Health Care Reform – A Peek at What’s Ahead for 2014 and Anticipated Trends.

The employer mandate, aka the pay or play tax, was pushed back one year to January 1, 2015, wherein a large employer, a business with 50 or more full time employees (I know, only the government could qualify a business with over 50 employees as “large,”) must offer coverage. A full time employee is one that works more than 30 hours a week, with few exceptions.

If employers don’t “play” they will pay. Two thousand dollars per year per full time employee if no coverage is offered. Three thousand per full time employee, if the insurance plan offered is considered too costly. One mechanism for the government to find out who is not complying will be when employees use the healthcare exchange to get coverage and get a tax credit, the employer will be exposed.

Interestingly, only 3.7 percent of domestic businesses have more than 50 employees so while it’s a big deal for those affected businesses it’s a small percentage of the business community.

The healthcare exchanges, while off to a rough start, are actually working well and are relatively easy to use. 

The surprise is individuals with incomes between 100 and 400 percent of the federal poverty level may be eligible for federal premium tax credits to help pay for private health insurance through the Marketplace. For individuals, that is an adjusted gross income of up to $45,900 and up to $95,000 for a family of four.

A big new insurance regulation for 2014 encompasses a ban on annual limits which include caps, deductibles, co-pays and out of pocket, for coverage on ten essential health benefits. The 10 essential health benefits are:

        1.      Outpatient Care
2.       Emergency Room Services (can’t charge more for ER visits)
3.       Hospitalization
4.       Wellness Visits and Chronic Disease Care
5.       Maternity and Newborn Care
6.       Mental and Behavioral Health
7.       Prescriptions
8.       Services and Devices
9.       Lab Tests
10.   Pediatric Care (including dental and vision)

On April 1, 2014 the IRS penalty kicks in for the individual mandate. If you don’t have coverage, the penalty is $95 or one percent of salary, whichever is greater.

While small businesses received a 35 percent tax credit in the past, in 2014 the new metric is up to 50 percent of employer covered premium costs. That should be favorable for many businesses.

Some anticipated trends as a result of Obamacare could be a rise in self-insurance for mid-size employers. Also an increase in the popularity of HSA’s and FSA’s. This will be incentivized by employers as a way to control costs as employees will think twice about spending their own money for marginal or unnecessary doctor’s office visits.

Also, expect to see larger employers (with thousands of employees) move to private exchanges with wide menus of plans for employees, the exchanges will look like healthcare.gov but will be for employees of companies like 3M or Boeing.

For a much deeper dive please click the following link to the Affordable Care Act and HRSA Programs at  http://www.hrsa.gov/affordablecareact/

CBlakely, CFP®, CTFA                      Jan-2014

Source: US Department of Health and Human Services

Should Individual Investors Buy an I.P.O.?

Twitter has an initial public offering (I.P.O.) for 70 million shares coming in a couple of days and has confidently upped the price range by about 30 percent in the last week. The new price range ($23-$25) will give Twitter around $1.7 billion to finance its growth.

These high profile I.P.O.’s beg the question: Should individual investors buy into an I.P.O.?

According to research from Fidelity Investments, the number of I.P.O.’s so far this year is up 40 percent from the same point last year, and the dollar values of those offerings has increased 10 percent. Sounds like a good deal for investors on the surface, but think back to the last high profile tech I.P.O., Facebook’s I.P.O. was a disastrous stock debut.

Twitter is the type of I.P.O. that creates all kinds of media attention which might entice people to try to buy the stock without doing enough (or any) research. The more of a household name a brand is the higher the probability it will attract a greater number of investors but excitement for a brand and financial success are uncorrelated.

I.P.O.’s don’t just rise in value as they did in the late 1990’s. There are many more flameouts than winners in this market, but most people don’t remember the losers, it’s not wired into our optimistic DNA. (Which is another reason to use a professional advisor, we are like Missourians in that we tend to say, “Show me.”)

For instance, information on the company ahead of an I.P.O. is limited (although there are exceptions). And larger offerings like Twitter’s, often mean more hype, which can cloud an individual investor’s judgment. Remember, as with any investment, it comes down to the fundamentals, current financials and long-term growth prospects. Not to mention, security fit in your overall investment strategy.

Buying with the intent to quickly flip the stock at a profit is a recipe for disaster. Even Wall Street insiders admit they can’t predict the future. A better approach may be to look at what a company does and ask if it is something that will be needed in the future. As always, take the long-view with stock investments. Is the company going to around for the next ten years, if you believe so, maybe the better strategy is to find several stock companies in that industry sector and buy a basket of stocks.

Conversely, not buying the I.P.O. does not mean you should forget about the company. If an investor bought Facebook shares at their low of $18 three months after the I.P.O they have a nice gain currently. Seventeen months after the I.P.O. the stock is trading around $52 a share.

Finally, if it’s something you know about and you have an insider’s perspective on it, an I.P.O.is a way to gamble on that perspective, with maybe better odds due to the depth of your knowledge. Put another way, if you have 20 years in tech and are determined that social media has continued upside for the foreseeable future, buy that I.P.O., but remember, it’s still a bet.

CBlakely CFP®, CTFA      11/2013

Source: New York Times - Business Day, Fidelity Investments