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March 03, 2015 at 02:00 AM
Much of the Patient Protection and Affordable Care Act (PPACA) seems from a distance to have more to do with the working poor than with the investment advisory business.
PPACA imposed a 0.9 percent Medicare tax on wages above $200,000 for single filers and over $500,000 for married joint filers. The law also imposed a new 3.8 percent tax on the net investment income of single filers with “modified adjusted gross income” (MAGI) over $200,000 and married joint filers with MAGI over $250,000. A $500,000 PPACA cap on what health insurance companies can deduct for an executive’s compensation could also affect some clients.
But another PPACA provision, which prohibits insurers from using personal health information when deciding whether to issue coverage, and personal health information other than age and tobacco use when pricing coverage, helped some advisors and clients.
Before the PPACA medical underwriting restrictions took effect, on Jan. 1, 2014, New York and a few other states already required insurers to sell coverage on a guaranteed issue basis, but, in most states, solo advisors who had health problems had trouble buying coverage. The same barriers often affected clients in their 50s and 60s who had sold businesses, or retired from corporate positions, and had to buy their individual coverage for the first time in decades.
In theory, the Health Insurance Portability and Accountability of 1996 (HIPAA) was supposed to prevent that sort of situation, by giving people with the money to pay for expensive private coverage guaranteed access to individual coverage. All people of means had to do to get coverage on a guaranteed-access basis was to be careful to always be covered.
The problem was that, in some states, the state used a “risk pool” program with skimpy benefits to meet the HIPAA requirement, or let an insurer with a less-than-inspiring plan provide the mandated coverage access.
The result was that, in some states, advisors and clients had to move to states with different underwriting rules, or buy second homes, simply to qualify for acceptable coverage. In other cases, affluent people may have started businesses they did not want simply to get access to group coverage.
