Obamacare’s Uncertain Future and The Impact on Early Retirement Planning

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Full quote:  “When we win on Nov 8 and elect a Republican Congress, we will immediately repeal and replace Obamacare. ” Made during many, many speeches, a tremendous number of huge speeches, the very best speeches, by U.S. president-elect Donald Trump.

You can’t always believe what candidates running for office say as they slog through their campaigns — gross exaggeration, pandering, and outright lies are to be expected by all involved — but when it comes to Obamacare, surely it is safe to believe that some real changes are in store for us.

Why?  Well, it’s because the Republican party has been actively trying to cripple and repeal this legislation since it passed back in 2010.  These attempts have been a) without a Senate majority and b) while Obama was still in office.

So it’s logical to assume that there will be some action taken here now that those blocking problems have, from their perspective, been corrected.

And to be perfectly honest, I’m a little concerned about it.  Not scared or panicked — not at all.  But it’s a situation that warrants interest, attention, and the ability to alter plans and be flexible.

This post will explore what might happen, and how we could best approach potential changes.

Starting Facts

  • I’ve retired early, and I’m enrolled in the Affordable Care Act (ACA, also known as Obamacare) along with my wife.
  • We pay about $160 each (320/mo together) post-subsidy for a Silver plan offered by Blue Cross Blue Shield of MA.  Our income is low because we’re no longer earning, and we are therefore eligible for substantial reimbursement from the government for our insurance plans.
  • We would not have been able to stop working without the existence of the ACA. Period. Similar coverage from a private insurer prior to the enactment of the ACA would have run us close to a thousand a month. To cover that gap via passive income we would have had to save an additional 250K or so. We just don’t have it.
  • It’s not just about the current cost of private insurance, either. It’s also about the cost control. If insurance premiums go up — and they have — we know we are protected in the sense that subsidies should rise to cover the difference. With private insurance, there is no such guarantee. You are at the mercy of the insurers. If we felt we had to save enough to indefinitely cover indefinitely rising health care costs, we might have been indefinitely working.
  • Obvious:  The ACA was a savior when it came to creating and finally executing our early retirement plans.
  • Side note: We do not carry dental coverage, which is kind of a bum deal for most people.  We pay out of pocket for annual cleanings, which are sufficient for most folks who practice daily oral care.

The facts above lead into my concerns, because if you read this blog at all, you know that I don’t particularly like working in offices.  (Very long story short, I slogged away in my industry [software] for 15 years or so and grew tired of it.  I am not yet remotely tired of not working, though.  I would very much like to continue to not work for a very long time. Yep, that’s what I would like to do, all right, just sit back and read and play video games and exercise and travel and lead a life full of dynamism and variety rather than going back to commuting and being given daily fake work by some other individual placed above me in a nonsense hierarchy and so on… Okay, okay, inside voice — that’s enough of that for now. Let’s get back to talking about the ACA.)

In order to continue to not work, my wife and I require affordable health care. The fact that President-Elect Trump has promised to “repeal and replace” Obamacare (and he absolutely will have the authority and power to do it), well — this is (potentially) a kaboom-type wrench in the early-retirement machine.

Let’s get into specifics using a question-and-answer format, shall we?

Question 1: How likely is it that Obamacare might be immediately repealed outright in January 2017 when Trump takes office?

Answer:  Extremely unlikely.  The ACA is now firmly embedded into the insurance industry and government systems.  It will take time.  There are also currently political risks to its wholesale destruction, as many people (22 million!) have come to rely on it — such an action will be unpopular to many. Further, the Republican party lacks the 60 seats in the senate necessary to overcome a filibuster, which the Democrats would almost certainly use because of their investment in the legislation.

Question 2: If there are major changes, what are they most likely to be?

Answer: According to Rueters, the most likely form of changes will be around the cost and subsidies, simply because a) those are the easiest type of alterations to enact and b) such changes have already been attempted.  Note that certain budgetary changes can be made without having to pass a senate vote, bypassing the threat of filibuster.

This means that it’s possible that the federal subsidy will be reduced or eliminated entirely.

Further into the next administration — 2018 or 2019 — it is more likely that profound structural changes could occur.

The New York Times has reached similar conclusions regarding the most likely short-term changes.

Question 3: When might such changes occur?

Answer: 2017 is almost certainly safe. Even if Trump makes good on his promise to make sweeping changes “on day 1” it will take, minimally, a year to enact them, push them into effect with insurers, and update tax code.

