For several years, financial advisors have known the Affordable Care Act’s rules and regulations were coming. As of 2014, most of the provisions are in full force, including the new rules for health care—who qualifies for it, what plans must cover, how premiums are determined, etc.

Yet the law affects more than your client’s health insurance. It also affects how clients save and invest money each year, their year-to-year cash-flow strategy and, of course, their income taxes. As a financial advisor, if you are not up to speed on how the act is affecting your clients, then it will probably cost them financially. You may not be filling a need they have, and we all know what happens when clients find another advisor who can.
So what should you be doing to improve your planning skills for the Affordable Care Act? Here are three strategic tips.

Not A Health Insurance Expert? No Problem, But Find One
Many financial advisors don’t have the registered health underwriter (RHU) designation, nor have they probably taken educational courses on health insurance. I, for one, fall into that category. However, it’s important to understand how your clients are covered for health insurance, what they are paying and whether it’s competitive for their situation. After all, health insurance premiums can be one of the largest monthly expenditures for clients (and it’s increasing). Financial advisors should not overlook a major expense category!

If your clients have access to group insurance, they are probably fine to stay put. Those with individual health insurance might have experienced a 20% or higher premium increase when they renewed their policy for 2014 given the new rules and regulations for health insurance coverage. I certainly received calls late last year from clients (unhappy clients, I might add) lamenting their premium increases.

If you don’t know what your clients’ health insurance strategy is, ask them, but first make sure you can refer them to a health insurance expert who can assist them, assuming this is not your area of expertise. To find a specialist, ask other professionals you know in the life or long-term-care insurance industry for a referral. Who do they know? Who have their clients used? Or ask your business owner clients who they use to provide their company’s insurance needs. You can end up widening your circle of influence and finding new referral opportunities yourself. And you want your clients to be calling you first when they need help in any financial area.

Map Out Five Years Of Cash Flow
The primary area of the Affordable Care Act that financial advisors are impacted by is the new 3.8% surtax on dividends, interest, capital gains, etc. Clients who continually find themselves in high tax brackets will be paying this surtax year over year on their taxable portfolio. However, those clients who might fall under the $250,000 adjusted gross income (AGI) threshold (for married couples) or $200,000 AGI threshold (for singles), should map out several years of cash flow. This can help them determine, for example, when it’s a good tax year to take extra capital gains. (We like using five years for many client cash-flow projections.)

Let’s say you have an executive client who is retiring in two years and has a large concentrated company stock position he or she needs to diversify. Perhaps selling company stock the year after retirement is best to limit or avoid the 3.8% surtax, as the client’s presumably higher salary and bonus income has ended. Or maybe not. Perhaps the clients need to exercise a large block of stock options or they have deferred compensation starting to pay out after retirement.