensuring individual coverage is available directly from an exchange allows clients to be far more flexible with their job decisions. Deciding where to work will no longer need to be tied to the availability of health insurance, freeing clients to make job changes, start new businesses, or simply retire before age 65 Medicare eligibility, without worrying about how they’ll get access to health insurance. How many clients would still be working where they are today if health insurance availability was guaranteed regardless of where (or whether) they worked?

On the other hand, the new health insurance rules will require new knowledge and skills for planners, as the health insurance exchanges will ensure access and availability to health insurance, but introduce complex rules regarding affordability.

Health Insurance Under The Affordable Care Act

While a great deal of controversy has been made regarding the provisions under the Affordable Care Act that establish an individual “mandate” beginning in 2014 to purchase health insurance or pay a penalty tax assessment, the real planning impact of the coming new health insurance rules is not the requirement to purchase coverage, but the fact that insurers will be required to offer coverage to anyone and everyone, without any exclusions for pre-existing conditions and without any underwriting based on individual health issues. In fact, under the new health insurance rules, premiums can be adjusted based on four – and only these four – factors: age, number of people in the family, tobacco use, and rating area (essentially an adjustment for cost of living and health care in the geographic region). Notably, pre-existing conditions, getting sick, or other changes in health, are not factors on the list.

Separating Health Insurance From Employment Status

Perhaps the greatest significance of the new health insurance policy rules that take effect in 2014 is not just that anyone will be able to obtain health insurance regardless of their actual health, but how that health insurance can be obtained: for those who don’t receive it through a small or large group employer already (or via Medicaid), anyone will be able to go to the health insurance exchange in their state and obtain the coverage directly, in one of four standardized packages (labeled Bronze, Silver, Gold, and Platinum in rising order of both benefits and costs). Although some state health insurance exchanges will be run by the states themselves, with the rest operated by the Federal government, the distinction is mostly about the control that the states will have for managing their own exchanges; from the client/consumer perspective the reality is simply that health insurance will be available through a health insurance exchange in all 50 states, with no underwriting or restrictions based on individual health conditions.

Financial Planning For Health Insurance

Financial planners will need to begin to prepare for helping clients plan in the new world of health insurance. While coverage for 2014 will be available through health insurance exchanges with open enrolment beginning October 1st, the reality is that most clients have not spent any time considering the implications of this on their current career or retirement decisions. The first step is to begin that conversation, perhaps by asking clients: “If you were assured of having access to health insurance and you (or your spouse) didn’t have to work where you do in order to get access to it, would you still be working and doing what you are doing now?” For many of them, the answer may well be “no” and a planning process to something better can begin.



Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s