A proposed replacement for the Affordable Care Act (Obamacare) would have a big impact on what Americans who buy health insurance on their own pay for it…what tax breaks they could receive…and even how early many people choose to retire.
It seemed unlikely that the bill—introduced by House Republicans in March—would be enacted entirely in its original form. But if certain provisions survive, they would have the following effects…
The cost of insurance for people in their 50s and early 60s could be much higher. Obamacare has allowed insurance companies to charge older applicants up to three times what they charge young people. Under the new proposal, starting in 2018 insurers would be able to charge older applicants five times as much as younger ones. That could be partially offset by tax credits (see next section).
Caution: If you have been planning on early retirement or on quitting a job in your 50s or 60s to start your own business, you might instead consider waiting until it’s clear whether you can afford to buy health insurance under the final terms of the new law. You might decide to keep your current job until age 65, when you become eligible for Medicare.
A sizable income might no longer disqualify you for tax credits. Obamacare has provided tax credits to help pay the cost of coverage for people with relatively low incomes. The new plan would offer tax credits that vary with age to people with income of up to $75,000 for single tax filers and $150,000 for joint filers (the credits phase out above those income levels). Older people could be eligible for larger credits than younger people. For instance, a taxpayer in his/her 60s could qualify for a credit of up to $4,000 per year, while a taxpayer under age 30 could qualify for a credit of up to $2,000 a year.
A gap in coverage could lead to a big penalty. Under the new plan, anyone who goes without health insurance for more than 63 consecutive days and then applies for health insurance could be charged 30% higher premiums for up to 12 months. This may be another reason to remain with an employer that provides coverage or to sign up for COBRA gap coverage.