RIAs see mostly silver linings in the wake of Supreme Court's decision on Obamacare

Lisa’s note: When I first heard the news last week that the Supreme Court had upheld President Obama’s health care legislation, I was instantly relieved. It meant that my husband and I could continue to purchase health insurance for our 8-year-old daughter, Liz, who is considered by insurance companies to have a “pre-existing condition.” Now, insurance companies certainly don’t truly understand — or for that matter care — that Liz was born with a form of dwarfism called Achondroplasia. Because of the hand she was dealt at birth, she will always carry that annoying label of “pre-existing condition,” regardless of the insurance company. What’s interesting to me is that amid all of the drama associated with the health legislation, many people didn’t know that before this legislation was approved, children born with medical conditions would be turned down by insurance companies. However, friends warned me shortly after Liz’s birth in 2004 that one of my main priorities as her mother was to ensure that her health insurance policy never lapsed because if it did — no insurance company would ever insure her. We had to carefully screen future employers’ health insurance plans, and even had to maintain positions where we were miserable simply to keep the health insurance. It was honestly a small price to pay to ensure she was covered. But in September 2010, when the law changed, forcing insurance companies to provide insurance for children with pre-existing conditions, it felt like a heavy cloud had lifted from our family. We knew we were no longer dependent on an employer’s plan and we could finally purchase health insurance on our own. Oddly enough, while people with Achondroplasia can be prone to a number of health issues, Liz is the healthiest in our family of four. My little guy, who was born with no “pre-existing conditions” ran up our medical bills last year. While the matter of pre-existing conditions for children was important to my family, this story delves into some of the other lesser-known provisions that are affecting RIAs.

Lisa’s kids: Liz and Chance

In the week since the Supreme Court’s decision to uphold President Obama’s Affordable Health act, Democrats and Republicans have reacted in predictable fashion.

Predictably, Republicans angrily opposed the High Court’s 5-4 decision, and House Majority Leader Eric Cantor (R-Va,} quickly announced that he wants to fully repeal the law on July 11. The Republican-controlled House will likely vote again to approve such a measure. It has voted successfully to repeal the health legislation before, but it’s unlikely the Democrat-controlled Senate would vote in such a fashion.

Just as predictably, Democrats have gloated about the decision, praising the Supreme Court for its wisdom.

But many RIAs put politics aside and have dug into how this decision will affect their small businesses and their clients. See: What RIAs need to know about health care reform.

Helps with younger employees

The news was a welcome relief for RIA Kenneth F. Robinson of Practical Financial Planning in Cleveland because it means his young assistant can still get health insurance through her mother’s employer. Robinson works as a consultant but advises on about $30 million in assets. Under the health care law, children ages 26 and under can get medical coverage through their parents’ plan.

“This cuts my administrative hassle dramatically and allows me time, as a former one-person office, to set up the infrastructure to deal with providing health insurance when she’s no longer eligible on her mother’s plan,” he says.

“Frankly, when we hired her, we thought we’d be providing health insurance. It was a happy accident that she already had it,” he says. Robinson’s office does pay for other employee benefits, such as dental and vision, 401(k) match and disability insurance. See: Which three of DOL’s new 401(k) rules represent the biggest land mines for financial advisors and plan sponsors.

Kenneth Robinson: This cuts my administrative
hassle dramatically and allows me time,
as a former one-person office.

Costs rising

There’s no question that as a small-business owner, certified financial planner Andrew Russell feels his health costs will rise under the new legislation.
He is, Calif.

“The Supreme Court’s decision to uphold the law all but guarantees higher insurance costs will continue,” says Russell, managing partner and portfolio manager of Dean Roland Russell Family Wealth Management in San Diego. “However, I do feel the issue of health care reform had to be addressed. The costs were already spiraling out of control. It will be a rough couple of years as more of the legislation goes into effect, but I think as a nation we’ll grow to accept it and be a healthier nation because of it.”

Helping clients

Russell’s clients have been affected as well. Before the Supreme Court made its decision, he spent a great deal of time helping a client who is uninsurable to gain a letter from his physician stating that he had a pre-existing condition.

Russell took the lead, overnighting his client’s application to the federally funded Pre-existing Condition Insurance Program so his client would get in the system before the Supreme Court’s decision was made.

“We were all relieved for him that the ruling was upheld,” Russell says. “The insurance will save him thousands of dollars in annual health care costs.”

H2 Holes on both sides of the argument

Another longtime RIA taking an analytical approach on this subject is former Aspiriant CEO Tim Kochis, who retired from the giant firm this spring. This week, he about the Supreme Court’s decision in his blog.

As part of his post, Kochis, also an attorney, points to holes in both the Democrats and Republicans arguments. For instance, he says that the mandate requiring everybody to carry health insurance was declared constitutional because of the undisputed power of the federal government’s ability to tax individuals. As such, it ruled, the mandate is clearly a tax.

Tim Kochis: Calling it a penalty
or fine simply won’t work and
is frankly disrespectful of the Court’s
decision.

“Calling it a penalty or fine simply won’t work and is frankly disrespectful of the Court’s decision and the people’s strong desire for less spin, more transparency in government. The American people — with most of them in the center — are smart enough to grasp these distinctions, and I don’t think they’ll let the Democrats get away with wanting to have it both ways.”

But Kochis calls out the Republicans as well.

“The Republicans, so far, are missing the most important part of the message they can respond with. The American people at the center are not going to be comfortable with a strident repeal, repeal, repeal solution. Their message should quickly emphasize its next thought and replace [the law] with something much better!”

What’s better

In his blog, Kochis writes about the challenges of persuading young, healthy individuals to pay $5,000 a year for a health insurance policy simply to avoid a tax of $1,000.

Instead, he suggests that even more important than getting individual coverage changing what is covered. He acknowledges that such changes could take decades, but the real solution is to put individuals in charge of their dollar costs.

“But the ultimate solution is to put individuals in charge of their first-dollar costs so that competition among providers and careful prioritization by consumers applies to medical care as it does to everything else,” he writes. “To my thinking, the 'much better’ would be a tax rationalized individual mandate used to purchase catastrophic, not basic, insurance coverage, with the tax cost on a par with the premium cost of such coverage.

He adds: “But as a society, making sure that catastrophic, non-elective costs don’t bankrupt individuals through universal insurance against that risk will be the real revolutionary solution to the mess that we have now.”

Brooke’s Note: When we wrote about Occupy Wall Street and I expressed some sympathy for the thinking behind the cause, I found out just how conservative our readers are. So as we put out a query to NAPFA’s membership and beyond on the Supreme Court decision on Obamacare, I expected to get some of the same intense reaction. We didn’t. Of course opponents can make up for lost time in the comments section here.