A look at 2 states health insurance plans

A look at 2 states health insurance plans

By The Associated Press – 17 hours ago

Here's a look at the health insurance expansion efforts in Massachusetts and Tennessee.
___
Massachusetts:
POPULATION: 6.5 million.
LAW SIGNED: April 2006.
ADDITIONAL PEOPLE COVERED: 432,000.
COST TO STATE: $628 million in fiscal year 2008, about 42 percent of that reimbursed by the federal government.
HOW IT WORKS: Uninsured adults must pay tax penalties if the state says they can afford insurance. Employers with more than 10 workers must offer insurance or pay penalties of $295 per worker.
STRENGTHS: High standards for what qualifies as minimum health insurance coverage. Low-income residents now more likely to get preventive care. Employers still offer benefits, haven't been "crowded out" by the state-subsidized plan.
WEAKNESSES: Rising health care costs may force future cuts to benefits. One in five adults say they were told by a doctor's office no new patients being accepted.
ADVICE FOR CONGRESS: "Insurance is a grudge buy. Nobody goes down to the brokers on Saturday to see how fast this baby will go from zero to 60 and smell the new leather." — Jon Kingsdale, executive director, Commonwealth Health Insurance Connector Authority, Massachusetts.
___
Tennessee:
POPULATION: 6.2 million.
LAW SIGNED: June 2006.
ADDITIONAL PEOPLE COVERED: 19,000.
COST TO STATE: $10.9 million in fiscal year 2008. No federal dollars.
HOW IT WORKS: Plan targets workers at small businesses, the self-employed and recently unemployed adults. The cost of monthly premiums is shared by the state, the individual and employers.
STRENGTHS: No one is forced to participate. People who want coverage get the basics like doctor visits, prescriptions and lab tests at affordable rates.
WEAKNESSES: Covers only generic drugs, except for brand-name insulin. Annual limits on inpatient hospital visits leave people vulnerable to high bills when they most need help. Hospitals potentially lose money when people in plan hit annual maximums.
ADVICE FOR CONGRESS: "There's nothing wrong with crossing the river a stone at a time. You don't have to make a flying leap for the far bank." — Gov. Phil Bredesen of Tennessee.
Sources: Massachusetts, Tennessee, U.S. Census, Kaiser Family Foundation, Urban Institute, Health Affairs, AP interviews.

Copyright © 2009 The Associated Press. All rights reserved.

Progressive agrees to pay Mass. fine

May 26, 2009 02:25 PM Email| Comments (1)| Text size – +

Progressive Direct Insurance Co., which has long compared its rates to competitors, agreed to pay the state $120,000 to settle charges that it inflated the rates for rival companies, Massachusetts Attorney General Martha Coakley announced today.
Specifically, Coakley's office accused Ohio-based Progressive, the nation's fourth largest automobile insurer, of inaccurately comparing its six-month rates to the 12-month rates offered by other companies, such as Arbella Mutual, Liberty Mutual, and Commerce Insurance. Progressive inaccurately listed all the rates on its web site as six-month prices.
Progressive, which started offering policies in Massachusetts on May 1, 2008, stopped quoting rivals' rates on its web site and through its call center late last year, and notified Coakley's office about the mistake.
�For competition to truly work in Massachusetts, consumers must be able to easily access accurate information about rates from insurance companies,� Coakley said. �Progressive�s failure to provide correct comparison quotes harmed consumers and harmed Massachusetts� ability to introduce a competitive system in automobile insurance.�
In addition, Coakley's office said Progressive failed to follow its own official rate practices, filed with the state's Division of Insurance, by charging consumer to list additional drivers on their policies who already carried their own insurance. Progressive agreed to reimburse drivers who were improperly charged.
Coakley's office also complained that Progressive frequently failed to notify customers' former insurer when a customer switched auto insurance companies. That in turn led some insurers to cancel customers' policies for nonpayment - instead of just closing the accounts when customers switched to Progressive - potentially hurting customers' credit scores. Progressive agreed to help any customers who were affected.
Progressive spokeswoman Cristy Cote acknowledged the company mistakenly calculated the rates for some competitors when it began offering insurance in Massachusetts last May.
But the company noted that it shut down the service and notified state regulators and competitors after it discovered the errors. It also said it offered to pay the difference for customers who bought its policy when a competitor actually offered a lower rate, provided the customer wanted to switch to the other firm. The company said it also cooperated with Coakley's probe into the other issues.
"We understand that the attorney general�s role is to protect consumers and we wholeheartedly support that goal," Cote said in a written statement. "We are glad to put this matter behind us."
(By Todd Wallack, Globe staff)

