Obamacare stands, solidifying health care planning

In the first of two U.S. Supreme Court decisions with significant financial planning implications, the high court preserved the core of President Barack Obama’s health care law Thursday.
The justices ruled 6-3 that individuals who have been receiving federal subsidies are due those tax breaks no matter whether they purchased health insurance from state or federal online exchanges.
“Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them,” Chief Justice John Roberts wrote.
He and Justice Anthony Kennedy joined the court’s four Democratic appointees in deciding that Obamacare allows those who buy health benefits through the federal exchange to qualify for tax credits, instead of just allowing those in the 16 states that provide their own exchanges to qualify, as a sentence in the law seemed to indicate.
“Those credits are necessary for the federal exchanges to function like their state exchange counterparts, and to avoid the type of calamitous result that Congress plainly meant to avoid,” the majority opinion said.
Many financial advisers increasingly help clients with health insurance decisions as the choices have become more complex in recent years under the Affordable Care Act, which was signed into law five years ago.
“The law isn’t going away,” said Carolyn McClanahan, director of financial planning at Life Planning Partners, and a physician. “Advisers need to learn how to do income planning for tax credits; it can save their clients thousands of dollars and provide great value.”
About 6.3 million people would become uninsured if they lost the tax credits that help cover premiums for health care bought through the federal exchange, according to an analysis by the Urban Institute.
Millions more who buy insurance without receiving the subsidies also could have been hit with a surge in prices if the pool of those buying insurance through the exchange had shrunk. A RAND Institute report found insurance premiums in the individual health insurance market could have risen by an average of 47% if the justices had not upheld the subsidies.
Some experts also believed equities in the health care sector could have been depressed, at least temporarily, if the decision had gone the other way.
Either Friday or Monday, the nation’s highest court is expected to issue a decision in another case of huge consequence that could effectively make same-sex marriage legal in every state.
If the Supreme Court throws out same-sex marriage bans in Michigan and three other states, Social Security and other planning for gay couples may come much closer to that of married heterosexuals. Gay spouses would be afforded the federal benefits that come with a recognized union, such as those related to estates and income and other taxes.
All but 13 states have approved same-sex marriage in the two years since the Supreme Court largely proclaimed the Defense of Marriage Act unconstitutional.
Jennifer Hatch, president and managing partner with Christopher Street Financial, an advisory firm focused on the lesbian, gay, bisexual and transgender market, said even if the court throws out the gay marriage bans, there will likely be a few remaining challenges, such as adoption rights.
(More: As more states recognize gay marriage, planning traps still await couples )
The high court already created big news for retirement plan advisers in May when it issued a ruling in a 401(k) excessive fee lawsuit. The Supreme Court’s order in that case will require retirement plan advisers to keep a close eye on their fund lineups and review their contracts with plan sponsors, among other details covered by the Employee Retirement Income Security Act of 1974.