Category Archives: Investing and fiduciary requirements

401(k) fee disclosure leading to plan conversion activity

By Darla Mercado

July 24, 2012 1:31 pm ET

Mandated retirement plan fee disclosure has been in effect for only a few weeks, but plan sponsors are already bailing on costly service providers.

The much-ballyhooed retirement plan fee disclosure to employers went into effect July 1, requiring record keepers, third-party administrators and other service providers to divulge their fee data. Similar details will need to be shared with plan participants starting Aug. 30.

While plan sponsors have only just started receiving their fee disclosures, some of them are displeased with the fees they’re paying, particularly the cost of insurance for group annuities.

“We changed over one client who was in a group variable annuity that cost 1.39%, switching over to Fidelity Investments,” said Brian T. Niemann, president of Wealth Management Group LLC. “It wouldn’t surprise me if we had a few conversions.”

Though everyone is focusing on the participant fee disclosures that will be coming up at the end of August, it’s really the disclosures to plan sponsors that will create waves, advisers noted. Employers who are dissatisfied with the services they’re getting for the fees they pay are ready to make some changes.

For Stephen D. Wilt, senior vice president and adviser at Captrust Financial Advisors, the last three weeks have brought across six new and unsolicited employers looking to dump their previous provider. One of those clients already has decided to sign on with Captrust. “Six to 10 new clients in one year is a good year,” Mr. Wilt said. “Last week was a week of unsolicited opportunities coming in the door.”

In some cases, the prospective clients are looking to break up with advisers who don’t specialize in retirement and who haven’t been very attentive to the plan’s needs. Plan sponsors have a duty to ensure that the fees are reasonable.

“They have an obligation to look around,” Mr. Wilt said of the plan sponsors. He noted that the firms he’s been working with for new business include The Charles Schwab Corp., Fidelity and T. Rowe Price Group Inc., while some of the smaller plans have been signing on with Great-West Retirement Services.

The Labor Department recently announced improved procedures to protect plan sponsors from fiduciary liability in the event a service provider doesn’t comply with the disclosure requirements. Employers can notify the department when the service provider fails to submit the information.

Still, not having that information in the first place is enough for some plan sponsors to walk away from their providers, advisers said.

“It’s viciously competitive,” Mr. Wilt noted. “If you’re with a provider that hasn’t been proactive, you have an opportunity to negotiate your fees and benchmarking.”

“Some record keepers are less prepared than others,” said John Wilcox, an adviser with Mayflower Advisors LLC. “They’re not prepared [for fee disclosure] or they’re not communicating that to their clients. If the vendor isn’t ready, then maybe we should look elsewhere.”

Parent Company of Empire Blue Cross, WellPoint cuts outlook as 2Q profit falls 8.3 pct

Jul. 25, 2012 12:31 PM ET

By Tom Murphy
INDIANAPOLIS (AP) — WellPoint Inc., the nation's second-largest health insurer, surprised Wall Street on Wednesday by cutting its 2012 forecast and reporting second-quarter earnings that both fell and missed expectations. Investors then sent the Indianapolis company's stock price on its biggest one-day plunge in more than three years. The insurer said it lowered earnings expectations after enduring a rough month of May and seeing enrollment slip. That fall was largely due to job cuts, which reduce the number of people covered by employer-sponsored health insurance. "We're not seeing the economy improve, and it continues to be sluggish," Chief Financial Officer Wayne DeVeydt said. Medical costs came in about $50 million higher than WellPoint expected in May, as more people visited the doctor and then were referred to additional outpatient care, DeVeydt said. Growth in medical costs returned to expected levels in June, but WellPoint decided it was prudent to lower its forecast in case costs spike again later this year. WellPoint now expects 2012 adjusted earnings, which exclude one-time items, to range between $7.30 and $7.40 per share. That's down from a previous forecast of $7.57 per share. It's also well below the $7.76 per share, on average, analysts surveyed by FactSet expected. Citi analyst Carl McDonald said in a research note that UnitedHealth Group Inc., a WellPoint competitor, also had higher medical costs. But it still managed to raise its 2012 earnings forecast when it reported second-quarter results earlier this month. "Time may be running out for WellPoint's management team," McDonald wrote. "Several large (share) holders were already frustrated by WellPoint, and this earnings report won't do much to improve the relationship." In the second quarter, WellPoint earned $643.6 million, or $1.94 per share. That's down more than 8 percent from $701.6 million, or $1.89 per share, a year ago when the company had more shares outstanding. That marked the fifth-straight quarter in which WellPoint reported a drop in earnings compared to the previous year's quarter. Adjusted earnings were $2.04 per share. Operating revenue, which excludes investment income and gains, climbed 2 percent to $15.17 billion. Conversely, membership fell 2 percent to 33.5 million people compared with last year's quarter. The performance missed Wall Street expectations. Analysts had forecast, on average, earnings of $2.08 per share on $15.31 billion in revenue. WellPoint shares dropped 11.7 percent, or $7.17, to $54.25, the stock's deepest one-day decline since January 2009, according to FactSet. Shares of other major insurers like UnitedHealth and Aetna Inc. also sank 5 percent while broader trading indexes were mixed. WellPoint shares have now dropped more than 18 percent so far this year. Chairwoman and CEO Angela Braly told analysts during a Wednesday conference call that WellPoint was disappointed that it had to lower its guidance. But she said the insurer's decision to invest in growth despite tough market conditions will pay off with a better future performance. Earlier this month, WellPoint said it will spend about $4.46 billion to buy Amerigroup Corp., which runs Medicaid coverage in 13 states. Medicaid is the state-federal program that provides coverage for the needy and disabled. Insurers see lucrative growth opportunities in working with people who qualify for both Medicaid and the federally-funded Medicare program. Last month, the insurer also completed its purchase of contact lens retailer 1-800 Contacts Inc., and it continues to expand a Medicare Advantage plan provider it acquired last year DeVeydt, the CFO, said in an interview that the insurer could have cut down on its investments in order to meet its earnings forecast. "But Angela made the difficult call of saying the future is more important," he said, referring to the CEO. WellPoint trails only UnitedHealth in size. It runs Blue Cross Blue Shield plans in 14 states, including California, New York and Ohio. Associated Press

S.C. BlueCross BlueShield issuing rebates to small-business owners

Charleston Post and Courier, Staff Report

Published July 24, 2012

BlueCross BlueShield of South Carolina and BlueChoice HealthPlan are mailing rebate checks this week to individual customers.

