Advisers embrace elimination of Obamacare taxes, question GOP replacement plan

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.