Updated Sept. 13, 2012
Even before the U.S. Supreme ruled on the controversial healthcare law, the Obama Administration backed off on implementing a costly component of the law. A published report (“HHS suspends controversial program in healthcare reform law”) indicates the administration is conceding the CLASS program, insurance for long-term coverage, is too costly.
Another red flag: Health and Human Services had actually warned about the financial consequences of the CLASS program – even before the law was passed.
These are just two new red flags.
If you haven’t considered how the so-called healthcare reform law will affect your business, you might want to do it now. You might not like the other developments. All businesses will be affected by the mandates, price increases and more government regulation.
Your employees will also need to understand that if you face premium hikes, so will they.
Starting in March, governance of group health plans became onerous. All plans must provide policyholders with coverage information in 12-point type, no longer than four pages, and must be “culturally and linguistically” explicable. If you fully don’t abide by the requirements, you face a $1,000 fine for each occurrence. That means if you have 25 employees, the fine is $25,000.
There are other issues to consider including the individual mandates, pre-existing conditions, adult child coverage, and small business tax credit.
Cost is a major concern, especially now that an authoritative 2011 study indicated there will only be a minimal competition of health insurers. The Henry J. Kaiser Family Foundation study reveals that in 30 states and the District of Columbia, only one insurer holds at least half of the policies.
The number of workers enrolled in a health plan was the determining factor in market share.
Data was provided by the National Association of Insurance Commissioners and the California Department of Managed Health Care. It was compiled by a healthcare research company, Mark Farrah Associates.
The so-called Affordable Care Act (ACT) supposedly compels insurers to provide coverage to small businesses and individuals in a transparent fashion. We’re told to expect ACT options for comparable costs and benefits. Anyone can get coverage despite pre-existing conditions.
The hope is that new health insurance exchanges will alleviate premium costs and the federal government will subsidize the cost for premiums for low and moderate-income persons. Individual states will oversee the exchanges.
So the study’s conclusion about the lack of competition among health insurers in numerous markets is eye-opening. If one insurer is too dominant, it will control the premiums and fees paid to doctors.
And the intrusion of government to coordinate and oversee the reform is alarming.
From the Coach’s Corner, for more background information, we warned you in previous columns:
- Economic, Political Freedom Get Boost from Two Reproaches
- Healthcare Reform Increases Costs to Workers, Study
- How Healthcare Law Would Affect Small Business
- Oxymorons: ‘Healthcare Reform’ and ‘Public Servants’
The last thing I want to do is hurt you. But it’s still on the list.
Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.
Feb. 14, 2010
Instead of productive public policies to create jobs, the federal government is pushing an increasingly nerve-wracking idea.
The Obama Administration appears to be taking an elitist approach regarding your retirement plan – bureaucrats ostensibly think they know better than you regarding your retirement planning and money.
Yes, the federal government is considering proposals to convert your 401 (k) and IRA accounts to annuity-type plans.
On February 1, President Obama advocated amending government rules that permit 401 (k) retirement plans with annuities.
There have been multiple news accounts of the government’s scheme. A comprehensive BusinessWeek report concerning the Obama Administration and your retirement was published Jan. 8, 2010 but didn’t seem to attract much attention.
The article by Theo Francis explained the plan, and indicated the U.S. Treasury and Labor Departments want Americans to weigh in on the ideas to exchange their retirement plans into annuities. Carrying the annuity ball for the Obama Administration are Assistant Labor Secretary Phyllis Borzi and Deputy Assistant Treasury Secretary Mark Iwry.
The government has begun soliciting comments.
Naturally, there are several companies that would benefit because they sell annuities including AIG (the company that received a $182.3 billion taxpayer bailout). The major players also include MetLife, Hartford Financial Services, Lincoln National, and New York Life.
In general, annuities would seem attractive because they guarantee funds until a retiree passes away. The thought is they’re a hedge against retirees running out of savings. And some people seem to think that annuities are a viable option for senior citizens because of their losses in the stock market.
The article quoted a 2009 report that stated only 2 percent of 401 (k)s are switched to annuities.
Fidelity Investments reported the average 401 (k) fund decreased by 31 percent between 2007 and 2009.
Hence, the alleged government interest in retirement security for citizens.
A lot of money is in retirement plans: $3.6 trillion, according to a trade group in Washington – the Investment Company Institute.
So what, you ask?
Well, my sense is that the government bureaucrats have another furtive motive.
In 1993, Democrats were looking into ways to get control of retirement funds. During the Clinton Administration, there was a proposal to levy a 15 percent tax on retirement plans to share wealth with low-income citizens. The scheme was attributed to Dr. Alicia Munnell, who was assistant secretary of the Treasury for economic policy. But the idea died with the 1994 voter revolution that swept Democrats out of office.
Early in my career, I enjoyed working for two insurance companies offering annuities. Because of the expensive fees, sales commissions were healthy which conjured images of me driving a new Lamborghini as a 20-something.
But in some ways it was embarrassing. Annuities were not flexible or affordable for many of my policyholders. Plus, the annuities would not have yielded sustainable retirement incomes.
