chalk talk | PLANADVISER January/February 2014

Asset Accumulation Alert

The hurdles of the new health care act

By Steff C. Chalk | January/February 2014
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Art by Dadu Shin

Each new year arrives with a mixture of optimism, trepidation and excitement. Historically, the final six weeks of each calendar year are reserved for getting clients’ plans in good order for the next 12 months, whether that means revising asset class lineups, updating client documentation, business-planning or restructuring client defaults.

During their 2013 year-end plan reviews, retirement plan advisers undoubtedly discussed with their clients such topics as maximizing plan outcomes, retirement plan industry norms, benchmarks and peer group averages.

However, this year, your clients will experience yet another key employee benefits concern, namely the administration and costs associated with the Patient Protection and Affordable Care Act (ACA). Retirement plan advisers must now engage in conversations with plan trustees concerning the ACA and the corresponding influence it will have on their plan sponsor clients and their work forces.

Embarking on a New Era

As consumers and managers of our own health care, we were directed by House Minority Leader John Rusche, D-Idaho, to embrace the ACA. In essence, Rusche said the act will expand health care coverage for Americans, lower expenses for those currently insured and improve the cost of health care, overall. So far, however—as of my writing this column—America’s health care consumers have faced sign-up and execution hurdles due to glitches with the plan’s website.

For us as advisers, our initial education includes being introduced to terms and practices that had heretofore been foreign or unnecessary. One of the bigger learning curves coming through the ACA is attributable to introducing exchanges at both the federal and state levels. Retirement plan advisers are no strangers to exchanges, as we have worked with, in and around them throughout our careers. Exchanges have been prevalent and used in an orderly fashion in our industry for far longer than anyone alive today can recall.

Insurance exchanges have existed since the 1600s, when those gathering at Lloyd’s Coffee House on Tower Street near the Thames in London would isolate and mitigate risks associated with the safe passage of merchant ships that, at the time, transported spices, tobacco, silk and other goods around the globe. Coffee house exchanges would operationally function by matching a willing buyer of risk (an investor) with a willing seller of risk (a merchant), so that the loss of a single ship (by weather, war, pirates or some unknown event) would not bankrupt a merchant shipping concern. These exchanges, born of necessity, served the willing buyer and the willing seller, thus birthing the basis for what we know today as the insurance industry.