Tag: regulation

Laws Entrench Liquor Wholesalers At Drinking Public’s Expense

As part of their regulation of alcohol sales, an estimated 33 states maintain so-called At Rest laws, which require that bottles spend time in an in-state warehouse before being sold to consumers. The laws limit competition, drive up prices to consumers, and make it harder to special-order less common labels. Now, as the New York Post revealed in a Sunday exclusive, New York may join the list following generous donations to Gotham politicians from an in-state wholesaler. State Sen. Jeff Klein (D-Bronx) alone got $33,000 from Empire Merchants LLC.

David Waldenberg, of BNP Distributing Co., said 180 small-and medium-sized New York distributors will hurt by the measure.

Those businesses have offices in New York that employ hundreds of people, he said, but use New Jersey storage facilities.

If their warehousing costs go up, these businesses will die and jobs will ultimately be lost, he said.

“The price of wine — it’ll go up $7 or $8 a bottle,” warned wine connoisseur and writer Jesse Nash. “The consumer is going to get nailed.”

In an (alas) still-relevant 1985 article (PDF) in Cato’s Regulation magazine, Federal Trade Commission attorney David Spiegel analyzed how anti-competitive state liquor laws exploit consumers. [adapted and expanded from Overlawyered]

Update: Tom Wark at WineInterview.com (via Michelle Minton, CEI) believes the New York bill as of this point is “going nowhere” following a vigorous campaign against it by small wholesalers who would be hurt by its provisions.

The Real Problem with Highly Regulated “School Choice”

A Fordham Institute paper released today seeks to answer the question: do private schools really refuse to participate in heavily regulated school choice programs? Its authors tell us that “many proponents of private school choice… take [this] for granted,” citing two examples—one of them being the Cato Institute, whose Center for Educational Freedom I direct. The authors even cite a relevant commentary by former Cato policy analyst Adam Schaeffer.

The only problem is that the cited commentary says precisely the opposite. Describing Indiana’s voucher program, Schaeffer writes: “Because participating schools will have a significant financial advantage over non-participating schools, lightly regulated [non-participating] schools will face increasing financial pressure to participate.” This captures Schaeffer’s concern as well as my own (which I expressed over a decade ago in the political economy journal Independent Review): We do not fear that private schools will refuse to participate in heavily regulated school choice programs. We know that they ultimately will participate, or be driven out of business by their subsidized counterparts.

We know this because there is extensive evidence to that effect from all over the world and across history. Everywhere that private elementary and secondary schools are eligible for government subsidies, the share of unsubsidized school enrollment falls. The higher the subsidy and the longer it has been in place, the more the unsubsidized sector is generally diminished. The Dutch enacted a heavily regulated nationwide voucher program nearly a century ago. Unsubsidized private schooling remains legal, but has been reduced to a statistical asterisk—now making up less than one percent of enrollment, compared to roughly 70 percent for subsidized private schools.

Our reason for concern over this pattern is also grounded in empirical evidence: it is the least regulated, most market-like private schools that do the best job of serving families. That is the consensus of the worldwide within-country research, which I reviewed and tabulated for a 2009 paper in the Journal of School Choice. The Fordham paper does not discuss this evidence.

Despite imputing to Cato scholars the exact opposite of the view we hold, the paper does include some interesting data. In particular, it offers a new corroboration that voucher programs are more heavily regulated than tax credit programs (a difference whose magnitude and statistical significance was previously established here). This will make it even harder for objective observers to cling to the notion that vouchers and credits are functionally equivalent.

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.

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.”

ObamaCare’s Magical Premium Tax

The Department of Health and Human Services has announced it will unilaterally impose a (legally questionable) 3.5-percent premium tax on health plans purchased through the ObamaCare Exchanges it operates.

According to The New York Times, an HHS spokeswoman “predicted that insurers would not raise prices” in response to the tax.

If that’s the case, why not make it 35 percent?

Does HHS Have the Authority to Tax Health Premiums in Federal Exchanges?

Remember how an adviser to the federal Department of Health and Human Services said the department would have to “get creative” on funding federal health insurance exchanges, because states were refusing to create their own and ObamaCare provides no source of funding for federal exchanges? Well, HHS released its very creative response in a Friday news dump today, and the answer is “user fees” of 3.5 percent on all health insurance plans sold through federal exchanges.

But is that a little too creative? Does HHS have the authority to tax health premiums in its exchanges? Here’s what the department’s proposed regulation says:

Federally-facilitated Exchange user fees: Section 1311(d)(5)(A) of the Affordable Care Act contemplates an Exchange charging assessments or user fees to participating issuers to generate funding to support its operations. As the operator of a Federally-facilitated Exchange, HHS has the authority, under this section of the statute, to collect and spend such user fees. In addition, 31 U.S.C. 9701 provides for an agency to establish a charge for a service provided by the agency. Office of Management and Budget Circular A-25 Revised (“Circular A-25R”) establishes Federal policy regarding user fees and specifies that a user charge will be assessed against each identifiable recipient for special benefits derived from Federal activities beyond those received by the general public. In this proposed rule, we establish a user fee for issuers participating in a Federally-facilitated Exchange.

I don’t know anything about 31 U.S.C. 9701 or Circular A-25R. But here’s the Section 1311(d)(5)(A) language upon which they rely:

NO FEDERAL FUNDS FOR CONTINUED OPERATIONS.—In establishing an Exchange under this section, the State shall ensure that such Exchange is self-sustaining beginning on January 1, 2015, including allowing the Exchange to charge assessments or user fees to participating health insurance issuers, or to otherwise generate funding, to support its operations.

A few thoughts:

  1. It is interesting that when the federal government wants to justify generating funds for their Exchanges’ operational expenses, they cite for authority a paragraph titled, “NO FEDERAL FUNDS FOR CONTINUED OPERATIONS.”
  2. The proposed regulation correctly notes that Section 1311(d)(5)(A) only “contemplates” state Exchanges charging assessments. It certainly doesn’t authorize states to make such assessments; states already have the authority to impose such levies. (They are states, after all.) Nor does it even direct states to levy user fees. It says, in essence, “You gotta fund this yourself. Here are a couple of methods. Knock yourselves out.” Since Section 1311(d)(5)(A) doesn’t give states the authority to levy such taxes, it’s hard to see how that paragraph translates into “HHS has the authority, under this section of the statute, to collect and spend such user fees” (emphasis added).
  3. Section 1311(d)(5)(A) speaks specifically of states. It makes no mention of the federal government. Lest anyone think its mention of “an Exchange” could refer to state or federal exchanges, I refer you four paragraphs up to Section 1311(d)(1), which imposes another “REQUIREMENT … An Exchange shall be a governmental agency or nonprofit entity that is established by a State.” Or is the federal government again claiming that it can establish an Exchange that is established by a state?

Again, I don’t know anything about 31 U.S.C. 9701 or Circular A-25R. But the fact that HHS also cited them makes me think they lack confidence in their claim that Section 1311(d)(5)(A) authorizes them to do this. And the fact that they listed them after their Section 1311(d)(5)(A) claim makes me wonder if they even weaker.

I’ll be looking into this. But I would be interested to hear from anyone with expertise in 31 U.S.C. 9701 or Circular A-25R.