No thanks to feds' health-care plantation

Commentary

By STAR PARKER
Syndicated columnist

Published: Sunday, May 24, 2009 at 4:01 a.m.
Last Modified: Sunday, May 24, 2009 at 2:16 a.m.

Four Republicans - senators Tom Coburn of Oklahoma and Richard Burr of North Carolina along with congressmen Paul Ryan of Wisconsin and Devin Nunes of California - have fired the first salvo in the great health-care reform debate.

They've introduced the Patients' Choice Act. Now, although we have a pretty good idea of what Democrats have in mind, we await crystallization of their ideas into legislation.

The difference of approach of the two parties on health care rides on the same basic question that divides the country and the parties on everything else. Are the problems we're facing today the result of too much government intervention in our economy and our lives or not enough?

The Patients' Choice Act reflects Republican thinking that health-care costs are out of control and, as result, not affordable for many, because of too much government. It allows Americans to take direct control of their health-care expenditures by giving families and individuals cash in the form of a tax credit ($5,700 and $2,300, respectively) to buy insurance and set up a Health Savings Account.

Democrats will take things in the opposite direction. Rather than controlling costs and access through more competition and consumer control, they see it coming from more government and regulation. Mandates on employers to provide insurance, fines if they don't, and using those funds to finance a new subsidized government plan.

And central to cost control are government bureaucrats defining what procedures may be used and determining what physicians will be compensated.

I'd suggest two considerations in assessing whether today's runaway costs and inefficiencies are the result of too much government or not enough.

First, we already have massive government involvement in health care. Practically half of all health care delivered today comes directly from government programs - mainly those begun in the 1960s. Medicare, Medicaid, and then later the State Children's Health Insurance Program (SCHIP).

Only 35 percent of health care is paid for through private insurance. Some 87 percent of it is paid for by third parties - either government or employers. In 1960, 60 percent of Americans' health-care expenditures were out of their own pocket. Today it is 12 percent.

So massive growth in health care spending and cost escalation correlates directly with increasing government involvement in this marketplace and decreasing consumer control over their own expenditures. Does this tell you something?

Second, to see government health care at work, we don't need to look at Canada or Great Britain or Cuba. Fifty nine million Americans already have it. It's called Medicaid.

Medicaid was passed in 1965 to cover health care for poor Americans. It is a pure entitlement. If you qualify, you are covered. Government, both federal and state, pays.

Bureaucrats define what is covered and how much physicians will be paid. And, as result, there is a huge gap between being covered and actually getting health care.

On average, 40 percent of physicians won't accept Medicaid patients. They are paid less than what it costs them to provide the care. In a survey done last year by Merritt Hawkins, a health-care manpower firm, 65 percent of physicians said reimbursements from Medicaid were less than their costs.

Merritt Hawkins did a survey this year of physicians of different specialties in 15 different cities on acceptance of Medicaid patients. In Washington, D.C., for example, which has the highest incidence of children living in poverty in the country, only 63 percent of surveyed physicians in family practice will accept Medicaid patients.

A federal district appeals court ruled just a few weeks ago, affecting Alabama, Florida and Georgia, that state Medicaid programs can't be forced to pay if they disagree with a doctor's decision regarding care. In this particular case, Medicaid officials disagreed with the amount of nursing care prescribed by a physician for a teenager who suffers seizures.

