Tag: insurance

FSOC’s Arbitrary, Ever-Changing Double Standard

In the Dodd-Frank Act, Congress, without irony, decided the best way to end “too big to fail” was to have a committee of regulators label certain companies “too big to fail.”  That committee, established under Title I of Dodd-Frank, is called the Financial Stability Oversight Council (FSOC) and is chaired by the Treasury Secretary. Like so much of Dodd-Frank, FSOC gets to write its own rules. Unfortunately FSOC won’t even write those rules, but instead it has decided that it knows systemic risk when it sees it. This has led to an ad hoc process that almost makes the bailouts of 2008 look systematic.

Compare the process for asset management firms and that for insurance companies. In late 2013, the Treasury released a report on the asset management industry. It was widely viewed as an attempt to make the case for labeling some asset management firms “systemic.”  The report was widely criticized. Such criticism did not stop FSOC from conducting a public conference on the asset management industry in May 2014.  Whether it was the public reaction to the conference or the paper, FSOC has largely abandoned labeling asset managers as “too big to fail.”  That was an appropriate outcome as firms in that industry are not systemic and shouldn’t be lead to expect a federal rescue.

Now don’t get me wrong: A shoddy report and a conference do not constitute a thorough process. As someone who has overseen a rulemaking process, I can say they do not even meet the basics of the Administrative Procedures Act. But just when that process seemed wholly inadequate, along comes the “process” for insurance companies.

Not unexpectedly, AIG went along without a peep. Given its role in the crisis that’s not a surprise. But there’s been no report or even a conference on whether insurance companies pose systemic risk. Completing either one would, of course, require FSOC to define systemic risk and to offer some minimal metrics. Instead, what we have is unelected bureaucrats simply making it up as they go along.

And here I was thinking Dodd-Frank was meant to end the haphazard behavior of regulators in 2008 and lead us towards a predictable rules-based approach to ending systemic risk!

Bloomberg: ObamaCare Doubling Premiums for Individuals & Firms Spurs Talk of Delaying Rollout

Bloomberg reports:

Health insurance premiums may as much as double for some small businesses and individual buyers in the U.S. when the Affordable Care Act’s major provisions start in 2014, Aetna Inc. (AET)’s chief executive officer said.

While subsidies in the law will shield some people, other consumers who make too much for assistance are in for “premium rate shock,” Mark Bertolini, who runs the third-biggest U.S. health-insurance company, told analysts yesterday at a conference in New York. The prospect has spurred discussion of having Congress delay or phase in parts of the law, he said.

“We’ve shared it all with the people in Washington and I think it’s a big concern,” the CEO said. “We’re going to see some markets go up as much as as 100 percent.”…

Premiums are likely to increase 25 percent to 50 percent on average in the small-group and individual markets, he said, citing projections by his Hartford, Connecticut-based company.

Industry analyst Robert Laszewski comments:

[F]or the vast majority of states there will be rate shock.

I can also tell you that, so far, I have detected no serious effort on the part of Democrats to delay anything. Frankly, I think hard core supporters of the new health law and the administration are in denial about what is coming.

I expect more health insurers to be echoing the Aetna comments in coming weeks.

Tennessee Rejects an ObamaCare Exchange

Yet another state seems poised to lure employers away from Mississippi. Excerpts from Tennessee Gov. Bill Haslam’s press release:

Tennessee faces a decision this week about health insurance exchanges created by the Affordable Care Act.

I’m not a fan of the law.  The more I know, the more harmful I think it will be for small businesses and costly for state governments and the federal government.  It does nothing to address the cost of health care in our country.  It only expands a broken system…

Since the presidential election, we’ve received 800-plus pages of draft rules from the federal government, some of which actually limit state decisions about running an exchange more than we expected.

The Obama administration has set an aggressive timeline to implement exchanges, while there is still a lot of uncertainty about how the process will actually work.  What has concerned me more and more is that they seem to be making this up as they go.

In weighing all of the information we currently have, I informed the federal government today that Tennessee will not run a state-based exchange.  If conditions warrant in the future and it makes sense at a later date for Tennessee to run the exchange, we would consider that as an option at the appropriate time.

NJ Gov. Vetoes ObamaCare Exchange; SD Gov. Rejects Medicaid Expansion

On the same day he met with President Barack Obama (D) at the White House, New Jersey Gov. Chris Christie (R) vetoed a bill that would have implemented a key part of ObamaCare:

New Jersey Gov. Chris Christie (R) became the latest state chief executive to rebuff President Barack Obama’s health care reform law Thursday by vetoing a bill that would have created an online marketplace for uninsured residents to shop for health insurance.

For the second time this year, Christie rejected legislation passed by New Jersey’s Democratic-controlled legislature that would have established a state-run health insurance exchange under Obamacare.

Meanwhile, South Dakota Gov. Dennis Daugaard (R) said his state will not implement ObamaCare’s Medicaid expansion:

There are far too many unanswered questions for me to recommend adding 48,000 adults to the 116,000 already on our rolls.

The Huffington Post reports that 19 states have refused to establish an Exchange, and 9 states have refused to expand Medicaid. I’ve heard higher counts, though.

Laszewski on ObamaCare: ‘Get Ready for Some Startling Rate Increases’

The invaluable Robert Laszweski:

The Affordable Care Act: Ten Months to Launch “Obamacare”––Get Ready for Some Startling Rate Increases

[…]

I conducted an informal survey of a number of insurers…None of the people I talked to are academics or work for a think tank. None of them are in the spin business inside the Beltway. Every one of them has the responsibility for coming up with the correct rates their companies will have to charge…

On average, expect a 30% to 40% increase in the baseline cost of individual health insurance to account for the new premium taxes, reinsurance costs, benefit mandate increases, and underwriting reforms…

In states with the least mandates or for health insurance companies with the tightest underwriting now, the increase could be a lot more…

[E]xpect individual health insurance rates for people in their 20s and early 30s to about double…

Will the feds be ready to provide an insurance exchange in all of the states that don’t have one on October 1, 2013?

I have no idea. And neither does anyone else I talk to inside the Beltway. We only hear vague reports that parts of the new federal exchange information systems are in testing.

The former CIA director couldn’t get away with an affair in this town but the Obama administration has a complete lid on just where they are on health insurance exchanges and haven’t shown any willingness to want to talk about their progress toward launching on time––except to tell us all not to worry.

We are all worried. I would not want to be responsible for the work that remains and only have ten months to do it…

The Republicans said this would not work. If it does not launch on time, or does with serious problems, I would not want to be an incumbent Democrat.

I told them not to call this the “Affordable Care Act.”

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