Trumpcare may put a stop to your plans for early retirement

After decades of saving diligently, Dan Maize, 53, of Williamsburg, Va., made the decision last year to retire early. He stayed at his job, managing a grocery store, until February — just before Republicans in the U.S. House of Representatives unveiled a health-care bill that could make his early retirement much harder to afford.

Under the American Health Care Act, the Obamacare overhaul that faced a congressional vote on March 23, costs could fall for many younger Americans. The majority of older people would pay much more, according to the nonpartisan Congressional Budget Office and others who analyzed an early version of the legislation. “People who are thinking about retiring may need to give serious thought to whether they can find affordable health insurance,” says Tricia Neuman, director of the Kaiser Family Foundation’s program on Medicare policy.

Being able to afford health care has always been a concern for older people, who are far more expensive to insure than the young. That’s why Medicare, which covers Americans 65 and older, was created in the 1960s. Nevertheless, millions of older Americans face a gap in health coverage between the time they stop working and when they become eligible for Medicare. According to Boston College’s Center for Retirement Research, about half of women retire by age 62 and half of men do by 64. “Our government needs to do something to provide some kind of a bridge between retirement and Medicare,” Mr. Maize says.

Under Obamacare, retirees under 65 had new insurance options, including access to state marketplaces that sell policies with government-mandated minimum levels of coverage, as well as subsidies to defray the cost of those plans. In addition, insurers can charge older customers no more than three times what they charge younger ones.

Under so-called Trumpcare, insurers could charge their oldest customers as much as five times what they charge the young. The legislation would also change subsidies from a sliding scale — based on income and how much premiums cost in different parts of the country — to a flat credit based on age. The result is a “double whammy” for Americans age 50 to 64, says David Certner, legislative counsel for AARP, which opposes the House bill. “The older you are, the bigger the premium increases will be.”

The AHCA could change substantially before it becomes law. One big area of debate among Republicans is how generous to make health-care subsidies and whether they should be aimed primarily at low-income or middle-income Americans.

In the CBO’s analysis of the original proposal, the annual premium for a 21-year-old would fall from $5,100 to $3,900 by 2026 (the base year the agency chose for its calculations). The yearly premium for a 64-year-old would jump to $19,500 from $15,300.

That’s before subsidies. With Obamacare, a 64-year-old earning $26,500 a year would pay $1,700 annually for premiums in 2026, or 11% of the total cost. Under the AHCA, that same person would have to cover 75% of the premium, an annual bill of $14,600.

Greg Ledbetter, a 66-year-old retiree in Redmond, Ore., figures premiums for his 63-year-old wife could double under Trumpcare and cost an extra $8,000 a year. “It will be really devastating,” he says. “It could even come to the point where I would have to consider selling our home and moving into something else that I could afford.”

An elite group of retirees could be better off under the AHCA. The bill lifts the income limits for tax credits. Single people 60 and older still would be eligible for at least a small credit up to an income of $115,000. The bill also repeals a 3.8% tax on investments for singles earning $200,000 or more, enacted in 2013 to help pay for the Obamacare subsidies. Of course, very few retirees have that kind of income. According to the U.S. Census Bureau, 13.2 million Americans age 55 to 64 aren’t working. Their median income is $12,699 per year.

Starting in April, Mr. Maize and his family will be covered by a policy he purchased on the national Obamacare exchange, with subsidies that make his premiums affordable. But he knows that planning for his future health-care expenses would be just a “wild guess.” Says Mr. Maize: “I wanted to retire on our own terms, not Trump’s terms.”