Saturday, July 27, 2013

ObamaCare: Reports from the Unfolding Train Wreck.

Remember when President Obama famously promised that if you like your health-care plan, you'll be able to keep your health-care plan? It was a brilliantly crafted political sound bite. Turns out, the statement is untrue.

Aside from that small detail, the slightly larger problem is that the Obama administration doesn't have a health-care plan. Yes, the White House has a law with thousands of pages, but the closer we get to Oct. 1, the day government-mandated health-insurance exchanges are supposed to open, the more we see that the administration doesn't have a legitimate plan to successfully implement the law.

Unworkable. That word best describes ObamaCare. Government agencies in states across the country, whether red or blue, have spent countless hours and incalculable dollars trying to keep the ObamaCare train on its track, but the wreck is coming. And it is the American people who are going to pay the price.

Fifty-five working days before the launch of the ObamaCare health-insurance exchanges on Oct. 1, the administration published a 600-page final rule that employers, individuals and states are expected to follow in determining eligibility for millions of Americans. Rather than lending clarity to a troubled project, the guidelines only further complicated it. - Jindal and Walker: Unworkable ObamaCare, Opaque rules, big delays and rising costs: The chaos is mounting, Wall Street Journal, 07/25/2013

Link to the entire article appears below:





Thursday, July 25, 2013

ObamaCare: Liking What You Don’t Understand Transforms into Disliking What You Understand

‘Labor unions are among the key institutions responsible for the passage of Obamacare. They spent tons of money electing Democrats to Congress in 2006 and 2008, and fought hard to push the health law through the legislature in 2009 and 2010. But now, unions are waking up to the fact that Obamacare is heavily disruptive to the health benefits of their members.

Last Thursday, representatives of three of the nation’s largest unions fired off a letter to Harry Reid and Nancy Pelosi, warning that Obamacare would “shatter not only our hard-earned health benefits, but destroy the foundation of the 40 hour work week that is the backbone of the American middle class.”
The letter was penned by James P. Hoffa, general president of the International Brotherhood of Teamsters; Joseph Hansen, international president of the United Food and Commercial Workers International Union; and Donald “D.” Taylor, president of UNITE-HERE, a union representing hotel, airport, food service, gaming, and textile workers.

“When you and the President sought our support for the Affordable Care Act,” they begin, “you pledged that if we liked the health plans we have now, we could keep them. Sadly, that promise is under threat…We have been strong supporters of the notion that all Americans should have access to quality, affordable health care. We have also been strong supporters of you. In campaign after campaign we have put boots on the ground, gone door-to-door to get out the vote, run phone banks and raised money to secure this vision. Now this vision has come back to haunt us.”

‘Unintended consequences’ causing ‘nightmare scenarios’
The union leaders are concerned that Obamacare’s employer mandate incentivizes smaller companies to shift their workers to part-time status, because employers are not required to provide health coverage to part-time workers. “We have a problem,” they write, and “you need to fix it.”

“The unintended consequences of the ACA are severe,” they continue. “Perverse incentives are causing nightmare scenarios. First, the law creates an incentive for employers to keep employees’ work hours below 30 hours a week. Numerous employers have begun to cut workers’ hours to avoid this obligation, and many of them are doing so openly. The impact is two-fold: fewer hours means less pay while also losing our current health benefits.”
What surprises me about this is that union leaders are pretty strategic when it comes to employee benefits. It was obvious in 2009 that Obamacare’s employer mandate would incentivize this shift. Why didn’t labor unions fight it back then?

Regulations will ‘destroy the very health and wellbeing of our members’

The labor bosses are also unhappy, because of the way Obamacare affects multi-employer health plans. Multi-employer plans, also called Taft-Hartley plans, are health insurance benefits typically arranged between a labor union in a particular industry, such as restaurants, and small employers in that industry. About 20 million workers are covered by these plans; 800,000 of Joseph Hansen’s 1.3 million UFCW members are covered this way.
Taft-Hartley plans, they write, “have been built over decades by working men and women,” but unlike plans offered on the ACA exchanges, unionized workers will not be eligible for subsidies, because workers with employer-sponsored coverage don’t qualify.’ - Labor Unions: Obamacare Will 'Shatter' Our Health Benefits, Cause 'Nightmare Scenarios', Avik Roy, Forbes, 07/15/2013


The entire article appears in the link below:

Wednesday, July 24, 2013

ObamaCare is Coming and Hospitals are Laying Off Workers? No Way! Way!

