Advisers embrace elimination of Obamacare taxes, question GOP replacement plan

The House Republican approach kills investment-income levies, but the breadth of coverage could shrink

Mar 7, 2017 @ 2:23 pm

By Mark Schoeff Jr.

Financial advisers endorse the elimination of taxes that funded the Affordable Care Act but wonder about the extent of the health insurance coverage that will result from the House Republican substitute plan.

The House Ways and Means and Energy and Commerce committees introduced the American Health Care Act on Monday, fulfilling a campaign promise to dismantle so-called Obamacare and replace it with a measure the GOP says is more market-friendly.

The Republican legislation, which is scheduled for committee action Wednesday, would eliminate the 3.8% tax on net investment income and the 0.9% tax on wages for high-earners that helped pay for Obamacare.

Bruce Diner, president of BD Financial Services, said some of his clients had been complaining about those levies.

"You're penalizing people who are saving, earning money," he said.

In place of Obamacare subsidies for the purchase of insurance on state health exchanges, the House GOP plan would establish refundable tax credits for the purchase of insurance that are adjusted by age and income.

The Republican plan maintains two popular Obamacare provisions — a prohibition on the denial of health insurance because of pre-existing conditions and allowing children up to age 26 to stay on a parent's health plan — but it kills individual and employer coverage mandates. The measure does allow insurance providers to assess a 30% late-enrollment surcharge on top of a premium on people who let their coverage lapse for more than 63 days.

Those who benefit under the GOP plan are different from those who benefit under Obamacare, according to Chris Orestis, chief executive of Life Care Funding, a firm that helps seniors finance long-term-care services.

"The big winners in this shift are the high-income and young and healthy people," he said. "But by doing so, you've made this less attractive and less beneficial to the low-income purchasers and the elderly. This plan is the Trojan Horse for changes to Medicare and Medicaid that will come over the next four years."

Tim Steffen, director of financial planning at R.W. Baird & Co., also sees a bifurcation in the elimination of the Obamacare taxes.

"Most of the people impacted by the taxes already have health insurance coverage," he said. "People who would benefit from increased access to health insurance won't be impacted by the tax cuts."

The GOP changes don't really speak to his young clients, said Douglas Boneparth, president of Bone Fide Wealth, because it doesn't get to the heart of their concern: the cost of coverage.

"None of this spells out how prices are going to come down and how health care is going to be more efficient," Mr. Boneparth said. "It sounds like a lot of work for very little difference."

Mr. Steffen questions whether the GOP tax-credit will be effective.

"I do worry a little bit that this is simply going to be a tax rebate," he said. "If the goal of Congress is to have more people purchase health insurance, you have to wonder whether this accomplishes that goal."

But Mr. Diner said the credits are better than subsidies.

"With tax credits, you avoid big-government bureaucracy," he said.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Events

The power of data

Your clients have financial news and data at their fingertips, but donít know how to interpret it. Katy Gibson of Envestnet|Yodlee and Blake Kannady of Envestnet discuss the power of leveraging aggregated data.

Recommended Video

Path to growth

Latest news & opinion

Tax reform: 7 essential strategies for financial advisers

While advisers face the difficult task of analyzing the law's impact, they will also have a significant opportunity to prove their value by implementing money-saving strategies for clients as well as their own businesses.

Bill requiring fiduciary disclosure reintroduced in New Jersey

Measures would obligate financial advisers to tell clients they do not have to act in their best interests.

Merrill Lynch to let advisers text with clients

Texting has been a popular mode of communication for years, but in the past the firm's regulations have prevented advisers from using it.

Bear market for bonds has arrived, Gross says

10-year Treasury rate's move above 2.5% confirms outlook for fixed income, legendary bond manager says.

Mary Beth Franklin's advice for optimizing Social Security claiming strategies

InvestmentNews' retirement guru Mary Beth Franklin offers strategies you can put into place that may significantly increase your clients' Social Security draw.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print