It appears that Trump’s administration will have until March or April to submit changes which could be effective in 2018.

So that’s when the real risk starts — 2018. Perhaps the party will move slowly in enacting changes, making 2018 safe.  Perhaps they will move at the speed of The Flash and request changes in February, putting the safety of 2018 in doubt.

I am personally preparing to deal with changes for 2018, as it appears the party is fairly motivated to take rapid action on Obamacare.

Only time will tell for sure, though.

Question 4: Might the changes be good?

Answer: I’m skeptical, as I’ve yet to see any concrete proposals either by Trump or his party, but yes, it’s possible that they will be.

For years the Republican party has been promising to repeal Obamacare once they captured the senate. The followup question is always: What will you replace it with?

And the responses have been elusive — there are, as of this writing, no concrete policy proposals on the table that have been communicated to the public other than vague assurances that they’re working on something and it’s going to be absolutely terrific.

I readily concede (100% willingly, and just slightly optimistically) that it is within the realm of possibility that an effective replacement is proposed and implemented.

I am not a health care policy wonk, telepath, or clairvoyant and will therefore avoid further speculation other than to make two points:

  1. Trump has not always held his current set of views on health care. In fact, in his 2000 book The America We Deserve, he stated that he was in favor of universal health care, citing Canada as an example of a country that had done it right. (Canada is, for the record, is a single payer system.)  He has mentioned in the same book that he wanted to decouple health care from employment.  I have to say, that’s speaking my language.  (I’ve always thought this coupling to be illogical and distasteful — just another way that the government and insurers enforce, intentionally or not, the work-for-life model on its citizens, making it harder for individuals to break away and claim freedom.)
  2. Soon-to-be Vice President Mike Pence has already stated that they’re not interested in rolling back the portion of the ACA which made it illegal for insurers to discriminate against citizens with pre-existing conditions.  Trump has literally just today 11.11.2016 made similar comments, going on to also state that they are interested in continuing to allow parents to keep their children on family plans through age 26.  I take these remarks as a sign of awareness.  They understand, apparently, which portions of the law are universally popular and appear to be interested in preserving them.

So, yes, there is some room for cautious hope.

Question 5:  I live in Massachusetts.  The template for Obamacare (AKA Romneycare) was created here.  Is it possible my state will continue to offer Romneycare if the ACA is blown to smithereens?

Answer:  Yes, this is completely possible. In the absence of any federal law dictating terms, states will again be able to choose how to handle this issue.  Romneycare was affordable and effective for both private citizens as well as the state — and it was reasonably popular to boot.  So yes, it could be plausibly resurrected in a post-Obamacare world — and not merely in Massachusetts.

Question 6:  If Romneycare is re-enacted in Massachusetts, can I move there from my state and gain coverage?

Answer:  Yes, but only if you’ve been good.

Monitoring

Smart early retirees will stay on top of changes to laws that affect their plans.

My wife and I knew going into this thing that we were dependent on the ACA. That knowledge is prompting us to keep abreast of changes the government is going to make in that area.

Other areas we monitor include rules around traditional IRAs, Roth IRAs, and the conversion rules which enable the Roth-Pipeline method of accessing retirement accounts without penalty prior to reaching defined retirement ages. (I described the full strategy we’re using in this old post.)

I’m confident that we can adapt and adjust.  This is not the early end of the world, and with any luck it won’t be the end of our early-retirement either.

On a less self-interested note, I hope that our newly elected officials don’t simply gut Obamacare without replacing it with a real, working alternative. I don’t want to see 22 million recently protected Americans again going without insurance. America is a rich country and can afford a plan to cover our citizens. I’m not sure how anyone with a shred of empathy can feel otherwise.

I’ll also add that I don’t mind paying somewhat more for insurance. We can afford a modest increase. What we can’t afford with our current asset sheet is 1K/mo premiums with virtually no restrictions on yearly rate hikes.  We can’t afford a return to a pre-Obamacare world without a similar alternative.

So the monitoring will continue.

Preparing for the Worst

Let’s project the worst case scenario for a moment:

Obamacare is gutted without a replacement.  The Trump administration does indeed take fast action on submitting changes.  They are put into effect in 2018.

And let’s further say the most likely path to this end is taken: All federal subsidies are removed, but people are still required to purchase their own insurance.

