Latest posts by Wanderer (see all)
- Investment Workshop 50: Goodbye TD Ameritrade, Hello Vanguard! - November 15, 2017
- The Three Paths to Financial Independence - November 13, 2017
- Investment Workshop 49: Expat Insurance - November 8, 2017
Hello again and welcome back to the Millennial Revolution Investment Workshop! New readers, please click here to start from the beginning.
In what appears to be a never-ending cycle, the Republican effort to repeal and replace Obamacare continues to careen from news story to news story. If you were to try to keep up in the day-to-day negotiations, back-room dealings and press briefings, you’d probably go nuts. Fortunately, you don’t have to since I did it, and JOKES ON THEM, I’m already nuts so no (further) damage done.
Why Is This So Important?
To recap, if you’re reading from Canada, Australia, the UK, or much of Europe, none of this shit applies to you and you should thank your lucky stars it doesn’t. You guys all have gold-plated government-backed universal health care coverage, so you don’t have to worry about it either before or after retirement.
But if you’re American, what happens to Obamacare is HUGELY important because you’re going to need it if you plan to retire. In pre-Obamacare America, your health insurance was tied to your job, so if you didn’t have a job you didn’t have health insurance. Obamacare changed all that in 2010 by providing federal subsidies that were tied to your income to help pay for insurance premiums bought on the Obamacare exchanges.
And those premiums were costly. In 2016, the average cost of insurance premiums for a family in the US was $833 a month, or $10k a year. That additional continuing expenditure increases your retirement portfolio (as per the 4% rule) by $10k x 25 = $250k! So Obamacare makes a HUGE difference to your financial ability to retire early.
And when Trump got elected on a platform to repeal the ACA, with the presidency, the Senate, and the House all solidly in Republican hands, we thought all that was toast.
Where We Are Now
As it turns out, the road to repeal-and-replace was a lot harder than anyone thought.
Shortly after Trump took office, Republican members of the House promptly got into idealogical fights with each other, with the moderate faction of the party saying “Hey, let’s maybe not throw people off of health insurance,” and the hard-right Freedom Caucus demanding to, from what I can gather, throw as many people off of health insurance as possible. This memorably led to the repeal effort tanking, then failing, leading House leader Paul Ryan to declare “Obamacare is the law of the land for the forseeable future” in May.
And then, out of nowhere, they manage to squeak the bill through the House by a single vote. Fantastic.
The bill went onto the Senate who then promptly…ignored it completely and started drafting their own bill.
Okie dokie. With me so far?
What they came up with is called the Better Care Reconciliation Act, or BCRA. And the Senate’s reputation for being a more moderate body than the House was put on display. I’m not going to get into the nitty-gritty details of the bill, but in broad strokes the Senate’s version:
- Eliminated the Individual Mandate which Conservatives haaaaaated, but replaced it with penalties if you tried to dump your coverage and then sign up when you get sick. Fine. Call it whatever you want, it’s still a penalty for dropping your coverage.
- Kept the ban on dropping people’s coverage due to pre-existing conditions. This was huge, because this was the biggest fix to the insurance markets Obamacare enacted, and this bill preserved that.
- Kept the Federal subsidies that helped pay for insurance premiums. Again, this was the other big plank of Obamacare that made it useable for early retirees, so that’s a pleasant surprise.
- Eliminated the Obamacare taxes on the wealthy. So…they’re keeping the federal subsidies, and giving a tax break to the wealthy? How are they going to pay for that?
- Cutting the ever-loving shit out of Medicaid. Ah. There it is.
So in broad strokes, the BCRA kept the core facets of Obamacare in place that early retirees care the most about, namely the pre-existing condition ban and the income-based Federal subsidies. It fucks over poor and disabled people, but that’s not exactly surprising given a Republican government.
Enter the Cruz
But the Senate faced the same issue that the House did: delicately threading the needle and trying to appease just enough moderate and hard-right Senators to get to 50 votes. With a 52-vote majority, they could only stand to lose 2 votes, so it was a tough sell.
Senator Cruz then introduced his Cruz Amendment, which was an attempt to drastically lower premiums for healthy people.
