Job lock occurs when you would like to quit your job, perhaps to start your own business, but you feel you can’t do it because you would lose your health benefits.
Older workers tend to have more health problems and higher health care expenses, which makes it more likely that they will experience job lock. Medicare doesn’t kick in until age 65, so workers who are age 50 and older may feel a greater need to keep their job just for the health benefits.
An April 2013 Harris Interactive poll found that workers age 55 and older showed the greatest concern about their job security and benefits security, compared to other age groups.
Harris Interactive president Al Angrisani says the data “points to a rise in worker insecurity about their income, benefits and employability.”
How Obamacare will reduce job lock
The Affordable Care Act, also known as Obamacare, is likely to reduce job lock and encourage entrepreneurship in four ways:
1. The health insurance exchanges in each state will make it easier and more affordable to buy an individual plan.
2. Americans with an annual income between 133 percent and 400 percent of the federal poverty level will qualify for tax credits when they buy an individual health plan through an exchange.
3. The law will prohibit insurers from denying coverage or charging higher premiums based on preexisting conditions.
4. In some states, the law will expand Medicaid eligibility to cover Americans with an annual income up to $15,281 for a single person or $31,321 for a family of four. The Supreme Court ruled that states could opt out of the Medicaid expansion.
If health care reform law solves job lock as experts expect, Obamacare will increase the number of self-employed individuals in the United States by about 1.5 million, according to a recent study from the Urban Institute, a Washington, D.C.-based nonprofit organization that researches social and economic issues.
Kathleen Stoll, director of health policy at Families USA, a Washington, D.C.-based nonprofit organization that advocates for health care consumers, says that the Affordable Care Act will change things for workers in job lock. “(Many workers currently) need to change the kind of work they do or the hours they keep because of an illness or a disability or a chronic condition.” Obamacare, she adds, will give workers the opportunity to make this change.
Job lock and entrepreneurs
In the past, a lack of access to affordable coverage on the individual market has kept some Americans from starting their own business. The situation is especially difficult for those who have a preexisting condition or disability.
Some Americans find the monthly premiums for individual health plans are too high, and others are turned down by insurers because of a preexisting condition or disability.
That’s about to change. Starting on Jan. 1, 2014, insurers will no longer be permitted to deny coverage or charge higher prices because of a preexisting condition.
Also, starting on Oct. 1, 2013, Americans who don’t have coverage through an employer will be able to shop for an individual plan on a health insurance exchange. The competition on the exchanges may keep premiums down, since the consumers will be able to easily compare the prices. If that’s the case, then it will be more affordable and easier for Americans to start a business and buy coverage for themselves and their family members.
Stoll says the exchanges “will give people much more choice” for health insurance.
The federal subsidies to help low- and middle-income Americans buy insurance on the exchanges “are quite significant. They can be quite large,” she adds. For example, a 40-year-old making $28,783 per year who buys single coverage with an annual premium of $4,500 would get a tax credit of $2,185, according to the Kaiser Family Foundation.
Some small business owners can get health benefits from their spouse’s employer now, but many don’t have that option because they’re not married or their spouse works for the family business.
Some entrepreneurs have chosen to go without health insurance, at least for a while, because of the cost. But for a person who has a chronic condition that is expensive to treat, it may be financially impossible to go without coverage. In addition, all Americans must have health insurance or pay a tax penalty, under the Affordable Care Act, starting on Jan. 1, 2014.
Impact on retirement
Some older workers have postponed or avoided retirement partly because of concerns about health care costs, even with Medicare coverage after age 65.
About 49 percent of Americans aren’t confident that they will be able to pay for their medical expenses during retirement, according to research by the Employee Benefits Research Institute, (EBRI), a Washington, D.C.-based nonprofit organization that studies retirement and health care issues.
This uncertainty may be because of the high costs of health care for elderly people. For example, a 65-year-old couple who are average prescription users, would need to have $283,000 in their savings to be able to cover most of their health care expenses during retirement, according to EBRI.
If the Affordable Care Act causes more people to have access to affordable health insurance, and therefore stay healthier and avoid medical debt, then fewer older workers would feel the need to stay in their jobs and delay retirement.