Congress didn’t do it, so President Trump is taking the Obamacare repeal reins into his own hands, with a new executive order and a cut in state subsidies that are threatening to raise health-care premiums by as much as 20% next year for some investment advisors’ clients. Among those clients who could experience serious changes in insurance coverage are early retirees under 65 years old who are ineligible for Medicare and self-employed individuals.
“We are definitely telling clients who are considering early retirement to hold off and preserve their workplace health-care plans for a year or two if possible, until the dust settles on this,” says Carolyn McClanahan, a doctor, CFP and founder of Life Planning Partners in Jacksonville, Fla. “We definitely had clients who were able to retire using ACA plans in the past because they weren’t old enough for Medicare. It spurred many to retire early to consult or start their own businesses,” she said.
President Trump plans to cut the federal government’s subsidy of $17 billion in cost-sharing payments. Almost 6 million enrollees, or 57%, currently qualify for the cost-sharing payments, according to the most recent data from the U.S. Department of Health and Human Services. The subsidies are expected to cost the federal government about $7 billion in 2017.
Insurers will be the ones left holding the bag for 2017 policies whose prices were based on the assumption of subsidies, so many are hiking their rates for 2018 by as much as 20%. Several major carriers dropped out of the individual market, unwilling to wait and see what Trump and Republicans would do.
In addition to cutting subsidies, President Trump took his first steps toward fulfilling his vow to dismantle Obamacare, signing an executive order yesterday that he says will bring affordable health insurance to millions more people. The order broadly tasks the administration with developing policies to increase health-care competition and choice in order to improve the quality of health care and lower prices.
Trump’s executive order will also allow the sale of substandard plans, “so cheaper plans will be sold, but they’ll be worthless. Unfortunately people won’t figure that out until they’re sick,” said McClanahan, who will present her own health-care plan at the Economists for Peace & Security Symposium in Washington, D.C., November 13.
The mistake Washington continues to make is to focus on who pays for health care rather than on how to actually reduce costs, she adds.
Cheaper is not always better when it comes to health-care plans, says Katy Votava, president of GOODCARE.com, a consulting firm that specializes in health-care comparison shopping for advisors and clients.
“Last week, we ran plans for an advisor’s attorney client getting ready to retire and we found that the cheapest plan [in terms of premiums] would cost him $130,000 annually in prescription costs, compared to the best plan for him, which would still cost him $12,000 annually for medications,” says Votava, who holds a Ph.D. in economics. “He was in disbelief initially because his benefits department had recommended the plan costing $130,000.”
She urges advisors and clients to take the time to drill down into policies to get specifics on prescription coverage and plan health-care providers, both of which can cost investors plenty. “Drugs and major trauma can cost investors dearly if they have the wrong coverage,” Votava says.