You Should Have Been There…
Health Care Reform: Here it Comes!
Can you believe open enrollment under the PPACA is here?! Progress is being made, but uncertainty for individuals, employers, insurance and tax professionals is still the
A few things we know for sure…
· Smaller employers and employees will need education, support and advocacy; and they may have to be reliant on government “navigators” for their information.
· Costs have increased and will likely continue that trend. All employers, in addition to the premium, will be required to pay a fee of $65 per covered person to help cover the cost of PPACA implementation. Doing the math, a 45 employee company, with 20 spouses and 35 children will pay $6,500 in additional costs (aka, an additional tax).
· All employers will have an increased burden of record keeping and reporting.
· Accountants are now squarely in the middle of the health insurance business and will be involved in the new testing to determine eligible employees for purposes of large v small plan qualification, tax credits and subsidies for eligible employers/employees, increased reporting, sorting out seasonal and union employee implications, advising employers on personnel decisions specifically due to the impact on health care benefits, and benefit plan audits.
· Producer compensation from most carriers has been slashed and producers must now figure out how they will be paid in the new model or if it will continue to be profitable to market and service health insurance benefits.
· Producers have increased their emphasis on ancillary benefits in anticipation employers will reduce health plan benefits or allot a fixed dollar amount of money for employees to use for a menu of benefits to keep costs down.
· The CCIIO recently shut down the state Pre-Existing Conditions Insurance Programs (PCIP) due to cost overruns. Now everyone with pre-existing conditions can get coverage which will be reflected in increased plan costs.
Here is a taste of what we’ve seen in recent months:
· As of now, over 30 states and the District of Columbia have opted to create their own exchanges or are working with HHS to develop “partnership exchanges” and the remaining states have opted for the federally facilitated exchanges (FFEs).
· The PPACA included a provision allowing multi-state plans (MSPs) to encourage competition and nearly 200 MSPs have been submitted to the Office of Personnel Management (OPM), one of the many alphabet soup entities created to oversee the implementation of the PPACA.
· The deadline for carriers and other issuers to submit their plans to the exchanges for approval have passed and those plans are under review.
· Several private exchanges have either been created or will be created, including:
o Mercer Marketplace (Marsh & McLennan) – a one stop shop for 100+employee groups featuring multiple issuers and a menu of medical and ancillary benefit plans
o Aon Hewitt – operating since the fall, it presently has over 100,000 enrolled
o Arthur J. Gallagher & Company – still in development
· Health plan renewals, in anticipation of PPACA implementation, are receiving upwards of 50% to 60% increases. Much of that stems from the addition of new required coverage provisions, changes in underwriting, and the anticipated pricing tiers that will be required.
· Insurance companies are gearing up and selectively participating in exchanges where they have geographic presence and networks, but are particularly cautious of potential catastrophic claims, poorly received exchange launches, and erosion of their financial stability and profitability.
· The range of future pricing is unknown, but the finger pointing by various stakeholders - government officials, insurance industry actuaries, watchdog groups, regulators, insurance agents and brokers among others – as to who is out-exaggerating who only thickens the fog.
· Pricing is complex and the range will vary significantly across states, age and gender demographics, individual v group, states’ uninsured population, and other factors. Because of the new rate tier structures groups with younger demographics may see much higher initial cost increases to subsidize older groups.
· The IRS is trying to figure out how to value the standardized “essential health benefits” (EHB) created by the PPACA. Still being debated is how other plan provisions, such as HAS and HRA contributions, wellness program incentives and other benefits impact this valuation. They have made an attempt at creating sample plan design descriptions for large groups that “meet” the EHB standards.
· Each state has created its own EHB benchmark plans (www.cms.gov/cciio/resources/data-resources/ehb.html).
· Physicians and health care facilities are also being bombarded with change in the way they will provide care, how they will be paid, what reporting they must provide and how they will deploy their resources.
Simple questions: Who is going to help employers and employees manage all of these new choices and decisions? And who will be the individual consumer’s voice? A strong collaboration of professional guidance will be required, along with strong advocacy on behalf of employers and individual insureds. Each week there are new developments, guidance and regulations, nationally and within each state, as we approach formal implementation. The sea change is coming.
Behavioral Finance and Neuro-economics – The Emotions of Investing
The Chapter co-sponsored a joint event with Drexel University’s LeBow School of Business at the Union League to delve into the psychology of how we make investment decisions. Moderated by Sue West, Director of SEI Private Wealth Management, the presentation featured a distinguished panel of Drexel University Professors involved in various research activities surrounding the topic.
Daniel Dorn, Ph.D., Associate Professor of Finance, LeBow School of Business, opened the discussion with a review of investor behavior in Germany during the 2009 and 2011 stock market crisis events. Specifically he analyzed how individual investors allocated and reallocated their portfolios between mutual funds and individual stocks. Generally there were no significant changes in investor behavior, although there was a slight shift away from funds to individual stocks which could be attributed to several factors, perhaps including a need to take control of their investments. More specifically money was moved away from funds with higher cost ratios, foreign stocks and investments affiliated with large banks. And those that did shift away from funds tended to be people who had prior stock market investing experience.
In her experience, Sue West commented that SEI has evolved to a role of trusted advisor. Those investors who had prior advice tended not to react adversely to negative trends, while those who did not have the same experience tended to react poorly.
