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

As small business owners and financial shepherds of human flocks, accessible and affordable health care is a good thing

Thursday, July 5, 2012 – 5:30 AM by Lisa Shidler
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Andrew Russell: It will be a rough couple of years but I think as a nation we'll grow to accept it and be a healthier nation.

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
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.
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.
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.



Joe Regenstein

Joe Regenstein

July 9, 2012 — 2:53 PM

It’s all fun and games until a hack empowered by the ACA decides Liz has lived a good life and isn’t going to experience an increase in quality of life compared to the expenses for healthcare or insuring her. Stripping Americans of their liberty has no silver lining. When these masterminds plans fail they will continue to plan. Britain’s nationalized system started by providing people who were out of work health insurance, a noble cause. The well intentioned legislation people applauded eventually ended up enslaving them.

I can empathize with the real world implications of health issues beyond peoples control. But I reject being blinded to the overreach of government in the name of a noble pursuit.

Kiernan O'Connor

Kiernan O'Connor

July 5, 2012 — 2:16 PM

I’d like a law forcing RIA’s to take on clients who are broke, because they need advice too. I’d also like a law that forces the law firm next door to me to pay for my staff’s health insurance. I’m also really excited about all the innovation about to occur in the health care industry. I also know that Obama was the only one to ever offer viable, market-oriented and market-tested, cost-effective, sensible way to reform health care, I mean health insurance (what’s the difference again? apparently none). Good grief.

Larry Steinberg

Larry Steinberg

July 5, 2012 — 6:09 PM

I don’t see the silver lining. There is nothing in the bill to actually bring down the cost of delivering healthcare or improve the quality of care, unless you believe the $2 per employee per month slush fund to optimize care will actually do something. I won’t hold my breath.

We do know our clients will face higher taxes and for those of us with business owners, a vast new set of regulations, taxes, and fees to try and maneuver through. This may make the adviser more valuable, but it doesn’t help the client improve their finances or add to the economy by growing their businesses. In fact, it really incentivizes outsourcing, using part time employees and keeping companies under 50 employees. Not good for economic growth.

For my retired clients, the half trillion dollar cut to Medicare looms large as I see them having to come more out of pocket even for covered services. Their is no way to spin that as being good for them.

Larry Steinberg

Larry Steinberg

July 10, 2012 — 9:29 PM

Ken, who gets to decide where the line is you can not cross between denigrating Fox News and using the term “enslaving”? Who gets to determine what is reasonable and rational? It goes back to my prior point that people on both sides like to accuse the other of going over the line and then when someone on their side does it. they call it an aberration. None of that gets to the heart of the debate.

The problem I have with how you responded is rather than debate the actual points Joe Regenstein made, you attacked the language. I gave you a second opportunity to debate his point by stripping out the hyperbole, but instead you made the ridiculous allegation that the pro PPACA side never stoops to such tactics and then went on to do the very thing you claimed the pro people never do, and then said when you did it it was ok because it was sarcastic.

My point is that we can not have an honest debate when instead of debating you quibble over language and tactics everybody is using. their is no moral high ground on this legislation, there is only the facts on the ground of how this is going to effect real people with real problems.

Ken Weber

Ken Weber

July 9, 2012 — 3:11 PM

“Stripping Americans of their liberty “ “enslaving them” Nothing like a little hyperbole, eh, Joe?
All governments issue regulations. You may not agree with some, but it’s a huge stretch to equate mandating that around 1% of Americans have health insurance (and thus can’t be freeloaders in the emergency rooms) and enslavement.
And prior to ACA, if the hypothetical Liz’s of the U.S, had a serious condition that required extenesive treatment, her insurance could — and frequently did — say she reached her limit and give her no further assistance. That is a fact, while your death panel scenario is nothing more than a sophmoric slippery slope argument.

Ken Weber

Ken Weber

July 10, 2012 — 5:14 PM

That’s right. That happened a year or two ago. Once. And that Florida congressman was roundly criticized by many on the left. He was subsequently defeated when he ran for re-election because much of the Democratic establishment walked away from him. If only the other side did the same to their crazies.

Ken Weber

Ken Weber

July 10, 2012 — 6:27 PM

“ ...when someone on the right does it, it is standard procedure.” Excellent, Larry! You got it!
To recap — your example was from Sep 29, 2009. My examples of over-the-top scare tactics are from THIS VERY THREAD! And there are more on Faux News every single day.
Whew. I’d thought we’d never agree on anything.

Larry Steinberg

Larry Steinberg

July 10, 2012 — 6:50 PM

Ken, obviously I was making fun of your hypocrisy and this is a great teachable moment. Rather debating the merits of the legislation, you attack the people criticizing it over their choice of language. The fact is that your point of view uses the same tactics and language, which you dismiss. Then you go on to continue the attack using the hyperbole of “faux news”, demonstrating the very thing you criticize conservatives for and claim the left doesn’t do. I couldn’t make this stuff up if I tried.

