From the June 2009 issue of Investment Advisor • Subscribe!

June 1, 2009

Retirement News & Products

Recent data published by the Employee Benefit Research Institute (EBRI) found that many Americans support the use of lower cost sharing as an incentive to change the way individuals use the healthcare system in order to reduce costs. Lower cost sharing cuts healthcare consumers' out-of-pocket expenses when they follow certain courses of treatment or use certain healthcare providers. Employers have been interested in bringing aspects of "consumerism" into health plans for more than 25 years, according to the May 2009 EBRI Notes, which reports the survey data. Concurrent with the movement toward account-based plans, or "consumer-driven" health plans as they are more frequently called, employers have increasingly focused their attention more broadly on consumer engagement in health care. The use of lower cost sharing to change the way individuals use the healthcare system is one aspect of consumer engagement. Some of the findings were that: More than one-half (58%) of individuals surveyed support lower cost sharing for patients who actively participate in a program to maintain or improve their health; 40% support lower cost sharing for patients who use treatments that have been scientifically proven to be effective for their medical condition; one-third (34%) support lower cost sharing for patients who choose to see high-performing healthcare providers; and nearly one-half (47%) support lower cost sharing for patients who choose less invasive procedures to treat their medical conditions.

A recent study by Envestnet Asset Management found that investors do not understand target-date funds (TDFs). The study found that fewer than 6% of investors surveyed have heard of target-date funds and can correctly describe them. Nearly 62% of respondents thought they would be able to retire on the fund's target date; roughly 38% of respondents believe the funds will produce a guaranteed return; more than one-third of respondents believe their money will grow faster in target-date funds than in other investments; and almost 30% believe they can save less money with the funds and still meet their retirement goals. The Envestnet study also found that investors had little sense of the risks of investing in target-date funds. Forty one percent of respondents think there is little or no risk of losing money in a one-year period, the study says, while 57% believe it is unlikely that they can lose money in any 10-year period. The study also found that one-fifth of respondents believe it is less likely they could lose money in TDFs than in money market funds, while 50% believe the odds were equal. When asked to choose from a list of seven potential target-date fund portfolios, the majority of respondents selected the most aggressive fund, based on expected returns over a 10-year period. Only 8% of respondents said selecting a retirement savings rate was the most important planning decision they could make.

Jesse Slome, founder and executive director of the American Association for Long-Term Care Insurance, has established a new insurance trade organization called the American Association for Critical Illness Insurance (AACII). Slome says the new professional trade group was set up to increase the number of insurance and financial professionals successfully marketing critical care insurance protection. "There is an enormous opportunity in the United States for sale of quality critical illness products," Slome, who will direct the new association, said in a statement. "Our initial focus will be on creating heightened awareness among professionals and support their efforts to successfully market and sell this important protection." The new producer-focused association will work closely with the National Association for Critical Illness Insurance (NACII).

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