Economix Blog: Older Workers Could Benefit if Companies Drop Insurance

CATHERINE RAMPELL

Dollars to doughnuts.

As I’ve written before, older workers, once unemployed, have an extraordinarily difficult time finding re-employment. But they may get one unexpected employment booster next year: the health insurance exchanges put in place by the Affordable Care Act.

That theory was just proposed to me by John Challenger, the chief executive of Challenger, Gray Christmas, a global outplacement and executive coaching company. Here’s how it would work.

Once individuals are able to buy insurance on exchanges, employers may be tempted to “get out of the health care business,” as Mr. Challenger put it. In other words, they will dump their workers onto the individual market. For most workers, this is probably a less-than-desirable outcome. But for older workers, it might be a blessing.

One potential reason that older workers have so much trouble finding work, after all, is that employers do not want to be responsible for their health care. Health care spending rises steadily by age; in fact, the health care costs of an older person are around five times those of a young adult. If employers are no longer on the hook for those health care costs, that is one less negative to be held against older job candidates.

Of course, those older workers would still have to find their own insurance, but the Affordable Care Act forces younger people to subsidize older people on the exchanges. Under the law, a health insurance plan’s oldest subscriber can be charged no more than three times as much as a plan’s youngest subscriber (even though, as mentioned, the oldest subscriber’s costs are probably closer to five times as much).

It’s worth noting that the exchanges might increase demand for older workers, but could also reduce their supply.

If older people no longer need to be on someone’s staff in order to afford health insurance, they could decide to drop out of the job market altogether, or at least decide to go into business for themselves. We have already seen this phenomenon among Medicare-eligible workers. A recent Rand study documented a spike in entrepreneurship at age 65, when people newly qualify for Medicare and so have less to risk if they leave their employers and start their own businesses.

Article source: http://economix.blogs.nytimes.com/2013/02/15/older-workers-could-benefit-if-companies-drop-insurance/?partner=rss&emc=rss