Financial Planning For Health Insurance Financial planners will need to begin to prepare for helping clients plan in the new world of health insurance. While coverage for 2014 will be available through health insurance exchanges with open enrollment beginning October 1st, the reality is that most clients have not spent any time considering the implications of this on their current career or retirement decisions.
The first step is to begin that conversation, perhaps by asking clients: “If you were assured of having access to health insurance and you (or your spouse) didn’t have to work where you do in order to get access to it, would you still be working and doing what you are doing now?” For many of them, the answer may well be “no” and a planning process to something better can begin. Of course, it will be crucial not to confuse access to health insurance with affordability of the coverage. Clients will still need to pay for the health insurance that they get from the insurance exchanges. The good news from the recent rollout of premiums in California is that the costs are not turning out to be as high as many had feared, as individual premiums are coming in relatively close to what group medical insurance plans already costs; however, for those who have been accustomed to having (group) health insurance paid by an employer, the prospect of buying it directly from the exchange and bearing a new cost of hundreds of dollars per month may result in a bit of sticker shock. On the other hand, as noted earlier, premium assistance tax credits will be available – in fact, estimates from Kaiser are that as many as 2/3rds of households will be eligible for at least some assistance – which means planning for this particular tax credit will become increasingly common and important, especially since the benefit of the tax credit is meant to replace the fact that most people will not be able to receive a tax deduction for the share of the premium they do pay (due to the 10%-of-AGI limitation on deductions for health insurance and other medical expenses).
In addition, anticipate that a new bargaining chip for employees in the future may well be: “how much more will you pay me to work here if I do not want/need to participate in your health insurance plan?” In fact, given the way the “pay or play” rules are structured for employers, it is increasingly likely that in the future, more and more employers will simply choose to pay the modest penalty, perhaps pay their employees a bit more cash compensation, and simply let employees make their own individual health insurance decisions and purchase their own coverage directly from the exchanges. Especially since the pay-or-play penalty is not indexed for inflation, which means it will be a more and more desirable option for employers (relative to the escalating cost of offering affordable employee health insurance) over time. The bottom line is that the introduction of the new health insurance rules may well mark the beginning of the end of tying health insurance decisions to employment status, which ultimately will reshape a lot of important career, retirement, and other financial planning decisions that clients make. Clients will find a new freedom in the job decisions that they make – whether changing jobs, starting a new business, or retiring altogether – but will also need help to content with affordability of health insurance and how to pay for it, including maximizing the available premium assistance tax credits. In addition, many clients – and small business owners – will need help in the coming years handling the transition from employer-based to individual-based health insurance, as the system slowly shifts. In the long run, arguably a system where people can make employment and job decisions without being constrained to access to health care will be a huge plus, but there will be much planning to be done, including helping clients to change their mindset, during the coming transition years! [Source: https://www.kitces.com/blog/how-coming-health-insurance-exchanges-willdrastically-impact-career-and-retirement-decisions/]