According to an article last week in The Post-Standard(Syracuse, N.Y.), New York’s health insurance exchange, which is called “NY State of Health,” will “not affect people who get health insurance at work or through the federal Medicare program.”
The exchange opened October 1, 2013, but many insurance brokers are only this week completing training on the exchange’s products. So most financial advisers don’t have what I would consider an acceptable answer to how the exchange will affect retirement planning.
It’s probably wise to presume that future healthcare costs and healthcare insurance will remain on par with today’s prices, with the annual increase in costs too. For example, Sally Pipes of the Pacific Research Institute wrote in Forbes magazine last week that the Affordable Care Act bans deductibles over $2,000 for single coverage. More than 25 percent of insured people working in small firms opt for these high-deductible plans to keep costs in check. But, according to Pipes, under the ACA they’ll be required to purchase a higher cost government-approved plan. And The Washington Post wrote in September that “Some healthy people may also experience sticker shock on premiums.”
A smart retirement plan should account for flexibility if healthcare costs rise, or rise more than expected. While it would be a positive development if healthcare insurance premiums dropped, counting on that scenario simply creates too much risk for retirement planning. If you’re closer to retirement age, then deferring Social Security until later in retirement could be a sound strategy for some people. The higher fixed monthly income later in retirement could help offset the probability of rising healthcare costs. It’s certainly worth asking your financial adviser about.
Depending on where you are in your retirement planning timeline, you’ll have to take a different approach, of course. But a safe bet is expecting to pay at least as much in healthcare insurance as you’ve been accustomed to paying in the past. In 2011, research from eHealth, Inc. showed the average monthly premium in New York for a family healthcare plan was $932. If you’re interested in collecting additional research on premiums, the Manhattan Institute for Policy Research created a map illustrating how the ACA affects health insurance premiums. I cannot vouch for the validity of the research, but it could prove to be an interesting starting point for a conversation with your health insurance broker or financial adviser.
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