Health exchanges prompt new conversations with clients

As the deadline for enrollment in the federal insurance exchanges looms, financial advisers with clients who have signed up thus far are reporting mixed results.
The Obama administration announced this week that applicants who have started the enrollment process on HealthCare.gov but who won’t finish by the initial deadline of March 31 will have the opportunity to ask for an extension. Since Oct. 1, when enrollment kicked off, some 6 million people have applied for coverage via the marketplaces.
Advisers with clients who either have an entrepreneurial streak or who are looking to retire early anticipated that these individuals would be among the chief beneficiaries of the health care reform and the marketplaces for coverage.
“More people are considering retiring early; I get e-mails from people who now have the freedom to quit early and can go be consultants or independent contractors and get their own insurance,” said Dr. Carolyn McClanahan, a physician and director of financial planning with Life Planning Partners.
The process hasn’t been easy for everyone. So far, some of their enrollment experiences have been positive and others – particularly with respect to getting onto the HealthCare.gov website – less so.
“We did have to do a little bit of education, and fortunately we have a good health insurance agent in town that we could point clients to as a resource,” said Giles Almond, president of Matrix Wealth Advisors Inc. in Charlotte, N.C…
Admittedly, the core of most advisers’ high-net-worth client base will likely have a hard time qualifying for the tax subsidies, as those are largely available to those with family income between 100% and 400% of the federal poverty level. The most that those families will pay for when buying coverage via an exchange will range between 2% of income at 100% of poverty to 9.5% of income at 400% of poverty, according to the Kaiser Family Foundation.
But that’s where the additional education comes in. Advisers have uncovered scenarios where some clients are able qualify for subsidies after shopping on the exchanges.
Lisa Brown, a partner at fee-only advisory firm Brightworth, noted that while her client base has an overall net worth of $2 million and up, she has a client in his 40s who sold a company a few years ago and hasn’t been gainfully reemployed since then. All of his income is generated from his investment portfolio.
“They’re a family of four and because their income is just their portfolio, they go below the threshold [to qualify for subsidies],” said Ms. Brown. “They have private insurance, but because their income is so low, they would probably qualify for a subsidy.”
In another case, Pam Poldiak, an adviser at Partners in Financial Planning, has a client who’s 63 and retired – but too young to benefit from Medicare. On the individual market, this client was facing a steep rate increase that would’ve bumped her monthly premium to $600 a month from $200. The client initially tried to go through an insurance agent, but was told she couldn’t receive subsidies and that her income was low enough to make her eligible for Medicaid.
The client resides in Alabama, which isn’t expanding Medicaid.
“She’s retired, but not collecting Social Security – and she has a nice investment portfolio,” said Ms. Poldiak. “You can manipulate income so that the client is high enough over Medicaid levels but low enough to get the subsidies.”
In order to help the client, Ms. Poldiak will convert a portion of the client’s assets from a traditional IRA to a Roth, effectively creating income and qualifying the client for a subsidy to buy insurance.
Nevertheless, not all of the experiences have been great. For instance, some clients are finding that they’re unable to see the same doctors due to the limits of the coverage available in their jurisdictions. Ms. Poldiak had one client who, in her ZIP code, only had access to health maintenance organizations – which restrict the choice of doctors to a select group in network – and not preferred-provider organizations. “That’s been the biggest disappointment: the lack of choice in providers,” said Ms. Poldiak. “You see stories about people not being able to go to the hospitals where they usually get treatment.”
In another case, Dr. Barry Kaplan, a dentist and chief investment officer at Cambridge Wealth Counsel, reported getting pushback from a widowed client’s adult son who has never had insurance and refuses to enroll through the exchanges because of ideological differences.
“He’s almost religiously opposed to taking the help, even though he needs it,” said Dr. Kaplan. “I worry that he’ll break his mother [financially] if he gets sick and is uninsured.”
In a case with a more promising outlook, another one of Dr. Kaplan’s clients is now saving more than $1,100 a month to insure his family of four. The 55-year-old early retiree was previously spending $2,876 a month to cover his family, and now that’s down to $1,702.
Savings aside, however, there were still some hiccups. The client was based in Delaware, and even though he applied for coverage shortly after the enrollment period started, it took six weeks for the insurance provider to recognize that it had received his premiums, Dr. Kaplan explained. “When he went to the doctor for the first time, he had to call the insurer and verify the coverage,” he said. “It took six weeks for him to get his insurance card.”
Advisers anticipate that as the exchanges shake out their kinks, discussions with clients – especially older ones who’ve stayed in the workplace because they can’t obtain coverage – will likely follow.
“You have people who went back to work just for their health benefits, and now they don’t need to,” said Ms. Brown. “If they don’t need to work to make money and support their lifestyle, then health care isn’t dictating what they do with their lives. That’s a positive.”