Here’s Some Good News…


Healthcare spending is expected to increase more slowly during 2016! It’s projected to grow by 6.5 percent this year, according to a report from PWC. That’s still a lot faster than inflation. The Economist projects overall consumer prices in the United States will increase by 1.2 percent this year.

The report suggested several factors are contributing to lower healthcare spending, including:

  • The Affordable Care Act’s Cadillac Tax. PWC reported the tax “…is motivating businesses to enact high cost-sharing. Their workers are already responding to the higher deductibles by scrutinizing what services are necessary and which are not…cost sharing can backfire if the employee foregoes preventative care and faces years of chronic illness.” Twenty-five percent of employers offer only high-deductible healthcare plans for employees.
  • Virtual healthcare. Telemedicine appears to be the next big thing in medicine. Doctors making house calls using real-time audio and video is the gold standard for service, according to the Modern Medicine Network. Remote patient monitoring, pre-recorded videos, and computer-assisted or message-based communications also are being offered.
  • New health advisors. A new variety of healthcare company is making information about facilities, providers, services, and pricing more accessible. In some cases, financial incentives encourage employees to seek treatment at a preferred facility.

These gains are more than offset by factors that are pushing healthcare spending higher, including:

  • High-cost specialty drugs. PWC reported specialty drugs are becoming a focus for the pharmaceutical industry. “With 700 specialty products currently in development, these investments will soon surpass traditional drug investments…According to a recent Express Scripts report, total national prescription spending increased 13.1 percent last year to about $980 per person.”
  • Cyber security investments. Healthcare organizations are spending heavily on cyber security to protect patients from data breaches. The cost of a breach is about $200 per patient record. The cost of security is about $8 per patient record.

It’s critical to factor healthcare spending into retirement plans. In 2015, the Employee Benefits Research Institute (EBRI) found a 65-year-old man needs $124,000 in savings and a 65-year-old woman needs $140,000 if each wants a 90 percent chance of having enough money saved to cover healthcare expenses in retirement. EBRI’s analysis did not include the savings needed to cover long-term care expenses.

Obamacare is Actually Not So Affordable — Unless You’re Broke

© Michael Jung/Getty Images
© Michael Jung/Getty Images

It’s time for the Affordable Care Act to join a long list of oxymorons. Why? Because rather like “military intelligence,” “cat proof,” “government organization,” and “simple calculus,” the law better known as Obamacare turns out to be an inherent contradiction. For a sizeable part of the population, anyway.

The ACA is just not affordable to a big chunk of those it was most meant to serve: The previously uninsured. In fact, many are worse off than before, according to a new study. That fact could also unravel part of the program’s foundation, which could be a problem for healthcare insurers.

“Many of the non-poor formerly uninsured are estimated to be worse off,” than without insurance, according to a September-dated working paper from the National Bureau of Economic Research titled “The Price of Responsibility: The Impact Of Health Reform On Non-Poor Uninsured.”

How so? The subsidies are not large enough to offset the cost of the insurance premiums and the fact that many previously uninsured will now have to pay part of the cost to see a doctor, the report explains. The authors reached that conclusion after reviewing data for the uninsured prior to Obamacare, including age, gender, earnings and location. Then, they married that information with health-care expenditures for the group and used it to make estimates of out-of-pocket costs before and after the law went into effect.

The group of people whom the authors highlight are the non-poor, or those ineligible for Medicaid but who maybe eligible for various subsidies for premiums or cost-sharing, depending on their income level. It turns out that the more someone earns the worse off they’ll be.

“At higher income levels, small or zero subsidies and currently modest penalties will not be enough to affect the large welfare losses that the middle class uninsured experience were they to buy coverage,” the report says. Those in good health were “consistently worse off from purchasing coverage regardless of the assumptions made,” according to estimates calculated by the researchers.

Is this the fault of healthcare insurers like AetnaUnited HealthcareCigna, or Anthem ? Not really. It’s just the way the law is designed. Will it mess up their actuarial calculations? Probably so, because an important demographic of healthy people may simply not buy coverage.

“Most uninsured will lose and, according to our estimates, will prefer to remain uninsured at the current penalty levels for violating the individual mandate,” the report continues.

Ultimately, people will do what is in their own best interests. In this case, many individuals who realize that signing up for healthcare insurance is a losing proposition financially simply won’t do it.

In this case, it will be those with higher incomes and better health — the population insurance companies need in order for their actuarial assumptions to work.

What happens if the healthy don’t sign up? Either the insurance companies stand to take a loss because overall claims are larger than the revenue from premiums and subsidies, or they raise premiums, making it even more unlikely that the healthy will sign on.

The big question now: Who will bear the financial brunt of this problem, the people buying or the insurance companies or both?

Written by Simon Constable of TheStreet

(Source: TheStreet)

4 Roads to Early Retirement

The happiest workday is Friday, according to a recent study by the fitness tracker company Jawbone. And people are happier on weekends than they are during the week. In other words, people are happier when they’re not working. Many of us have, for one reason or another, dreamed of early retirement. A TIAA-CREF survey from 2014 suggests that the biggest regret of retirees is that they didn’t retire sooner. Maybe our career has plateaued, the workplace has developed a poisonous atmosphere or we are just sick and tired of the job. Some of us have early retirement thrust upon us when we are downsized out of a job for the benefit of someone else’s bottom line. Whether by choice or chance, retiring early is easier said than done. But don’t be scared. It may be the key to a happier life. If you hate your job, or if your company is in trouble, the smart move might be to take matters into your own hands, decide whether you can retire early and then map out a way to do it. Here are four clear routes to early retirement, and one road hazard to avoid.

