Even as many new health-insurance plans are rolled out for the new year, myriad questions remain. “Continued uncertainty makes it difficult to plan ahead,” says Ronald Gelok, an RIA in Parsippany, N.J., a state that hasn’t established its own insurance exchange, instead defaulting to the federal marketplace at healthcare.gov. “People are putting off decisions because the situation is changing on a weekly or even daily basis.”
Who Is And Isn’t Affected
By “people,” Gelok means practically everyone—business owners and individuals of all ages and income levels. “For pre-retirees, it’s difficult to budget because we’re not sure what they’re going to be paying [over the long term]. For small-business owners, there is uncertainty as to what small-group plans are going to cost. And so forth,” he says.
This uncertainty stems not just from partially fixed technical glitches at the federal Web site. It’s equally due to the machinations of Washington politics, how state insurance commissioners—who set local rates and local rules—react to federal mandates, and the insurance companies themselves, which jockey for positions in the various markets, sometimes adding to or subtracting from their networks of preferred medical practitioners.
Adjusting To Changes
For many, the true impact of the Affordable Care Act didn’t hit home until they received a notice of termination from their current carrier. The panic may have been eased when the federal government announced a year’s extension for carriers that wished to maintain legacy plans. How many old plans will remain in force, however, remains to be seen. At best, this is only a temporary solution. “Will individuals be back in the same boat 12 months from now?” asks Gelok, reiterating clients’ queries.
Those who have looked at new plans are comparing costs and benefits, and for the most part not coming up with easy answers.
“The questions I’m getting as an advisor [are]: (1) Does this pertain to me? (2) Should I be worried? (3) How do I take advantage of retiring early now? (4) How do I compare what I have now to what my choices would be if I went to the exchange?” says Peg Chromy Webb, a senior vice president at Wealth Enhancement Group in Minneapolis. (Minnesota has its own state-based exchange.)
These questions, Webb notes, are similar to those asked when 401(k)s were new. “There was a tremendous learning curve for individuals when that shift happened,” she says. “This is where we position ourselves as advisors: to help with the terms and higher understanding of benefits, compare costs or refer the client to a specialist in the health-care field.”
Business Owners
Employers aren’t immune to the confusion. “The greatest misunderstanding of the law surrounds the rule that employers with 50 or more full-time employees have to provide health insurance,” says Bob Phillips, managing principal at Spectrum Management Group in Indianapolis (in Indiana, which defaults to the federal exchange). Most employers “interpret this to mean the employer has to pay for the insurance,” he says. “This isn’t the case. The employer only has to make the coverage available.”
The employer mandate has been postponed for another year, adds Phillips. “Most regulations still have not been written, so advisors are uncertain what to recommend to their clients,” he says. “Making a move before there is clarity of rules can be very costly, which results in inaction.”
Even small-business owners—those with fewer than 50 full-time employees—aren’t spared. They aren’t required to make coverage available, but those who do are experiencing rate changes, in some cases hikes so drastic they are forced to consider raising deductibles or otherwise cutting back on benefits.
“The most common concern I am hearing from … small-business people is what health care will cost for them and their employees, and if they will be able to continue to provide it,” says Mike PeQueen, managing director and partner at financial-planner HighTower Las Vegas, in a state with its own exchange. He is also a board member at an agency that distributes health insurance to members of the Las Vegas Chamber of Commerce.
Many of these concerned business owners, he says, are “not fully informed about what the ACA requires of them and what the actual penalties/costs are associated with changing or not providing coverage. … My small-business clients are already discussing if they can reduce coverage or increase deductibles in an attempt to control costs.”
The Upside
This doesn’t mean everyone is complaining about the insurance reforms. “Several of our clients who are contemplating retirement, but have stayed with their current company because they have a spouse that has a pre-existing condition, have reported that the ability to secure insurance through the exchange has allowed them to accelerate their retirement plans, which [to them] is a significant positive,” says Michael J. Merlin, executive director, family wealth director and financial planning specialist at Atlanta-based Hansberger & Merlin, part of Morgan Stanley Wealth Management. (Georgia does not have a state-based exchange.)
Webb, the advisor in Minneapolis, tells a similar story. “A 60-year-old client has talked about retiring and starting her own business for years,” she relates. “The only reason she was staying at her current employment was to have health insurance for herself and her retired husband. [Now] her mind has opened up to all the possibilities again with the new options [available].
She and her husband can now get coverage and live their dream of part-time work and building a business of their very own.”