A study cited by Dr. Scott Gottlieb, a physician and health-care expert at the American Enterprise Institute, showed Medicaid patients to be 50 percent more likely to die after heart bypass surgery than patients with private coverage or Medicare.

Move the whole nation onto a new government health care plantation?

No thanks. I'll take freedom and personal responsibility.

Star Parker is an author and president of CURE, Coalition on Urban Renewal and Education (www.urbancure.org). She can be reached at parker@urbancure.org.

Health plans are not health insurance

May 24, 8:49 PM · 3 comments

3 comments

ShareThis

Feed

Recently there has been a proliferation of advertisements, both on television and on line, for health cards. These cards claim to offer access to high quality and affordable medical care, dental care, prescription drugs, vision and other health care services. The rates vary but may be as little as $20 a month for an individual to as high of $225 a month for a family. The two big selling points of these plans are that they are affordable and that you cannot be turned down.

Exactly what are you buying? Health cards can also be called discount medical programs or plans. This industry has grown so large that they have their own trade association, the Consumer Health Alliance. Here is the definition of a health card given by the Consumer Health Alliance. "Our member companies make health care products and services, including prescription drugs, dental, chiropractic, eye care, physician, hospital and laboratory services, available to millions of Americans by providing opportunities for consumers to directly purchase health care services and products at discounted rates." According to the Consumer Health Alliance more then 28 million consumers have purchased these plans for various companies.

The problem lies not in the concept of the programs but in the sale and execution. The most important fact you must know about these health cards is that they are NOT health insurance. Many consumers have failed to understand what they are buying and as a result have been saddled with hundreds and even thousands of dollars in medical bills they assumed would be covered by their health card.

These plans advertise that they are affiliated with networks of medical providers. That is generally true. Their affiliation may even be with some of the national networks that insurance companies use themselves. The plan representative tells you that if you use the services of a network provider, you will get a discount on the service similar to the discounts that insurance companies negotiate when providers join their networks.

One company, for instance, gives you an example. If you see a network provider, that doctor's normal charge for an office visit may be $120. But with your discount health card, you will only be charged $90 thus saving you $30 each time you visit the doctor, On the surface that may sound good, but remember, the consumer, and only the consumer, has to pay the provider $90 every time he visits that doctor.

What happens if we review a hospitalization rather than a doctor's visit. You need a hip replacement. According the American Academy of Orthopedic Surgeons, the average cost of a hip replacement in 2007 was $42,000. You see a doctor who is in the network used by your $29.95 a month health card. You expect to get a significant discount for the procedure because you used a network provider. Remember the doctor visit.? You got a $25% discount and only had to pay the doctor $90 of the $120 bill.

But now you have a bill from the hospital for your hip replacement for $42,000. It is also discounted at 25%. That means you owe the hospital $31,500. And you have to pay it. It is better than owing $42,000 of course, but $31,500 is still a pretty significant amount of money that the consumer has to pay out. Unfortunately, the companies that sell these cards focus your attention on the small services. But, if consumers are smart, they will focus on the big items, which is the real risk of not having health insurance.

For some people who don't qualify for medical insurance, discount cards may be the only option. Individual health insurance generally is medically underwritten which means if a person has a medical condition that the insurance company does not want to insure, they will be unable to get health insurance. Many states have what are called pool plans, which will insure persons with medical conditions, but as you can imagine, these plans are extremely expensive. Not all states have pool plans, but Connecicut does.

The real danger of these health cards is the aggressive methods used to sell them. Many of these plans are actually sold as Multi Level Marketing plans. The sales representatives do not have to be licensed insurance agents, because the plans are not insurance. Their interest is in adding people to their downline as that is how they make money. Learning the programs and carefully advising consumers as to what they are buying may not be the most important thing to these sales representatives.

