Public exchange premium subsidies could reduce health costs for pre-Medicare retirees
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Thanks to the health care reform law, lower-income pre-Medicare eligible retirees no longer are big losers if their former employers terminate health care coverage.
That is because they will be eligible for federal premium subsidies to offset the cost of coverage for plans they purchase in public health insurance exchanges authorized by the Patient Protection and Affordable Care Act.
In some cases, the retirees could be better off.
Take the case of a 60-year-old retiree with an adjusted gross income of $25,000 residing in Chicago who seeks midlevel coverage, known as a silver plan, next year in a public insurance exchange.
According to a Kaiser Family Foundation online cost calculator, the annual premium for that plan would be $5,484. With the federal premium subsidy, the retiree would pay $1,710, or 31% of the total.
By contrast, the retiree likely would pay more for coverage from his or her former employer.
According to a study released earlier this year by Towers Watson & Co. and the National Business Group on Health, the annual premium for single coverage for a pre-Medicare-eligible retiree averaged $9,276, with the retiree on average picking up just over 40% of the premium, or $3,710.
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