“That busy health care industry to-do list ahead of ObamaCare includes an increasing number of hospital job cuts. Since the start of May, hospital groups have announced plans to lay off nearly 6,000 workers. Add in several thousand additional positions seeing fewer hours or cuts through attrition and buyouts, and the work reductions impact more than 9,000 jobs.

An IBD review found layoff and workforce reduction announcements covering 75 hospital groups in 33 states and the District of Columbia.

While hospital layoffs are much more common in recent years, what is notable is how widespread they've become, impacting even firms that have never before resorted to job cuts. Even more striking is the sudden change in patient behavior and rapid deterioration in hospital finances.

Baystate Franklin Medical Center, in Massachusetts, which is cutting up to nine nurses on its surgical staff, noted that the average hospital stay for its patients has fallen from 3.4 days in 2012 to 2.4 days this year.

Jordan Hospital, also in Massachusetts, is cutting 43 positions partly as a response to a 9% decline in inpatient admissions.

Cone Health of North Carolina, which earned $100 million in 2010, was reportedly $11 million in the red through eight months of its fiscal year. As a result, the hospital group is laying off 150 employees.

Baptist Health of Arkansas, which this week said it will lay off 170, nearly 2.5% of its workforce, listed the array of challenges forcing hospitals to find efficiencies wherever they can: "substantially less government reimbursement, burdensome government regulations, rapidly rising costs of supplies, increasing charity care and bad debt, and the need for technology and medical innovations."

Nashville, Tenn.-based Community Health Systems (CYH), with 135 hospitals in 29 states, warned late Thursday that it experienced its "first significant earnings miss" in almost seven years in the June quarter. The hospital group gave no word of layoffs but said it is intensifying its focus on managing expenses.

After-tax profit in the quarter sank to $65 million vs. $151.7 million a year earlier as admissions fell 5.1% and uncompensated care costs topped expectations.” - Investors Business Daily, Hospital Layoffs Pick Up As ObamaCare Era Starts, Jed Graham, 07/19/2013

Link to the entire article appears below:

Thursday, July 18, 2013

Cascading Train Wrecks on the Wrong Rail: ACA and the Existing Welfare State

“A new study suggests President Obama’s Affordable Care Act might have yet another huge and negative unintended consequence: if low-income adults can get health insurance through Obamacare’s Medicaid expansion, they are less likely to try and get a job — or keep a job. As Public Health Insurance, Labor Supply, and Employment Lock by Craig Garthwaite, Tal Gross, and Matthew J. Notowidigdo puts it [original emphasis]:

Our results suggest a significant degree of “employment lock” – workers employed primarily in order to secure private health insurance coverage. The results also suggest that the Affordable Care Act – which similarly affects adults not traditionally eligible for public health insurance – may cause large reductions in the labor supply of low-income adults. … One must exercise considerable caution when directly applying our results to the ACA, but our results appear to indicate that the soon-to-be-enacted health care reform may cause substantial declines in aggregate employment.

Using CPS data, we estimate that between 840,000 and 1.5 million childless adults in the US currently earn less than 200 percent of the poverty line, have employer-provided insurance, and are not eligible for public health insurance.

Applying our labor supply estimates directly to this population, we predict a decline in employment of between 530,000 and 940,000 in response to this group of individuals being made newly eligible for free or heavily subsidized health insurance. This would represent a decline in the aggregate employment rate of between 0.3 and 0.6 percentage points from this single component of the ACA.” - Study: Obamacare could cause 1 million low-income Americans to move from work to welfare, 07/15/2013, AEI, James Pethokoukis

The link to the entire article appears below:

Tuesday, July 16, 2013

Upon Further Review of the ACA Delays: the Synthesis of No Employer Mandate, No Employer Verification Mechanism, No Income Verification and the Use of Exchanges.

“That extra cash will subsidize coverage for workers without requiring an employer contribution, at least temporarily. It will make it easier for enrollees to understate their income to get subsidies that are richer — much richer in some cases. And it will enable modest-income families and poor adults who were supposed to be cut off from subsidies to access federal help.