The crux of the change is this: If an insurance carrier in a state offers at least one plan that complies with the current Obamacare regulations, it can offer other plans that don’t.
The idea behind this was insurers could offer a high-deductible catastrophic plan that only kicked in if you got a really expensive-to-treat disease. This way, if you were relatively healthy you could just pay for your own care out of pocket (or via an HSA), and your premiums would be super low, but if you wanted to keep your Obamacare-compliant plan, you could.
On the surface, this seems to be the best of both worlds. Healthier people could pick a cheaper plan, everyone else would keep their existing one. Except according to insurance industry analysts what this would do is bifurcate the insurance market, crowding all the healthy people to one side and causing premiums to skyrocket on the other. But even then, from an early retiree perspective, this would have been OK since the Cruz Amendment would have kept the Federal subsidies intact. Your premiums would go up, but the government would pay for them, so who cares?
And it’s Dead
This is where the Obamacare repeal effort stood on Monday, when I sat down to write this article. There were clear winners (rich people) and clear losers (Medicaid recipients) with this solution, but it seemed that from the FIRE community’s perspective, we actually had a workable solution.
And then the Republicans abruptly killed it.
President Donald Trump’s top legislative priority was dealt a potentially fatal blow Monday night as two more Republican senators announced their opposition to the party’s health care overhaul.
“Regretfully, it is now apparent that the effort to repeal and immediately replace the failure of Obamacare will not be successful,” McConnell said.
So NOW it looks like Obamacare is here to stay after all. Again.
I’m a little cautious in declaring the issue over and resolved with, as I’ve done that before only to be spectacularly wrong, but right now, as it stands, health care for early retirees just might be OK.
UPDATE: Aw, for FUCK’S Sake!
Oh for crying out…
On Tuesday, Senate Republicans have now announced that they’re planning on a straight repeal WITHOUT a replacement.
Senate Majority Leader Mitch McConnell on Monday night abruptly called for a vote to repeal Obamacare without an immediate replacement after the latest Republican effort to overhaul the U.S. health-care system fizzled out.
Well, that’s…not good.
A straight repeal with no replacement would be a disaster for everyone, early retirees included. It also directly violates a campaign pledge not to deliberately blow up the insurance markets without a firm replacement, but I guess that’s out the window now. We’ll keep monitoring the situation, but everything just went from “Maybe we’ll all be OK,” to “WELP, everyone’s fucked” in a matter of a day.
UPDATE 2: Aaaaand it’s Dead Again
And JUST as I was about to hit publish, now this happens.
Senators Susan Collins of Maine, Shelley Moore Capito of West Virginia and Lisa Murkowski of Alaska, all Republicans, immediately declared they could not vote to repeal the Affordable Care Act without a replacement — enough to doom the effort before it could get any momentum.
That’s 3 “No” votes in the Senate, and they can only afford to lose 2. So there goes the Straight Repeal option.
Leave it to me to pick today to say “You know, the Obamacare Repeal effort seems to have stabilized. I think I’ll write an update post.”
I seem to have picked the worst day to talk about Obamacare Repeal because it seems to be changing by the hour. First, it looked like it was going to be OK, then everyone was screwed, and now it looks like Obamacare is back to “here-to-stay” status.
Well, I don’t know about you, but I’m getting whiplash over here. What do y’all think is going to happen to Obamacare in the end?
How much does it cost to participate in this investment workshop? NOTHING. Because that's how we roll. All we ask is that you sign-up using the following affiliate links to keep it free forever:
NOTE: Due to their recent changes for their commission-free ETF program, we can NO LONGER RECOMMEND TD Ameritrade. We are currently seeking out a new brokerage to partner with and will let you know when we find one.
2) Personal Capital
Disclaimer: The views expressed is provided as a general source of information only and should not be considered to be personal investment advice or solicitation to buy or sell securities. Investors considering any investment should consult with their investment advisor to ensure that it is suitable for the investor’s circumstances and risk tolerance before making any investment decisions. The information contained in this blog was obtained from sources believe to be reliable, however, we cannot represent that it is accurate or complete.