How Obamacare could help retirement planning

A new study reveals the average costs of insurance policies based on the 11 states that have posted prices. Gayle King reports.

(MoneyWatch) Obamacare is coming soon to millions of Americans, with open enrollment in the program's state-run exchanges starting in October and many of the significant features going live January 1. And while it remains controversial, there are some practical, financial and retirement planning reasons to welcome the new health care law.

For one, before Obamacare anyone who got laid off, lost their job or retired before age 65 and had preexisting medical conditions was financially vulnerablebecause insurance companies routinely rejected them for health insurance. Starting next year, however, you can buy medical insurance even if you have preexisting conditions.

This lack of available medical insurance was often a deal-breaker for anybody who wanted to retire before age 65, when Medicare kicks in. But it wasn't only preexisting conditions that forced people to work longer. Because most employers have abandoned sponsoring retiree medical insurance in recent years, millions of workers lacked access to medical insurance at any cost before age 65. The vast majority of older workers report that they plan to stay on the job until age 65. A common reason? Lack of medical insurance.

But let's say you're under age 50. Why should you care about lack of medical insurance for early retirees? The availability of medical insurance can help your boss retire sooner, making his or her job available to younger workers -- you, for instance.

If you already have health insurance, you probably think you don't have any reason to like Obamacare because it doesn't affect you. But you should be concerned about the uninsured, who can begin buying subsidized insurance coverage starting in 2014. This is a critical solution to an existing problem: Currently, the uninsured often go to emergency rooms for conditions that aren't truly emergencies, because that's the only place they can get treatment. And those uninsured, non-emergencies can negatively affect the care and treatment that others with serious injuries need by delaying critical attention from hospital personnel; this can happen even if you have medical insurance.

Obamacare also may benefit you by closing Medicare's donut hole for prescription drugs and by allowing dependent children to be covered up until age 26.

Now let's look at some frequently cited reasons for opposing Obamacare.

Is Obamacare socialized medicine?

Many people oppose Obamacare, also known as the Affordable Care Act, because they think it's socialized medicine. But that's just not correct. Socialized medicine means your only choice for treatment is to go to a doctor or health provider who's employed by the government, or to a hospital that's owned and operated by the government. Under Obamacare, you'll be able to buy insurance from a private insurance company; meanwhile, the vast majority of doctors and hospitals aren't owned or employed by the federal government.

Supporters of Obamacare compare its requirement that people have health insurance to states requiring drivers to have car insurance. Most adults drive a car and buy auto insurance. Yet you never hear this requirement referred to as "socialized auto insurance." You can buy auto insurance from any number of private insurance companies, and when you get in an accident and need your car repaired, the vast majority of mechanics and auto body shops are privately owned.

Some people think Obamacare provides for "death panels" that will limit medical services for old people. That's false. Medicare and other insurance companies will pay for counseling for terminally ill patients and their families, and hospice care for those people who don't want to die in a hospital. This feature of Medicare and medical insurance actually increases your choices at the end of life, and it has been a godsend to families who are negotiating the medical system for their loved ones at the end of their lives. 

Premium costs unclear -- for now

Many people say Obamacare will cause health care premiums to increase. For now, that is speculation. Next month, we'll actually find out the dollar amount of the medical premiums charged by the exchanges and be able to see how these premiums compare to policies offered before Obamacare.

In reality, Obamacare has features that have the goal of containing medical costs overall. And while there were small increases in Medicare premiums, they were attributed to some of these medical cost containment provisions.

The bottom line is that Obamacare has features that will help ordinary working Americans plan for a healthy, prosperous retirement.

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    Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops and authored Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck and Recession-Proof Your Retirement Years.

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