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How Might the Affordable Care Act Impact Retirement Transitions?

23 June 2014—Kevin Cahill, Center's Research Economist will be presenting a paper titled, "How might the Affordable Care Act impact retirement transitions?" this Saturday, June 28th at the Western Economics Association International (WEAI) meetings in Denver.

With the implementation of the Affordable Care Act (ACA) in 2014 older Americans not yet eligible for Medicare or Medicaid will face very different incentives with respect to employer-provided health insurance. How might this latest change to the retirement income landscape affect the retirement patterns of older Americans? A priori, the expected direction of the impact is ambiguous. Older Americans who otherwise would have experienced “job lock” – staying with their current employer to maintain health insurance – might be more likely to change jobs later in life. On the other hand, older Americans who transitioned to bridge jobs in search of employer-provided health insurance might be less likely to do so because of alternative means of obtaining health insurance under the ACA. This paper explores the prevalence of each type of transition using a nationally-representative sample of older Americans from the Health and Retirement Study (HRS). Our findings suggest that, as a result of the ACA, bridge job prevalence is likely to decline among those without health insurance on their career jobs and is likely to increase modestly for those with employer-provided health insurance. One additional finding is that the ACA will likely improve outcomes among the self-employed, as a sizable fraction of those who switched into self-employed bridge jobs did so without having health insurance coverage. The retirement landscape has evolved considerably over the past several decades, and will likely continue to do so in the years ahead in part because of the ACA.

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