If annuities seem like a good idea for your situation, fine. But for many, they’re not viable, and a government-backed enterprise would not be productive.
Just look at the mismanagement of the Wall Street bailouts. The plan was not transparent and was administered by bureaucrats with a conflict of interest. The big banks still are not loaning money to deserving businesses and consumers, and the investment bankers are once again getting huge bonuses made possible by taxpayers.
Moreover, why give the federal government more power over your finances? If the government succeeds and does try to resurrect the Clinton proposal, redistribution of wealth represents another theft of your economic and political freedom.
A government plan to provide lifetime income. I don’t think so.
My hope is that you give the Obama Administration a loud, ringing earful.
From the Coach’s Corner, by May 3, 2010, here are three options in which you can comment:
- Via post office – U.S. Department of Labor, Office of Regulations and Interpretations, Employee Benefits Security Administration, N-5655, 200 Constitution Ave. NW, Washington, DC 20210, Attn: Lifetime Income RFI.
- Via e-mail – E-ORI@dol.gov
- Via the Internet – Visit Regulations.gov
Sept. 20, 2009
As a longtime free-market advocate, I never thought I would be writing this – but the time has come to regulate the Wall Street compensation of senior banking executives. So, I’m endorsing the proposal from the Federal Reserve – with two provisos.
The Fed ostensibly wants to discourage excessive risk-taking by many banks, including their permissive lending by regulating bank executives’ pay. Nearly 6,000 banks would be covered.
Such practices helped lead to the deepest financial crisis in decades. The behavior has been so bad, it also helped exacerbate problems with the agency that insures consumer accounts to $250,000. Federal Deposit Insurance Corp. may have to borrow money from the U.S. Treasury. FDIC’s bank insurance fund will be paying out $70 billion through 2013 after 123banks collapsed by Thanksgiving in 2009.
Businesses have suffered because their accounts are not insured.
“Wall Street greed and irresponsibility have nearly destroyed the U.S. economy,” said Dr. Peter Morici, a professor at the University of Maryland School of Business and former chief economist at the US International Trade Commission. “Big bonuses for bankers encourage reckless risk taking and were a principal cause of the credit crisis and Great Recession.”
Here are some examples:
“Banks wrote mortgages and sold those to Wall Street financial institutions, who bundled loans into bonds and sold those to investors, such as insurance companies and foreign governments,” said Dr. Morici. “From loan officers to the Wall Street bond salesmen, opportunities to exaggerate the quality of loans emerged. If local banks or Wall Street financial houses could pawn off high-risk, high-fee loans as reasonably safe, they enjoyed big paydays.”
He bluntly criticized the behavior on SWAPS, a financial instrument called a derivative. Simply put, it pays face value to the buyer if a company does not meet its debt obligations.
“Wall Street bankers wrote bogus insurance policies called SWAPS that were supposed to limit losses for investors when mortgages defaulted,” added Dr. Morici. “AIG wrote many SWAPS without capital to back them up, and banks even wrote SWAPS on each other’s mortgages – like two homeowners on a North Carolina beach promising to pay one another in the event of a hurricane.”
SWAPs and bad bonds victimized investors and the bankers garnered mega paychecks. But when the homeowners failed to pay mortgages, banks faltered and the huge losses rippled throughout the economy. But only the banks were bailed out by the government (taxpayers).
To add insult to injury, banks have been allowed to borrow at extremely low interest rates. But they failed to make funds available to consumers and business, and once again enjoy enormous profits. And they have been paying huge paychecks to management.
“Consequently, widows relying on Certificates of Deposit for income, now receive much reduced interest rates” said Dr. Morici. “That’s right – Ben Bernanke is taxing grandma to bail out Goldman Sachs.”
Receiving comparatively little attention has been the continuing predatory behavior on credit card customers – banks and credit card companies are still geting away with bogus reasons for jacking up credit card rates and fees.
But a year after the collapse of Lehman Brothers, another SWAPS practitioner, SWAPS have lost their stigma, according to published reports.
Dr. Morici agrees:
“Flush with profits, the banks are up to their old tricks – again creating highly engineered financial products, selling swaps, setting aside massive profits for bonuses, and manufacturing conditions for another crisis,” said the business professor. “If Wall Street banks are too big fail, then they are too big to let go on with this irresponsible behavior.”
But he points out the Fed would be over-matched in its proposal to regulate bankers’ pay.
“The latter is too complex to be realistic – the banks would run circles around such rules, much like lawyers creating tax shelters,” he said. “Better to limit bonuses and salaries of bankers to a fixed percentage of net income that aligns financial sector salaries with those of other industries.”
Agreed. In addition, I would add two caveats:
- Strictly reduce the amount of risk that banks undertake.
- Require high reserves – much higher.
And on a related topic while we are cleaning up Wall Street practices, let us correct the predatory behavior of banks and credit card companies that dramatically increase rates and fees for bogus reasons. The companies are domiciled in a handful of states that permit such behavior.
In other words, here is what is really needed: Police the behavior of these people.
But are the Obama Administration, Congress, certain state lawmakers, and regulators conscientious and determined enough to do the right thing and stop the madness?