If you are considering buying a health plan, be careful and ask questions. Understand first and foremost, that you are NOT buying insurance. Be wary of extravagant promises of discounts up to 60%. In our hip replacement example, for instance, a 60% discount would mean the service would only cost you $16,800. It is unlikely that a provider hospital would give you that kind of discount. Ask for specifics about hospitals, doctors and procedures. Ask if all the providers honor the advertised discounts. Sometimes doctors and other providers are not even aware they are listed as participants in these plans. Ask about hidden fees. Often there are administrative fees hidden in the fine print. Be especially careful if there are fees charged for each use of your card. These fees may eat up almost all of your discount.

Discount health cards are never a substitute for health insurance. Before you consider buying one, think about how you will use it. If your need is for less expensive services, such as routine doctor's visits, dental or vision discounts, they may be worth it. Remember, if you need an expensive procedure such as a hospitalization or surgery, you will be paying most of the bill yourself. No matter what the representative tells you or the advertisements imply, your card will never pay one single cent to any provider. The consumer will always be responsible for the amount of the charge less any discount that might be applied.

Consider your needs and the needs of your family. If you can afford it, buy real health insurance. Even a plan with a high deductible such as an HSA will be a better option because at some point after the deductible is met, the insurance will pay the balance of the bill. If you can't afford insurance or you cannot qualify because of medical problems, a health card may be useful. But before your buy, understand what it is and what it can really do for you.

Is Employer-Based Health Insurance Worth Saving?

May 22, 2009, 6:05 am

Is Employer-Based Health Insurance Worth Saving?

By Uwe E. Reinhardt

Uwe E. Reinhardt is an economics professor at Princeton.

The Takeaway With Uwe E. Reinhardt

Ask any group of health policy experts whether they would have put in place our employment-based health insurance system, had they had the luxury of designing our health system from scratch, the resounding answer most likely would be “No.” In fact, no other industrialized country has quite this arrangement. It is uniquely American in origin and in modus operandi.

Our employment-based system was not the product of a carefully designed health policy. It was a byproduct of evading wage controls during World War II.

At the time it was thought that, as the nation’s drafted military personnel risked their limbs and life on foreign battlefields at low, tightly controlled pay, those who stayed behind should have their wages controlled as well.

But with the wink of the eye with which Congress routinely puts loopholes into the tax laws or regulations it imposes, the wage controls imposed in World War II did not extend to fringe benefits. And thus, employer-paid fringe benefits, including employment-based health insurance, were born.

As was noted in last week’s post, Congress further encouraged the growth of employment-based health insurance by treating the employers’ contribution to their employees’ health insurance as a tax-deductible business expense. On the other hand, it was also not viewed as taxable compensation of the employee.

Remarkably, and quite unfairly, that tax preference was not granted to families forced to purchase health insurance on their own. They had to buy it with after-tax dollars.

From the perspective of employed Americans and their families, this model appears to have served them reasonably well. In opinion surveys, over 80 percent of the respondents typically declare themselves satisfied with that coverage. It can explain why Americans have grown so attached to that system and why so many politicians are keen to shore it up.

From the perspective of health policy experts, however, that approach has serious shortcomings.

First, it keeps opaque who actually pays for the health care used by employees.

Both employers and employees seem to believe that the “company” absorbs the cost of the employer’s contributions to the group health insurance premiums for their employees — typically 80 percent of the premium.

Employers believe that these costs must either be recovered through the prices of the goods or services they sell (i.e., passing along the rising costs of health care to their customers in the form of higher prices), or taken out of the return to the company’s owners. On that belief, American executives now complain pitiably that the high cost of American health care makes their enterprises uncompetitive in the global marketplace.

For their part, employees tend to view employer-paid health insurance as a gift, on top of their pay. Therefore they see little personal gain in attempts to control the cost of their care.

Most economists are persuaded by theory and evidence that, over the longer run, the contributions employers make toward the fringe benefits of their employees come out of the employees’ take-home pay. Economists think of employers as pickpockets, so to speak, who take a chunk of the employee’s total compensation and buy with it whatever fringe benefits they “give” their employees. That process blinds employees to the inroads that their health care makes into their families’ livelihood.

