As the government implements the Affordable Care Act of 2010 (ACA), employers will face some uncertainty regarding the retirement decisions of their employees. By 2014, all individuals will have access to group coverage regardless of employment status through newly established state health care exchanges. As a result, employees who might otherwise have waited until age 65 (the Medicare eligibility age) to retire may choose to retire earlier. Two recent studies on the link between retiree health insurance and retirement age provide support for this hypothesis.


Does Retiree Health Insurance Encourage Early Retirement?

Journal of Public Economics, Volume 104, Pages 40-51
Steven Nyce, Sylvester J. Schieber, John B. Shoven, Sita Nataraj Slavov, David A. Wise
August 2013

This paper uses employee records from a large and diverse set of firms to evaluate the impact of group health insurance on an employee’s decision to retire. After controlling for individual and firm characteristics and pension plan features, the authors find that being eligible for employer-subsidized retiree health insurance is associated with a 36.2% increase in the probability of turnover (leaving the firm) at age 62, a 48.8% increase at age 63, and a 38.0% increase at age 64. In other words, subsidized health coverage has a strong effect on employee turnover in the years immediately preceding Medicare eligibility. This effect is similar for both men and women and consistent across different pay levels. The authors conclude that the link between health care and employment may cause employees without subsidized coverage to delay retirement until they are eligible for Medicare.


Public Health Insurance, Labor Supply, and Employment Lock

Working Paper, National Bureau of Economic Research
Craig Garthwaite, Tal Gross, Matthew J. Notowidigo
July 2013

This paper contributes to the conversation about the ACA’s impact on early retirement by examining a reverse situation: whether the loss of health care coverage influences a retiree’s decision to start working again. In 2005, Tennessee abruptly ended its Medicaid expansion program, leading to the largest public health insurance disenrollment in the history of the United States. Approximately 170,000 citizens lost health insurance coverage. This group was disproportionately composed of single, childless adults with incomes slightly above the federal poverty line. The authors find evidence of an immediate increase in job search behavior among this group in the months following the disenrollment, including an uptick in Google searches for “job openings.” According to the authors, this behavior demonstrates the concept of “employment lock,” or the notion that people must keep working in order to have health insurance.