This would be a death knell for the ACA. Most people would pay the tax penalty for being uninsured instead of purchasing insurance on the exchanges, because paying full cost for insurance remains unaffordable for practically everybody — it’s a fact that medical costs in the United States are out of control.  The exchanges would, in turn, collapse.  Opposition to Obamacare, instead of being mixed and uneven, would quickly become unanimous as a result of what would amount to a broad tax increase on the population with zero payoff for the vast majority of citizens (since they remain uninsured.)

The resulting unpopularity would surely trigger a full repeal.  Recognizing the harm of the law, senate Democrats would have little choice but to get on board and allow passage.

And let’s say there is no alternative put in place.  The various branches of government get caught up in partisan wars, bickering about this and that, resistance from insurance lobbies, and so on.  Nothing happens.

Also, for Massachusetts residents:  Our state, currently run by Republican governor Baker, is unwilling or unable to reanimate the rotted corpse of Romneycare.

Net result:  It’s 2009 again.  We are living in a pre-Obamacare health care environment. Decent health care is again tied exclusively to employment.  Private insurance costs a million trillion gazillion dollars a month.

If all of this happens, it becomes likely that either my wife or I will head back to work in 2018 in order to gain full coverage.  We can’t afford to pay full premium costs, and we’re unwilling to live with the risk of going uninsured.

Other Actions You Can Take

We’re not completely powerless when it comes to the upcoming changes.  What else can we do?

  1. Once these topics begin to be discussed in the mainstream media (i.e. the eyes of politicians are fixed as firmly on Obamacare as Sauron’s Eye was on the One Ring) you should look up your house rep, your senate reps, and then send all three of them both email and snail mail stating your views. Sample text:  Obamacare is critical to my family’s health, lifestyle, and well-being.  We will continue to need an effective, affordable health care solution. Please work to make sure this legislation is not repealed outright.  Fix it or provide a suitable replacement.  Don’t sabotage it or junk it entirely unless there’s a good alternative plan which will be simultaneously enacted.   Please, please, please, please.  If you fail in your work, you will lose my vote plus I will tell everyone I know that you’re a practicing Satanist, or worse, an Atheist. You should do this regardless of their party affiliation or how you believe they will be voting on these issues.
  2. Send Trump an email for good measure at president@whitehouse.gov.  Use phrases guaranteed to provoke a response — I personally believe he responds best to compliments and ego-stroking.  Suggestion:  Mr. President, I expect the best from you, the very best, because you’ve always delivered the very best in the past in the form of your incredible hotels, casinos, and premium meat products.  So I know you have the ability, intelligence and temperament required to create an amazing and affordable health care plan for this country’s tremendous citizens.  Please deliver the goods once again. I recognize that you and only you can save the United States.  Help me, ObiTrumpIoni.  You’re my only hope.  And so on.
  3. Move to another country which offers universal health care.
  4. Find a small dank corner to huddle in and cry until the end comes.  Admit it — this has some dark appeal.

Bottom Line

We knew going into our early retirement that our plans depended on specific bits of tax code and legislation in order to make the numbers work.  At this point I’m not particularly alarmed by what are sure to be some upcoming changes.

The key for us is to stay on top of things so that we’re not hit with any surprises. If you can see what’s coming, and you have time to adapt, you can make the necessary adjustments to handle virtually anything. Don’t be caught with your pants down and all of that, blah blah blah.

To close I’ll turn to that old adage: Hope for the best, but plan for the worst.

The worst is going back to work, and if needs be, I’m prepared to do it for a few additional years in order to make sure we remain safe, healthy, and secure.

And the best — the thing I honestly hope for — is that a Trump administration will prevail by offering a similar or improved health care solution to the general public.  It could absolutely happen. Obamacare is, after all, far from perfect.

Trumpcare, I’m pulling for you.

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Don’t fear change.  Monitor, and Adjust as necessary instead.  And if things get really bad? 
Fight!


***
Please refrain from making highly charged political comments below.  This post is intended to be an even-keeled and rational exploration of potential changes to health care laws and their impact on early retirement, not a flame of any party.  While you can probably tell I’m deeply disappointed by the 2016 election results, I accept Trump as the president and want him to be successful for the good of the country.  

Thanks.

 

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102 Responses to Obamacare’s Uncertain Future and The Impact on Early Retirement Planning

  1. Roothy says:

    I miss your voice so much, especially as I get thisclose to pulling the trigger myself. It would help to hear how you are doing, this many years after your retirement, but I guess I’m just greedy. 🙂 Best wishes to you!

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