Monthly Archives: March 2019

401k Litigation Update

In 2016 and 2017, 107 complaints were filed with the DOL about 401k plans. This is the most since 2008-2009 according to Retirement Study done at Boston College.

Some things are obvious- when markets fall, complaints tend to rise. These complains tend to fall with plans that were not being paid enough attention to typically, and resulted in “hundreds of millions of dollars in settlements…”

Further, the complaints are typically “obvious and preventable. What are the primary complaints:

  1. Neglecting to have and follow prudent fiduciary policies, procedures and practices.
  2. Failing to mitigate conflicts of interest
  3. Offering inappropriate investment choices
  4. Lacking required transparency

The time to adjust your behavior is before complaints and problems occur, of course. A common theme in the study is that as soon as lawsuits and investigations start, everyone starts getting educated on their fiduciary duties, but thats too late. Also note that these issues are not about investment advice, but about fiduciary processes, so if you have an investment adviser, thats just not enough!

Healthcare costs by state

From a recent survey by business insider, an interesting comparison of overall costs by state – including premiums and average deductibles and expenses. Costs continue to rise faster than wages. Interestingly, the state with the highest average income (NEw Hampshire) also has the highest costs- $8,289 per person per year. How did your state fare?

Why people are buying short term medical…

A recent survey by ehealth shows that Consumers are turning to short-term health plans primarily because they cannot afford other options. With the premium costs ranging from $4700-8000 a year in the US, people cannot afford it. Even though these plans do not cover pre-existing conditions, and do not have the comprehensive protections of an ACA (“Obamacare”) policy, “More than 60 percent of respondents to the online poll said that affordability was their main reason for purchasing a short-term plan, compared to just 28 percent who cited the need for temporary coverage as their main motivation.”

More from the report: “Enrollees in short-term plans say they are satisfied with the benefits they receive, although relatively few people actually try to use them.

“Sixty-nine percent said their short-term plans offer coverage for the benefits they value most, yet only 23 percent of enrollees actually received medical care while covered by a short-term plan.

“Of those enrollees, 54 percent made a sick visit to a doctor, and 43 percent received preventive care.  Only 25 percent purchased prescription drugs, and 12 percent made an ED visit.  Only two percent engaged in a hospital outpatient visit and 8 percent required surgery or other serious care.

“Among consumers who received care, 43 percent said they were very satisfied with the results.

Long Term Care Policies in trouble?

Several events this past week are concerning about the financial viability of Long Term Care Policies.

In South Carolina, rate increases filed with the department of insurance last week requested between 143%-259%. The Director of the insurance department turned down those increases, which leads to the second event. In New York, Genworth (the largest writer in the past few years of LTC) announced, after their rate increases were declined, they are halting all new sales in the state.

Note that existing clients will still be serviced.

I am reminded that in 1988, when I was at John Hancock, they rolled out their LTC Policies with much fanfare, and a wizened old agent in the room asked a brilliant question. “How do they know what the claims will be in the future, they have never done this before. What if they underprice it?”

And the future is now here. Clients look at LTC premiums, rightfully balk, and elect life insurance or annuities with Chronic illness riders to accomplish the same basic thing…

“General Electric Co is setting aside one of the largest amounts ever to cover potential losses on policies that provide long-term care in nursing facilities and patients’ homes. But insurance experts are concerned that may not be enough.

GE shocked investors last year when it took a $6.2 billion after-tax charge and said it planned to set aside $15 billion over seven years to cover claims on some 300,000 long-term care policies written more than a decade ago, when actuaries did not yet know how costly the claims would become.

The costs, which far exceeded GE’s estimates, sent its shares tumbling, spurred an investor lawsuit and prompted the U.S. Securities and Exchange Commission to investigate.

Last week, GE provided new details about its insurance and scheduled a “teach in” for Thursday to give more information.

GE’s new reserves amount to about $55,000 per policy, in line with those of other long-term care insurers, according to an analysis for Reuters by Audit Analytics, an independent research company based in Massachusetts.

“For comparison, Humana Inc has set aside $77,282 per policy, while Unum Group has set aside $10,614, Audit Analytics said.

Can selling across state lines work?

The Washington Post reports that “The Trump administration is seeking ways to allow more health insurance plans to be sold across state lines — an effort that could involve implementing a part of the Affordable Care Act the Obama administration left untouched.

“The Centers for Medicare and Medicaid Services invited insurers and other stakeholders to give input over the next 60 days on how to “eliminate regulatory, operational and financial barriers to enhance issuers’ ability to sell health insurance coverage across state lines” in a request for informationissued yesterday afternoon.”

The problem, IMHO, is two-fold. Rates vary state to state because different states have different mandated benefits, the people in their pool have varying levels of health, and the costs for healthcare vary greatly state to state.

As an example, a hernia repair in Iowa averages $6900, while in NY it is 15% higher at $7900. Would your insurance bought in another state pay the local usual and customary rate? if so you will have $1000 uncovered, and MD’s might drop the plan due to lower reimbursement rates. OR would they pay the higher rate, therefore having to raise the premiums to cover these higher costs?

And if the rates all rise to meet the more expensive costs of healthcare, what have we accomplished? This is a very complicated topic, and sound bites on the nightly news are not solutions. Our system remains badly broken and in need of a comprehensive solution – one that actually controls costs, doesn’t drive physicians away, provides americans with access to care, and at a reasonable cost.


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Reeve Conover is a Registered Representative. Securities offered through Cambridge Investment Research, Inc., a Broker/dealer member FINRA/SPIC. Cambridge and Conover Consulting are not affiliated. Licensed in SC, NC, NY, CT, NJ, and CA.
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