What to Do About Early Retirees
by John Goodman
John Goodman is the president of the National Center for Policy Analysis
Baby boomers. There are about 78 million of them, and they have retirement on their minds. If the past is a guide to the future, more than 80% of them will retire early (before eligibility for Medicare) even if they are not now planning on it. Even if the husband waits until age 65 to retire, chances are his wife will be younger than 65. Two-thirds will not get health insurance from their former employer and even those who have been promised employer coverage (like GM workers - see here) may see those promises broken. So millions of baby boomer early retirees will soon:
a. Discover that 60 year olds cost three to four times as much as 20 year olds to insure,
b. Learn what medical underwriting is about, and
c. Learn what it’s like to pay for insurance with after tax dollars.
Under current law, employers mainly have an all or nothing choice. That is, General Motors can include a retiree on its regular health plan at a cost, say, of $12,000 or it can do nothing. What GM cannot do is offer $6,000 pretax to the retiree to apply to a more economical, individually owned plan.
Here is what is needed:
Employers should be able to help retirees obtain individually owned, portable insurance by (a) negotiating premium discounts and (b) paying a portion of the cost with untaxed dollars and/or (c) putting the funds in a health savings account.
Early retirees should be able to pay their share of premiums with pretax dollars.
Both the employer and the employee should be able to save (pretax) in preparation for post-retirement health care.
This is going to be a huge issue. Congress has not acted on the uninsured before because they rarely hear from voters who have a problem. Baby boomers will be different. They have assets to protect and they are very self interested. Fortunately, there are solutions that do not require huge taxpayer burdens.
