Health care knowledge boosts your value

According to a Kaiser Family Foundation survey published last month, 51% of those polled said they don’t have enough information about the Affordable Care Act to understand how it will affect them and their families.

That isn’t surprising, given the complexity of the health care reform law, and the fact that regulations still are being written and exemptions still are being granted. In other words, the law still is being refined.

But all of the confusion is an opportunity for financial advisers. They can do the hard work, and understand the law and its implications, and be ready to answer clients’ questions — increasing their credibility with and value to those clients.

If they haven’t already been asked about the law by clients, they likely will be over the next year or so as it goes fully into effect. As a series of stories about the new law in the most recent issue of InvestmentNews made clear, advisers are already getting questions.

Some of those questions are coming from small-business operators, and the number of business owners asking the questions likely will grow. They will want to know how the law affects the costs involved as they expand their businesses.

If the business expands to employ more than 50 workers, what happens to owners’ costs as they are forced to offer health insurance to their employees?

Although the starting date of that mandate has been postponed a year, they still will face the increased costs eventually.

What are the most cost-effective ways for a small business to provide the required insurance when it employs the 51st worker? Does it make financial sense to reduce employment below the 50th person and cap the company’s growth?

Others seeking the advice of their advisers are individuals who have had an idea for a business but have held back because of health insurance coverage at their present employer. Now they will have the freedom to pursue that dream, but they will need advice about buying insurance through the health care exchanges that are supposed to be up and running Oct. 1.

Although business owners and consumers can get information from federal and state officials, the Kaiser Family Foundation survey showed that a majority of the respondents, in all age groups, said they don’t trust the information they get from those sources. Those over 36 have the least trust in the official sources.

WHOM TO TURN TO

Although the respondents weren’t asked about how much they would trust information from their advisers, it is likely those who have advisers would trust their advice more than they trust federal and state sources.

Individuals who aren’t covered by an employer’s health insurance plan also are confused about whether they qualify for subsidies if and when they enter the health insurance exchange market. Because the subsidies are available to families with income up to 400% of the poverty level, or $94,000 a year for a family of four next year, many families with an adviser may qualify and not realize it.

More and more large companies are adopting high-deductible health insurance plans and establishing health savings accounts for employees to help them meet the high deductibles. Younger or healthier employees will be able to accumulate significant amounts of money in the HSAs over the coming years — employees with family coverage can put up to $6,400 into an account each year, and employees older than 55 can make an additional $1,000-a-year catch-up contribution.

Although much of the HSA money likely will remain in accessible accounts where it can be quickly reached in case of a medical emergency, some of it likely will be available for longer-term investment once a cushion has been established. Clients will need advice on how big the cushion should be, where the bulk of the money should be housed and where the longer-term part should be invested.

Higher-income clients also will need to be alerted to the impact of the new taxes imposed on them to help pay for health care reform, such as the 3.8% tax on investment income and the increase in the Medicare tax to 2.35%. They may already be familiar with the increase in the capital gains tax to 20% for high earners, which also took effect in 2013.

All in all, the looming implementation of the Affordable Care Act means more homework for advisers but also an opportunity to provide more service to clients and to increase their value to those clients.