How Much Does Access to Health Insurance Influence the Timing of Retirement?

Norma Coe, Gopi Shah Goda

NBER Retirement Research Center Paper No. NB 14-10
Issued in September 2014

Access to health insurance is a known determinant in the decision of when to retire. What remains unknown, however, is how much retirement behavior will change in response to the set of reforms that will be enacted in 2014 with the Patient Protection and Affordable Care Act (ACA). These reforms include more regulation of the non-group market, subsidies to health insurance for the low- to middle-class households, and Medicaid expansions. This project examines the effect of the state-level reforms that are most similar to those included in the ACA on the timing of retirement. We find that non-group health insurance reform substantially increases the hazard of leaving the labor force. For workers aged 63, the hazards of exiting the labor force increases by 2.2 percentage points, or approximately doubling the exit hazard at that age. For workers who report themselves to be in fair or poor health – those most likely to gain access to the individual market through these regulations, we find that the exit hazard differentially increases at age 64, and the self-reported retirement hazard also increase at age 62. These changes in retirement and labor force participation also lead to a hastening of claiming Social Security at age 63.

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