By suspending many of the least popular features for a year or more, ObamaCare's cost is likely to be significantly higher; public support may be temporarily supported as well.

Modest-income families are among those that get the rawest deal from ObamaCare. If a spouse is offered individual coverage by an employer that meets the law's affordability test of 9.5% of household income, then the other spouse and their children are ineligible for exchange subsidies.”

“Under ObamaCare's official rules, such families might be better off financially if they earned less. The law's "family penalty" now won't be a concern for 2014.

Friday's release from the Department of Health and Human Services said that state exchanges may take an applicant's word regarding the availability of affordable employer coverage.

This follows logically from Tuesday's announcement that employer reporting requirements about each worker's access to health insurance would be suspended for 2014. No reporting requirements, no fines.”

“Considering ObamaCare's complex rules that deem unaffordable employer coverage for families "affordable," it's only logical that many families will sign up for subsidies who weren't supposed to be eligible.

Friday's release also gave state exchanges temporary leeway to apply
the honor system to enrollees when it comes to reporting their income.

This is key because exchange subsidies can differ greatly for households separated by a few thousand dollars in income. In fact, the lower-earning household might be better off under ObamaCare after factoring in lower taxes, bigger premium subsidies and far-lower deductibles.

For example, a couple earning $30,000 might face a $300 deductible, thanks to cost-sharing subsidies, while one earning $32,000 could face a $3,500 deductible, according to one estimate provided to Kaiser Family Foundation by Towers Watson.”

“The delay of the employer mandate also will at least temporarily smooth over two additional ObamaCare cliffs: the 49-worker firm and the 29-hour workweek.

For employers with 49 full-time-equivalent workers (based on hours worked, not just headcount), the 50th worker for firms that do not carry health coverage would carry a $40,000 penalty.

Firms that do offer coverage which is either too pricey for some workers or not deemed comprehensive enough would owe $3,000 for each full-time worker who gets ObamaCare subsidies. Because the fine is nondeductible, it would equate to $5,000 in deductible wages for a profit-making firm facing a 40% federal and state tax rate.

Because that annual fine would be imposed for a worker clocking 30 hours per week, but not for one who puts in 29 hours, it would equate to a wage hike of $96.15 per hour.

Thus, the 30-hour workweek is likely to last only as long as the employer mandate is delayed.

The Congressional Budget Office has projected that the employer mandate would raise $10 billion in fiscal 2015, starting October 2014. That doesn't include any extra subsidy costs due to the mandate's temporary absence.

House Budget Committee Chairman Paul Ryan, R-Wis., has asked the CBO to recalculate the health law's budget impact as a result of the administration's changes.” - Smoothing ObamaCare's Transition Will Cost Billions, Jed Graham, IBD, 07/08/2013

Upon further review, by not requiring the employer mandate until 01/01/2015 then the “individual coverage by an employer that meets the law's affordability test of 9.5% of household income” is not in play meaning a worker could easily go to the exchange with family in tow and receive a subsidy for himself/herself as well as the remainder of the family by indicating the employee‘s coverage does not meet the affordability test of 9.5%. No mechanism is in place to verify the claim. If the mandate was in effect and the employer did in fact meet the 9.5% mandate and the verification mechanism was in place, then the remainder of the employees family would not qualify for subsidies through the exchange.

If the employee were to fudge in order to maximize a reduction in price for the entire family’s health insurance cost and hence seek out the exchange and maximum subsidy, then increased subsidies occur. The subsidy and potential increase in subsidy is taxpayer funds therefore increasing the need for taxpayer revenue to fund the increased subsidies.

The entire article from Investor’s Business Daily appears in the link below:

Friday, July 12, 2013

And about that “insured” pension of yours…..

‘A retirement plan supposedly is an excellent reason for joining a union. Yet a March report by the U.S. Government Accountability Office reveals chronic underfunding and potential insolvency of pension plans involving a union and two or more private-sector employers within the same industry. The insurance fund covering these "multiemployer" plans, run by a federal agency, Pension Benefit Guaranty Corporation (PBGC), "would be exhausted in about two to three years if projected insolvencies of either of two large plans occur in the next 10 to 20 years." The study follows a January PBGC report projecting "current premiums ultimately will be inadequate to maintain benefit guarantee levels." That same month, PBGC, the Labor Department and the Treasury Department jointly released a separate report with troubling implications. The best option for the agency may be to phase out coverage of multiemployer plans altogether.’

