Obamacare vs. The "Un"Affordable Care Act

In the spring of 2010 the health care system, or more specifically the health insurance system, in the United States made some dramatic changes. Having worked in the industry for over 10+ years at this time, I knew enough to know that the changes that were taking place had some tremendous benefits for a few, and some tremendous challenges for most.

Here we are 6+ years later, and I can see that the impact of the Affordable Care Act (Obamacare) is on a trajectory that is potentially unsustainable.

The following are some statistics to consider:

Out-of-pocket health care costs have increased an estimated 230% for the average working American in the past decade, reports Kaiser Family Foundation.

At the same time, 66% of consumers rank planning for these costs as the most challenging and stressful aspect of managing their healthcare, according to the Alegeus Healthcare Consumerism Index.

These statistics don’t surprise me. I regularly read news articles throughout the country stating that increases to individual insurance premiums are being approved in different states for as much as 76%. I don’t know about you, but that is a rather steep increase that is unsustainable for many hard working families.

The benefits of the ACA are that there are up to as many 20 million Americans who now have access to health insurance, my family being one of those. (not because I didn’t know how to purchase insurance, but due to my wife’s pre-existing condition)

The disadvantages are that if the costs of premiums continue to increase as they have over the last few years, none of us will be able to purchase insurance without some kind of subsidy.

Sadly, this leads to one of the next great concern. Initially, when the law was voted in, there were a number of insurance companies who leaped at the opportunity to sell their policies through either the state or federally run ‘exchanges’ because it was an opportunity to get many new policyholder with government subsidies. Unfortunately, those insurers who jumped in initially have lost millions of dollars insuring very very sick people and are removing themselves from the exchanges. Now, those that need insurance have fewer and fewer choices for coverage.

Yet, the law states we are all required to purchase health insurance in some form or another. What that coverage may look like in the near future could be very different than it is today, as many of the carriers are passing more and more costs along to individuals and families in an attempt to keep the premiums affordable.

How we define affordable has obviously not been defined in the law.

In spite of what we may think or want to do, someone has profoundly stated…

“It’s like death and taxes, over the long term, you can’t avoid healthcare costs.”

Social Security Income

Did you know that social security income plays a very large part of senior’s income? Roughly 60% of current retirees rely on social security as a major part of their monthly income, while 30% consider it to only play a minor part of their monthly income.

That means that roughly 90% of seniors in retirement rely on some level of social security income to sustain their current lifestyle.

Unfortunately most pre-retirees do not know the basics of social security and how to prepare to get the maximum benefits available to them.

• Social Security income is calculated based on the 35 highest earning years. Of these 35 years, the earlier working years are weighted higher to account for inflation. Your income also needs to be reported to the social security department within three years of earnings or they could potentially count as $0 for that year.

• If an individual takes their social security prior to their FRA (full retirement age) they will have a permanent reduction to their earning. An individual can start taking social security as early as age 62. Although taking it this early, will generate a dramatically lower monthly amount versus waiting, there can be times that it would be the smart thing to do.

• An individual can delay taking social security as long as they want, but your full amount will not increase past age 70. For many, this could be the most valuable time to initiate payment, but would depend on life expectancy. In addition, for every year social security income is delayed past your FRA, the monthly income can increase roughly 7-8%.

• A divorced individual has the option of claiming benefits from a prior spouse, as long as they were married for at least 10 years

• Lastly, if you take social security prior to your FRA, the income could potentially be taxable based on your current income at the time of taking social security. BUT, the taxable portion is not fully lost. Although your earnings will not be refunded at FRA, your benefits will be adjusted to account for the earnings withheld at FRA.

The biggest take away to understand about social security and knowing when and when not to start taking the income is determining your needs as you head into retirement. Many thorough financial planners should have this as a part of your overall financial plan. No one answer fits all individuals.