ACA Gives Older Workers Freedom to Retire

April 19, 2017

Sarah Rawlins

Last month the Congressional Budget Office (CBO) announced that the (now defunct) American Health Care Act (AHCA) would have reduced off-budget spending by $5.9 billion in 2026. Off-budget spending, otherwise known as Social Security, isn’t mentioned in the bill once, so how could the AHCA affect its spending? The answer is that the bill, in CBO’s assessment, would have discouraged older workers from retiring or moving to part-time work and starting to collect Social Security benefits.

Under the Affordable Care Act, workers have the flexibility to obtain health insurance from the exchanges instead of relying on employer-provided plans. Without it, we can infer that CBO’s projected savings came as the result of 500,000[1] older workers delaying their retirement, and therefore not collecting Social Security benefits in 2026.

It’s not only workers looking for full retirement who are affected by this increased flexibility. From 2013 to 2014 (when the ACA took effect) 130,061 workers ages 55 to 64 voluntarily moved to part-time employment. At the same time 153,613 young parents also began working part-time. Those numbers are just for the initial year that the ACA took effect, from 2013 to 2016 voluntary part-time employment increased 9.5 percent nationally, an increase of more than 2 million.

By decoupling healthcare choices from employment choices, the ACA has given millions of America’s workers considerably more flexibility in their decision on where to work and how much. An important test of any ACA replacement is whether the number of people choosing to work part-time stays at its current levels or falls back towards pre-ACA levels. In the assessment of the CBO, it seems the AHCA did not pass that test.

[1] Assuming a $12,000 per person average annual benefit. This is somewhat less than the average benefit, but since the workers affected would likely be retiring early, and also have less education, their benefits would likely be less than the average benefit.

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