Pension Benefit Guaranty Corporation was created by the Employee Retirement Income Security Act of 1974 (ERISA) to make good on pension promises that can't be kept. In the case of a terminated single-employer plan, PBGC takes over management functions outright. In the case of a terminated multiemployer plan, PBGC provides financial assistance but allows the plan to remain an independent entity. Funded primarily through sponsor-paid insurance premiums, the agency has never required a congressional appropriation (i.e., bailout). Congress, and not the agency, sets benefit and premium levels. And like other federal insurance agencies, such as the Federal Housing Administration (FHA), the self-financing mechanism has run up against natural limits. Every year since fiscal year 2002 PBGC has run an operating deficit. That is, assets have fallen short of projected liabilities. In 2003, the Government Accountability Office added PBGC to its list of "high-risk" agencies. And the funding gap is likely to be around for a while. The agency was about $4 billion in the red at the end of fiscal year 2002 after years of being in the black. That shortfall would rise to $23.5 billion by the close of fiscal year 2004. While it fell to $11.2 billion by the close of fiscal year 2008, it again rose, this time to nearly $35 billion, four years later.

The widening gap of the last several years, it is worth noting, has occurred in spite of a massive reform law, the Pension Protection Act of 2006. Among other things, this legislation raised annual premiums to rates more in accordance with what private-sector insurers would charge. Current rates are: $42 per worker/retiree, indexed for inflation, plus another $9 for each $1,000 of unfunded vested benefits (single-employer); and $12 per worker/retiree, indexed for inflation (multiemployer). Yet even these sensible (upward) adjustments have proven insufficient. Premiums didn't even cover half of the nearly $6 billion paid out to 887,000 retirees and family members in more than 4,500 plans during fiscal year 2012. PBGC Director Josh Gotbaum admitted last fall in the corporation's annual report: "PBGC has enough funds to meet its obligations for years. But without the tools to set its financial house in order and to encourage responsible companies to keep their plans, PBGC may face for the first time the need for taxpayer funds. That's a situation no one wants." ‘

‘So how frequent will insolvencies be over the years? The GAO concluded that by 2017, they would more than double. Financial assistance to plans that are insolvent, or likely to become so during the next 10 years, could exhaust the PBGC multiemployer insurance fund. In the event of that happening, many retirees will see their benefits reduced to a tiny fraction of their original value. To avert such a consequence, most of the experts that the GAO contacted about this scenario recommended one or both of two actions: 1) allow trustees, under limited circumstances, to reduce accrued benefits for plans headed for insolvency; and 2) provide federal loans to severely underfunded plans facing large benefit reductions. As for the second, the GAO admitted that such "loans" in the past rarely have been repaid because the plans rarely emerge from insolvency.

The PBGC report, released to Congress in January in accordance with ERISA statutes requiring an actuarial review of the multiemployer insurance fund every five years, isn't encouraging either. PBGC staff calculated that as of September 30, 2012, the fund had total assets of $1.8 billion and liabilities of $7.0 billion. In other words, it was running an operating deficit of $5.2 billion. To maintain the program, the report emphasized, "Premiums must be sufficient to cover current and future financial assistance obligations." But this negative equity carries the risk of bringing PBGC down. Based on asset and liability projections, and assuming no changes in multiemployer plans or in the PBGC multiemployer program, the study estimated there is about a 35 percent probability that the assets of the agency's corresponding insurance fund will be exhausted by 2022 and about a 90 percent probability of exhaustion by 2032.’ - New Reports Show Severe Shortfalls in Multiemployer Union Pensions. Carl Horowitz, National Legal and Policy Center, 07/02/2013

Link to the entire article appears below:

H/T Crony Chronicles



Sunday, July 7, 2013

ObamaCare Subsidies: Now You Qualify Without Income Verification. No Way! Way!

“The Obama administration announced Friday that it would significantly scale back the health law’s requirements that new insurance marketplaces verify consumers’ income and health insurance status.