Barry Waterhouse, Ph.D., Professor, Neurobiology and Anatomy and Vice Dean, Biomedical Graduate and Postgraduate Studies, Drexel University's College of Medicine, held the next segment and began with an explanation of what is Neuro-economics. From a biological perspective, neural mechanisms underlie decision making. Our physical movements and sense of our environment is very different than cognitive functions such as problem solving, attention, memory, tasking, sequencing, comprehension and creativity. Factors affecting these cognitive functions are impacted by our knowledge, experiences, stresses, reward valuation, and risk tolerance. The take-away was that decision making is biological, but predictable based on specific biological factors.
Raj Suri, Ph.D., Associate Professor of Marketing, LeBow School of Business, reviewed research on how we react to the way information is presented. Colors and typeset/handwriting evoke responses and the differences between how men and women respond to different colors or fonts impact their decision making. Color and font help the individual remember things and create perceptions that lead to certain decisions. In addition, complexity (e.g. math) and music in ads also elicits different responses in men and women.
Questions from the audience focused on compliance, and more specifically, risk tolerance questionnaires. The bottom line is these are very limited in scope and only truly touch the surface of assessing suitability and the investment experience. Putting it all together, financial decision making is fraught with mine fields, cognitively and physically, making the ability of the advisor to push the “right” buttons that much more difficult.
"Case Studies in Advising the Intergenerational 'Client': Mapping the Problem and Charting the Solutions"
Bill Widing, JD, an attorney with Kozloff Stoudt, moderated a panel of advisors as they discussed ethical issues surrounding family and business financial planning decision making. Using case studies the panel explored many conflict dilemmas advisors face when representing various client interests and different perspectives and approaches they could take to resolving issues and assisting in making “good” decisions.
The three panelists were:
Linda Callahan Henry – Linda specializes in the challenges inherent in multi-generational and trustee/beneficiary relationships, designing and managing virtual family offices that allow families to integrate the services of multiple advisors and develops strategies for effective planning, communication and decision-making on a global or situational basis.
Averill R. Jarvis is Managing Director at Pitcairn. Averill manages Pitcairn’s client relationship teams in the Philadelphia, New York, and Washington, DC offices. She oversees the professionals who provide trust administration, estate settlement, and tax and estate planning services to client families and their related trusts and entities, and serves as a relationship manager for irrevocable legacy trusts where Pitcairn Trust Company serves as co-trustee.
Gordon Wase is an attorney and partner in the Philadelphia firm of WASE & WASE, which concentrates its practice in the areas of estate planning with an emphasis on planning for the elderly and disabled, guardianships, estate administration, and Orphans’ Court litigation. Mr. Wase is also a professional mediator and arbitrator handling disputes for the U.S. Postal Service, Financial Industry Regulatory Authority and Philadelphia Court of Common Pleas, private, commercial and divorce mediations, and has served as a custody mediator for the Philadelphia Family Court.
The discussion ultimately focused on the importance of communication between all constituents in order to achieve desired outcomes.
Planning for the Non-Traditional Family
Presenter: Stephanie P. Kalogredis, Esq., Lamb McErlane PC
eMail: firstname.lastname@example.org; 610.527.9200
Our May education event featured local Estates and Trusts attorney, Stephanie Kalogredis from the firm of Lamb McErlane PC, Bryn Mawr, as she shared some of the many financial, benefit and estate planning issues facing non-traditional couples and families. Federal law only favors the traditional (husband/wife) marital unions. Federal benefits follow the Defense of Marriage Act (DOMA) and as such, non-traditional families are denied certain benefits under Social Security, COBRA, spousal beneficiary rights and other benefits. Tax filing status and dependency exemptions adversely impact non-traditional families and no marital estate and gift tax benefits are afforded these families. Some state laws do recognize non-traditional unions; however, state laws are varied. Stephanie shared some real life situations impacting the drafting of documents, including co-habitation arrangements, will planning, asset titling, health care disposition, and the many situations where care must be taken regarding asset protection and legal inheritance rights.
Starting The Year Styling!
Our final event of the year, an evening at the Phillies game, began with some great fashion tips and trends as presented by Janelle Moore and Jeanne Lyons, Style Consultants from J. Hilburn. Whether you fit the Classic style or find yourself on the cutting edge of Trendy, you can look your best and fit your wardrobe to reflect who you are, your confidence and your professionalism. Janelle and Jeanne disposed of some of the old “rules of thumb” in mixing and matching colors and patterns, and they shared some of the differences you will find in the quality of the fabrics available in the market.
Recently featured in Inc. magazine, J. Hilburn is the single largest seller of men's custom dress shirts in the world. Shirts start at $89, and they're made from the same fabric as shirts from classic designers such as Zegnas and Armanis, sold direct and delivered to you without the huge department store mark-ups. Esquire named J.Hilburn the best custom shirt maker, and since the company officially launched in 2007, it has expanded from dress shirts to custom men's suiting; ready-to-wear casual clothes; belts, ties, cufflinks, and other accessories; outerwear; formal wear, and new this year - eyewear.
So, if you see some of your fellow GP-SFSP members sporting pocket squares, fitted shirts or suits, it might be because they attended a great event, then set up a style appointment with Janelle and put on the shine!