A second major shortcoming of employment-based health insurance is that it is only temporary. It is tied to a particular job in a particular company, and it is lost with that job. Nowhere else in the industrialized world does a family, already down on its luck over a job loss, also suffer the loss of its health insurance. It happens only in America, under employment-based insurance.

Finally, the group health-insurance premiums employers pay to private insurers are “experience rated” over that employer’s group of employees. This means that the group premium is based on the claims experience – that is, the health history — of just that small group of employees.

For small employers, it can mean that if serious illness befalls one or several employees in the group, it can drastically and unpredictably drive up the premium for every employee in the group. Not surprisingly, only 49 percent of employers with three to nine employees sponsored health insurance for their employees in 2008, as did only 62 percent of employers with three to 199 workers (Exhibit 10 here).

The objective of current health reform efforts should not be to abolish the employment-based system to which so many Americans feel attached, brittle and expensive as that system may be. Instead, the aim should be to develop a robust, parallel system of fully portable insurance that individuals or families can purchase on their own, in a properly regulated and organized market, with public subsidies where deemed necessary. As my earlier posts to this blog sought to explain, this can be done in a variety of ways.

The success or failure of the current efforts by President Obama and Congress to reform the American health system can be gauged by the degree to which that goal has been accomplished a year from now. If success in this regard serves to shrink the traditional employment-based insurance system, so be it.

Tax on Medical Benefits Gains Traction

Health-Care Overhaul Could Be Funded by Levy on Employer-Paid Insurance Premiums

By Lori Montgomery

Washington Post Staff Writer


Friday, May 22, 2009

A new tax on employer-provided health insurance is emerging as a likely
option to finance an overhaul of the nation's health-care system, key
Democrats say, despite opposition from organized labor and possibly the
Obama administration.


Critical details have yet to be resolved, including whether to tax
the benefits of all workers regardless of income and what portion of
their employer-paid insurance premiums to tax. But the idea won a
surprising degree of acceptance during a closed-door meeting of the
Senate Finance Committee this week, according to several people
present. And once-fierce opposition among House Democrats is softening
as lawmakers confront their limited options for raising the estimated
$1.2 trillion that will be needed to pay for reform over the next
decade.

"There's a strong sentiment that still exists in the House" against
taxing employer-provided benefits, said Rep. John B. Larson (D-Conn.),
a member of House leadership who sits on the tax-writing Ways and Means
Committee. "But we understand how important it is to get a package
through."

Implementing such a tax would create a tricky
political situation for President Obama, who last year spent millions
on campaign ads that harshly criticized a similar idea advanced by his
Republican opponent, Sen. John McCain of Arizona. But while continuing
to express opposition to the proposal, White House officials have
repeatedly stated that all financing options are on the table. And some
Democrats are already calculating how to explain a reversal.

That task may have been made easier this week when congressional Republicans
proposed using the tax to finance their own health-reform blueprint, lending the idea a bipartisan stamp of approval.

Excluding employer-provided benefits from taxation "is one of the
distortions in the health-care marketplace that needs to be fixed,"
said Rep. Paul D. Ryan (R-Wis.), one of the plan's authors. "It was put
in place in the mid-20th century when everyone had the same jobs for
most of their lives. And we don't live like that anymore."

According to U.S. Census data, 177 million Americans received health
insurance from their employers in 2007, the most recent year for which
data are available. Nearly two-thirds of people under 65 have at least
some of their insurance premiums paid by their own employer or that of
a family member.

Under current law, those benefits are not taxed as income, one of
the largest loopholes in the U.S. tax code. If the loophole were
eliminated, congressional tax analysts estimate that the IRS would have
collected an extra $133 billion last year alone.