Next week, rebates will go out to small-business owners, the Columbia-based health insurance and information technology company said Monday.

Rebate amounts are based on overall claims for 2011 and other complex calculations by which the federal government has established medical loss ratios, or MLRs.

That means an insurer had to use 80 cents out of every dollar submitted in premiums to pay customers’ medical claims and for other specific activities. BlueCross is issuing rebates in those markets because it fell slightly below the 80% target.

No large groups are eligible for rebates since BlueCross did meet the large group target of 85%.

Rebate amounts vary from group to group and member to member. Most payouts are less than $200. Rebates are being mailed directly to members with individual policies and to small-group employers. The federal government defines small groups as those with two to 50 full- and part-time employees, including seasonal help.

Small-group employers have the option of returning a portion of the rebates to their employees or reinvesting it in the company to offset future health care costs.

BlueCross did not release the total amount of rebates being issued in South Carolina.

Jim Deyling, president of private business at BlueCross BlueShield of South Carolina
Jim Deyling, president of private business at S.C. BlueCross

Jim Deyling, president of private business at BlueCross BlueShield of South Carolina, said governmental MLR requirements do not address the root cause of rising health care expenses.

“We are complying with the law, but our concern remains that a rebate such as this not only creates a false impression of overpricing, but also reveals the fundamental flaw of the legislation, which is that it does nothing to reduce health care expense for members,” Deyling said.

“In addition to keeping our profit margins below 3%, we want our customers to know that BlueCross BlueShield of South Carolina continues to be innovative in our approach to reducing rising health care costs,” Deyling said.

“We are actively working with providers and employers to identify ways to keep premiums as affordable as possible,” Deyling said. “We are also leading the way in rewarding providers for the quality of health care services they provide rather than the quantity of those services. We believe these efforts will make our members healthier in the long run as well as reduce costs.”

BlueCross BlueShield of South Carolina is an independent licensee of the Blue Cross and Blue Shield Association. It is the only South Carolina-owned and operated health insurance carrier, comprising more than 40 companies involved in health insurance services, U.S. Department of Defense health program and Medicare contracts, other insurance and employee benefits services, and a philanthropic foundation that funds programs to improve health care and access to health care for South Carolinians.

BlueChoice HealthPlan of South Carolina, a subsidiary of BlueCross BlueShield of South Carolina, also is an independent licensee of the Blue Cross and Blue Shield Association.

Stephen Largen Posted: Tuesday, July 24, 2012 12:01 a.m.


COLUMBIA — South Carolina’s largest health insurer has begun sending out rebate checks to some policy holders because it failed to meet a requirement of the federal health care overhaul.

Blue Cross Blue Shield of South Carolina said Monday that checks — most for less than $200 — will be sent to individual and small group policy holders during the next two weeks.

The provider, like some others, didn’t spend enough on customers’ medical claims in 2011, according to the terms of the Affordable Care Act.

Blue Cross Blue Shield said it is complying with the law, even though the insurer views the requirement as bad policy.

The spending stipulation doesn’t address the root causes of rising health care expenses, such as waste and fraud and lifestyle choices, a company spokeswoman said.

And Jim Deyling, Blue Cross Blue Shield’s president of private business, said in a statement that “our concern remains that a rebate such as this not only creates a false impression of overpricing, but also reveals the fundamental flaw of the legislation, which is that it does nothing to reduce health care expense for members.”

The director of Gov. Nikki Haley’s Department of Health and Human Services agreed.

“In a health care system where it has been estimated up to 30 percent of health care spending is excess cost, these small rebates may be momentary relief for those who receive them, but they clearly don’t target the underlying reasons for out of control health care costs,” Tony Keck said in a statement.

Haley, like most Republicans, opposes the Affordable Care Act.

Conversely, the president of South Carolina’s Small Business Chamber of Commerce hailed the requirement that forced Blue Cross Blue Shield to issue rebates.

“This demonstrates that the Affordable Care Act, ‘Obamacare,’ health care reform or whatever you call it is doing what it said it would do: help make health insurance more affordable,” said Frank Knapp, a longtime supporter of the law.

Blue Cross Blue Shield held at least 60 percent of the market share in eight of the state’s largest metro areas in 2008, including about 70 percent in the Charleston area, according to a study by the American Medical Association.

Reach Stephen Largen at 864-641-8172 and follow him on Twitter @stephen largen.

Annual DBL reminider for NY Clients- perhaps you aren’t paying enough after all?

DBL- the New York State Disability Benefits Law – is required coverage.  It provides very little in the way of actual benefits (50% of salary up to $170 a week), but it can be enhanced.

The current rates for DBL hover around $2.50 male, $5.10 for female – assuming quarterly billing.  It can be up to 20% cheaper if you do annual billing.

But did you know that you can double your emplyees benefit (into tsomething that might actually help them pay their bills) for only about a 50% increase?  And for double the premium you can triple the benefit.

Something to consider,  as you look to add low-cost benefits that have some visible WOW factor to your employees.

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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. - SIPC - Brokercheck