Instead, the federal government will rely more heavily on consumers’ self-reported information until 2015, when it plans to have stronger verification systems in place.”

“After encountering “legislative and operational barriers,” the federal government will not require the District and the 16 states that are running their own marketplaces to verify a consumer’s statement that they do not receive health insurance from their employer.

“The exchange may accept the applicant’s attestation regarding enrollment in eligible employer-sponsored plan . . . without further verification,” according to the final rule.

The federal government will, however, conduct an audit for the states where it is managing the new insurance Web portal.

The rule also scaled back states’ responsibilities to double-check the income levels that consumers report, which determine any tax subsidy they receive.” - Health insurance marketplaces will not be required to verify consumer claims, Washington Post, O7/05/2013

The entire article appears in the link below:

Friday, July 5, 2013

Pulling Out of the Individual Health Insurance Market in California: UnitedHealthcare Follows Aetna

"A second health insurer notified state regulators Tuesday that it will stop selling individual policies in California.

UnitedHealthcare announced it will no longer offer individual insurance plans after the end of the year. It will focus instead on its core business of group plans for large and small employers.

"Our individual business in California has always been relatively small and we currently serve less than 8,000 individual customers across the state," the company said in a statement. "Over the years, it has become more difficult to administer these plans in a cost-effective way for our members in California."

The announcement comes two weeks after Aetna Inc. said it also plans to exit California's individual insurance market. Both insurers avoided participating in the state exchange that is being established as part of the Affordable Care Act." - UnitedHealthcare to stop selling individual plans in Calif, AP/, 07/02/2013

Link to the entire article appears below:

Thursday, July 4, 2013

Upon Further Review: Delaying ACA Penalties and Consequential Behavior

"The Obama administration said Tuesday it would delay enforcing a provision of the new health-care law that requires large employers to provide coverage for workers or pay a penalty in 2014, the biggest revision so far to the federal health-care overhaul.

The law, passed in 2010, requires companies with the equivalent of 50 or more full-time workers to offer health benefits starting on Jan. 1—or pay a penalty of at least $2,000 per employee. The delay, announced by the Treasury Department in a blog post Tuesday, means that penalty won't kick in until 2015.


The decision reflects pressure from companies in such lower-wage industries as restaurants, retail and agriculture, which had cited a host of practical difficulties posed by the law's requirements. Most large companies in the U.S. already provide health coverage to their employees.

Some companies had bet the law was going to be overturned by the Supreme Court last year, or by a new presidential administration after the 2012 election. After it withstood those legal and political challenges, some firms said there was too little time remaining before the provision was due to kick in.

"They realized they were not ready, and we were not ready," said Neil Trautwein, vice president at the National Retail Federation, an employer trade group. "At the very least, this will give retailers and chain restaurants a chance to breathe."

The decision follows media reports that companies had already cut back on some workers' hours to avoid exposure to penalties under the new health-care law. Those who work fewer than 30 hours a week aren't counted as full-time employees, according to the law.” - Health Law Penalties Delayed - WSJ 07/02/2013‏



Upon further review, consider that interventionists who advocate interventionist policy into economies, to supposedly fine tune a macro economy or as countercyclical measures to a macro economy e.g. Paul Samuelson’s policy, generally use temporary discretionary policy. The classic case is the temporary tax cut and/or rebate vs. the permanent tax cut. The former causing short term behavior that either quickly vanishes or has no impact and the latter causing long term positive behavioral changes.

Keeping the above in mind, delaying the ACA penalty to firms [plus fifty full time employees] until 01/01/2015, given that the firms are already engaged in cutting hours and/or hiring new employees at 28 hours (below the full time threshold of ACA) is, an interventionist policy that is fine tuning in nature. Meaning, it causes short term behavior that either quickly vanishes or has no impact regarding firms engaged in cutting hours and/or hiring new employees at 28 hours.

Moreover, the situation is the interventionist (promoters of government directed health-care/health insurance) who advocates interventionist policy (ACA) trumping his/her own interventionism with more interventionism (delaying provisions).


Link to the entire WSJ article appears below:

Updated 07/08/2013

Obamacare implementation delay no boon for hiring - Yahoo Finance