Senate Finance Committee Chairman Max Baucus (D-Mont.), who expects
to unveil health-reform legislation next month, has said he is not
interested in closing the loophole, but in establishing limits. Among
the options: Taxing only the benefits of high-earning individuals who
make at least $200,000 a year ($400,000 for families). Or taxing
benefits for all workers above some pre-set amount. One figure under
discussion is $13,000, the national average value of employer-provided
coverage for families.

Both options have disadvantages. Taxing only wealthy families, for
example, "doesn't make sense," said Sen. John F. Kerry (D-Mass.),
because it would raise too little money -- only about $160 billion over
10 years, according to Finance Committee aides. But "you've got to be
very careful how far you go" down the income ladder, Kerry said. "If
you come down too low, you're impacting workers and threatening the
employer-based system."

Some Democrats are particularly concerned that the tax would fall
heavily on union members, who tend to have generous health packages
sometimes derided as "Cadillac" plans. But those plans are expensive
because they include dental and vision benefits, large provider
networks and low co-payments -- "things every American wants and should
have," said Richard Kirsch, national campaign manager of Health Care
for America Now, a coalition of unions and community organizations.
Kirsch yesterday endorsed an alternative tax plan drafted by Citizens
for Tax Justice that would target corporations and the wealthy for $1
trillion in tax increases over the next decade.

Capping employer-provided health benefits would generate around $500
billion over the next 10 years, by various estimates, and key Democrats
say it may be the only politically viable option for raising that kind
of cash.

"Everyone hates it," said a member of the House Ways and Means
Committee, speaking on condition of anonymity because he has yet to
discuss the issue with his colleagues. "But where else do you go?"

Buzz up!Share this Article:

National Health Care?

Economic Scene
Health Care, a Lesson in Pain
Pablo Martinez Monsivais/Associated Press

Thirteen prominent health experts took part in a round table Tuesday on overhauling health care. Many urged senators to limit the tax deduction for employer-provided health insurance.

By DAVID LEONHARDT
Published: May 12, 2009

The events of the last few weeks have raised the odds that a health care overhaul will really happen this year.
Skip to next paragraph
Related
Times Topics: David Leonhardt
Enlarge This Image
 
Pablo Martinez Monsivais/Associated Press

Senator Max Baucus, left, head of the finance committee, and Senator Charles Grassley, its ranking Republican.
Readers' Comments

Readers shared their thoughts on this article.

* Read All Comments (55) »

Democrats have suggested that they are willing to play hardball and pass a bill without Republican support. Arlen Specter, the senior Pennsylvania senator, became a Democrat, potentially adding one more vote. At the White House on Monday, lobbyists for doctors, insurers and other industry groups pledged to reduce the growth of medical spending.

Yet none of these developments has removed the main hurdle to health care reform: the matter of the missing $90 billion.

Providing health insurance to the roughly 50 million people without it will cost something like $120 billion a year. President Obama has proposed $60 billion or so in new revenue for this purpose — a “down payment,” his advisers say. But Congress seems set to reject about half of the down payment (a plan to limit high-income families’ tax deductions for charitable giving and other such things). That makes for the $90 billion health care hole.

And no one is quite sure how to fill it.

Because Mr. Obama has made it clear that health care is his top legislative priority, the $90 billion hole has become one of the biggest political issues of 2009. The Obama administration’s health care team is now preoccupied by it. On Tuesday, the Senate began to consider it, at a packed round-table discussion among 13 prominent health experts and members of the finance committee.

“Now it’s time to think about money,” said Max Baucus, the Montana Democrat who heads the committee.

The experts at the round table — liberal and conservative — actually agreed to an impressive degree about the best way to fill the hole. They urged the senators to limit the tax deduction for employer-provided health insurance.

The deduction may seem a wonderful thing, but it isn’t. It benefits the wealthy more than anyone else. It encourages employers to overspend on health insurance, because $100 in untaxed medical benefits is more valuable to workers than $100 in taxed income. And, as Mr. Baucus said, the deduction has a certain Willie Sutton appeal for Congress: it’s where the money is.