Ken Weber

Ken Weber

July 10, 2012 — 9:04 PM

Drat! I gave you an opening with “Faux News.”
But if you are equating that sarcastic quip with the horrific “Stripping Americans of their liberty “ and “enslaving them,” well then, my friend, we not likely to find common ground.
As I said early on, “your claims about ACA MAY be accurate.” All I was asking for was a reasonable, rational airing of views.
Since at this point no one is reading this except you, me and the poor RIA Biz editors, I cede the final anwer to you.

Tim Kochis

Tim Kochis

July 6, 2012 — 5:00 PM

My suggestions for a much better law involve making the tax as big as the cost of buying catastrophic coverage and then using that revenue to actually buy the policy for the individual being taxed, but no mandate, or tax, for basic coverage. The long range solution (financial and societal) has to be changing the insurance mentality from “first dollar” to “last dollar”. Guaranteed coverage, including pre-existing conditions, can be part of that mandated catastrophic insurance package.

By the way, reports of my “retirement” are greatly exaggerated

Ken Weber

Ken Weber

July 5, 2012 — 7:51 PM

Great story, Lisa. Real world concerns, such as what you explained happened within your family, pack much greater impact than cold charts and studies. Our GOP friends had many years to tackle the massive health care problems the US faced, but did nothing.
The ACA went through the Congressional sausage-making process, and it is certainly not an ideal piece of legislation. But it is a start, and for the millions of families like yours, it is a vital improvement over what we had.

Larry Steinberg

Larry Steinberg

July 10, 2012 — 5:04 PM

A pro-Obamacare Democrat said on the floor of congress that Republicans just want poor people to die. If one side goes beyond the rational discourse, it has to be the side with people making statements like that.

Larry Steinberg

Larry Steinberg

July 10, 2012 — 9:34 PM

Brooke, I saw your comments after I posted mine. I don’t think we are united on fiduciary vs. suitability either, at least not if you read the article from a couple months ago I was quoted in, LOL:)

As for pre-existing conditions, I have that issue personally and it is no fun. I just know it will do me no good if suddenly I have additional avenues to get insured but they are so expensive I can’t afford them.

Larry Steinberg

Larry Steinberg

July 9, 2012 — 8:10 PM

There is no shortage of hyperbole both pro and anti PPACA, and if you are going to dish it out, don’t act all aghast when others do the same. The central issue is whether the act actually will improve the healthcare system in our country and I for one, do not. In fact, I think it will vastly worsen things. While Joe’s comments may appear a bit over the top, I think he is essentially accurate. PPACA puts the country on the way to socialized care and if you look at how socialized systems distribute care, they absolutely make decisions on who will or will not receive care based on a person’s perceived value to the country.

Larry Steinberg

Larry Steinberg

July 9, 2012 — 11:56 PM

I always find it funny when the argument is both sides do it, but the other side is much worse.

Ken Weber

Ken Weber

July 9, 2012 — 10:08 PM

Give me a break! “A bit over the top” you say? Yes, both sides are making claims that are difficult for any of us to evaluate. And your claims about ACA MAY be accurate. (I strongly doubt it.) But this right-wing onslaught about “enslaving” and “stripping Americans of their liberty” is way over the top, with no equivalent scare tactics on the other side.
I’m old enough to remember that similar phrases were strewn about when seat-belt laws and anti-smoking rules were enacted, and somehow we still are a nation that enjoys everything the word “liberty” stands for.

Ken Weber

Ken Weber

July 10, 2012 — 1:16 AM

Nope. Didn’t say that. Both sides have valid arguments about the pros and cons of ACA. But only one side uses rhetoric that goes beyond rational discourse.

Larry Steinberg

Larry Steinberg

July 10, 2012 — 5:41 PM

I get it, so every time someone on the left says something extreme it is an outlier and doesn’t count, but when someone on the right does it, it is standard procedure and should be roundly criticized.

Brooke Southall

Brooke Southall

July 10, 2012 — 9:18 PM

Well, I’m glad when a little humor can be injected into these comments — and that the comments stay civil and thoughtful. It means I don’t have to face any thorny questions about deleting entries.

I find our readers are as divided as the general populace on political issues but they are, by and large, united about issues relating to fiduciary care and financial advice. What standard of care should be applied to people with pre-existing conditions is another matter.

Brooke

Tim Kochis

Tim Kochis

July 10, 2012 — 11:35 PM

Yuck! I don’t this is getting us anywhere. My thoughts have always been that we need an effective alternative to ACA that most of the American people…from the center out to both left and right, can unite around. I think ACA is terrible and would like to see it gone…but doing nothing in its stead is also terrible. The solution is going to take leadership (and our current ideologue President is not going to provide it, so I hope he is defeated in November) and compromise (so, please!, let’s elect more centrists to Congress).

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