A fiduciary is generally someone who has to put the best interests of the beneficiaries first, instead of their own. While most people think that their investment advisor does that, it much less clear in the investment adviser community, which I have to say has always been somewhat concerning to me.
If you are a business owner, and have a retirement plan, as Trustee of that Plan you are in a fiduciary role- you have to put your employees best interests first. This means applying the “prudent man” rule to selecting and monitoring investments, among many other things. But shouldn’t your investment advisor be held to the same standard? of course.
But that hasn’t been the case. Under the new rules, you should be paying your adviser on a fee-based contract, and not based on commissions; that is going to mean ALOT of plans have to change in the next year. Commission-based payments have a alot of room for “issues” and conflict of interest.
As an example, say the adviser chooses the XYZ large cap fund, which has a cost ratio and commission structure higher than the similar ABC fund. Did they do that because it is a “better fund” or because it pays more? Are you prepared, as plan trustee, to defend the definition of “better fund” to your employees?
I have been fee-based in almost all my corporate accounts for years, because I believe that we should agree on what I am paid to do, and how much I get paid to provide those services.
In the end, the fiduciary rule changes may mean very little to you – or they may require wholesale changes to your plan.
While this has garnered alot of attention around the country and in the press and media, it is no surprise to anyone in the industry. “The smaller overall market size and shorter-term higher risk profile within this market segment continue to suggest we cannot broadly serve it on an effective and sustained basis,” said CEO Stephen Hemsley in the company’s quarterly earnings conference call.
While United covers more Americans for health insurance than any other private insurer, it has only been a bit player in the individual/exchange marketplace; most of its members are corporate plans.
A big part of the problem that was completely expected by industry experts is that the exchanges are “adversely selected” meaning that they have sicker enrollees. “So as we look at it, the early indications on the health status of the members appears to be a little bit worse,” said UnitedHealthcare CFO Daniel Schumacher. The original expectations of the administration was that younger members that were healthier would offset this problem, but they have not enrolled as expected.
ALBANY, N.Y. (AP) — New York is requiring insurers providing individual coverage through the state health exchange to allow victims of domestic violence or abandonment to enroll at any time.
The Department of Financial Services says those enrollments should be available starting Friday for coverage outside the state-operated exchange.
Standard enrollments through the exchange, established under the Affordable Care Act, are limited to between Nov. 1 to Jan. 31.
The department says the approach is consistent with federal policy and coverage will be available to any member of a household who is a victim, including those who are unmarried and dependents.
Insurers are Affinity, CDPHP HMO, Emblem HIP, Empire HMO, Excellus, Fidelis, HealthFirst, HealthNow, Independent IHBC, Metro Plus, MVP Health Plan, North Shore LIJ, Oscar, Oxford OHP, United and Wellcare.
Thats the argument made by Fortune Magazine in a recent article. Several of the initial cost-control measures expire shortly.
The law included 3 mechanisms to keep premiums down – risk adjustment, reinsurance, and risk corridors. These were designed to give some stability as carriers were setting premiums in a new environment for which there was only limited rate experience. The loss of 2 of these mechanisms (risk adjustment isn’t expiring) will likely cause increasing premiums.
For the full article, click here.