1. You have enough money. 

© Corbis

This is the most obvious path to early retirement, but for many of us also the most unrealistic. Nevertheless, there are still a few people who enjoy a generous defined-benefit pension that kicks in after 20 or 25 years of service. This might be enough by itself to enable you to retire. Or maybe you had a good career, lived frugally and built up a substantial retirement nest egg. I know one accountant who retired at age 49. She made a good salary and saved a lot of money. And since she was a financial professional, she was confident she could manage her money. Due to her hard work and diligent saving, she is enjoying life these days.

2. You have another career in you. 

Technically, this is not retirement. But it solves the problem of hating your job and wondering how to extricate yourself from a bad work environment. One friend of mine who was a production manager at a struggling printing company held a secret desire to become a teacher. He saved up some money, did his research and at age 54 jumped ship to enter a fast-track program designed to train mid-career individuals to become math and science teachers. He left work in November, started the program in January and was teaching middle school science by August.

3. Your spouse has a good job.

You can retire early if your spouse is earning well.

© Steve Prezant/Blend Images/Corbis You can retire early if your spouse is earning well.

My brother-in-law took a retirement package from his computer company when he was in his mid-50s. He had a daughter in college and a son still in high school, and I asked him how he could afford to retire with those responsibilities. He smiled and replied, “The secret? A working wife.” His wife had worked when she was younger, took off a dozen years to raise their two children and was more than ready to go back to work – at what turned out to be a very convenient time. But he is not the only guy who’s enjoying early retirement while watching his wife go off to work every morning.

4. You’re prepared to seriously downsize your lifestyle. 

© Tim Hale Photography/Corbis

Some people scoff at professionals who advise us not to retire until we have $1 million in our retirement accounts, or until we can replace 80 percent of our pre-retirement income. If you’re prepared to sell your home, move to an area (even overseas) with a low cost of living and just enjoy life rather than try to keep up a middle class lifestyle, you can retire with much less money. It’s a serious adjustment, but for some people it’s the right thing to do.

Road hazard. If you retire before 65, the age you become eligible for Medicare, make sure you don’t go without medical insurance. My friend the teacher stayed on COBRA for the nine months he was out of work, then signed up with his school’s medical plan. My brother-in-law had his own retirement medical insurance, and his wife’s new job covered the kids. And now, of course, you have the option of buying insurance through your state’s health insurance exchange due to the Affordable Care Act. Finally, don’t retire just to get out of a job. Have a vision of what you’ll be doing once you leave the workplace – whether it’s launching a new business, starting a new hobby or embarking on a road trip. You will probably have to watch your expenses and live a more modest lifestyle. You might be poorer, but you’ll probably be happier.

Written by Tom Sightings of U.S. News & World Report

(Source: U.S. News & World Report)

What the Obamacare Court Ruling Means for Consumers

© webphotographeer/Getty Images
© webphotographeer/Getty Images

Millions of Americans just got to keep their health insurance, as the Supreme Court ruled earlier today in a 6-3 decision for the government in the  King v. Burwell Obamacare case.

The case considered the highly anticipated challenge to whether the IRS can issue insurance subsidies for individuals enrolled on the Affordable Care Act federal exchange. In doing so, the Court upheld President Obama’s signature achievement for the second time, allowing the law to escape what many viewed as a potential disaster.

In the words of Tim Westmoreland, a law professor at Georgetown, the latest challenge to the Affordable Care Act has ended in one big case of “never mind.”

The lawsuit focused on specific language from the Affordable Care Act’s Definitions section, which says that subsidies shall be made available to individuals who enroll in exchanges “established by the state.” Under the plaintiff’s plain-meaning argument, this word choice should preclude subsidies for anyone except those enrolled on state-based insurance exchanges, specifically the federal exchange

The Court rejected this interpretation, along with the plaintiff’s argument that this language was built into the law intentionally to coerce states into setting up their own exchanges at the risk of losing access to federal subsidies.

The coercion argument, Westmoreland said, was particularly weak.

“Other than some highly rhetorical comments by Johnathan Gruber, I know of nothing that would suggest that Congress intended to do that,” he said. “The idea that they would put a gun to the states heads on page 113 in the Definitions section is just nuts… It’s in the definition of the term ‘coverage month.’ Who would ever look there to find the doomsday machine?”

According to research by the Kaiser Foundation, at stake in this decision were subsidies for more than 6.3 million people across the 34 states that haven’t set up their own exchanges. Many health care experts, wuch as the Urban Institute’s Matt Buettgens, predicted nightmare scenarios for the insurance marketplace at large in the wake of an adverse ruling. He suggested that the fallout from such a decision would have left more than 8 million people uninsured.

“We could see drastically decreased enrollment, and those remaining enrolled could see a much higher cost than average,” he said, speaking before today’s ruling on a possible adverse decision. “We could see large increases in costs of premiums, and because we would see many more people uninsured we would also then see much more uncompensated care that federal and state governments would end up paying for.”

“There are examples of premium death spirals that have actually occurred,” Buettgens added. “This would be an accelerated version of that because most of the enrollees would be hit immediately with increases once their tax subsidies go away, so that would jump start the process.”

Today’s ruling for the government will leave the system more or less in place, allowing subsidies to continue uninterrupted for enrollees on the federal exchange.

For the time being, it looks as though this may end the significant legal challenges to Obamacare, said Westmoreland of Georgetown. The only outstanding issue is a case challenging the constitutionality of the Independent Payment Advisory Board, which is unlikely to proceed due to the fact that the Board has not yet made any decisions.

Westmoreland cautioned about over-confidence on the part of the Obama Administration, however, pointing out that few in the legal community foresaw the potential significance of King either.

Written by Eric Reed of The Street

(Source: The Street)