The government forgoes $250 billion a year in taxes because of the deduction. Capping it, to apply only to reasonably priced health plans, would bring in enough money to fill most of the $90 billion hole.

The idea seems to be classic Obama: empirical, pragmatic, bipartisan. Unfortunately, it happens to be an idea that John McCain campaigned on last year and that Mr. Obama, sensing a political opening, blasted as a tax increase. “Taxing health care instead of fixing it,” intoned the narrator in an Obama campaign advertisement, with ominous music playing in the background. “We can’t afford John McCain.”

Mr. Obama’s economic advisers would be happy to see him reverse his position. But his political advisers remember that ad and know it could be used against him. Further complicating matters, labor unions and Charles Rangel, the influential Democratic House member, say they remain firmly opposed to capping the deduction.

All of which means that filling the $90 billion hole is going to be very tricky.

•

If the tax deduction can’t be touched, the first alternative is simply to add the $90 billion a year to the deficit, to cover the uninsured now and pay for it later, as President George W. Bush did with his tax cuts, the Iraq war and the Medicare prescription drug benefit. In another time, this might have been politically palatable. But it isn’t now, not when this year’s deficit is projected to be larger than any since the end of World War II.

That leaves two ways to pay for an expansion of health insurance: raise taxes or cut health spending.

Economically, spending cuts have a lot to recommend them. The United States spends vastly more per person on medical care than any other country. Much of that spending does nothing to improve health, as chronicled in this newspaper’s recent “Evidence Gap” series. Getting rid of such waste could pay for universal health insurance, several times over, and prevent Medicare from going bankrupt.

The $30 billion that remains of Mr. Obama’s down payment plucks the low-hanging fruit of cost reduction, like the subsidies for private insurers to provide the same coverage as Medicare at a higher cost. But the precise strategy for finding a lot more savings is still murky. “Reducing spending without also affecting services that do improve health,” says Douglas Elmendorf, director of the Congressional Budget Office, “is challenging.”

The Obama administration is laying the groundwork for a more efficient system by pushing for more research into medical effectiveness. But we’re not there yet, and getting there won’t be easy. Consider that some of the same industry groups that pledged to reduce medical spending this week are also trying to block effectiveness research — the very thing that would tell us how to reduce spending without damaging people’s health.

So over the short term, tax increases are probably necessary, though they have their own problems. Will the 85 percent of people with health insurance be willing to pay higher taxes for something approaching universal coverage?

Congress has already rejected several of Mr. Obama’s proposals to reduce the budget deficit, including the plan to limit charitable deductions for the affluent. The other ideas that have been floated, like taxing high-calorie sodas, wouldn’t raise anywhere near $90 billion a year.

You can imagine a bill that mixes together lots of different revenue sources, in typical sausage-making style. But it’s hard to get to $90 billion without changing the deduction for employer-provided health insurance. “I just don’t know where else you get enough money,” says Jonathan Gruber, an M.I.T. economist and one of the round-table panelists.

One possibility is that Congress will pass a bill capping the deduction, and Mr. Obama will be able to claim that he is signing it reluctantly. Another possibility, however, is that we need to begin thinking about whether health care reform is possible even if some significant number of people remain uninsured.

What might that look like?

The subsidies for insurance, which make up most of the $120 billion price tag, would have to be reduced, leaving some people unable to afford coverage but also cutting the bill’s cost. That would be the painful compromise.

The second, crucial step would be doing everything possible to get rid of wasteful medical spending: using the force of law to hold medical providers to their cost-reduction pledges; moving Medicare away from a fee-for-service model that pays for quantity, not quality; encouraging low-cost hospitals to grow and high-cost hospitals to change — or shrink.

During the campaign, Mr. Obama emphasized universal insurance more than costs. Since taking office, he has shifted his focus somewhat. “What we have done,” Rahm Emanuel, the White House chief of staff, told me this week, “is raise cost control to the same level as expanded coverage.”

Cost control has the political benefit of appealing to the 85 percent of people with insurance. And it has enormous economic benefits, too. If costs can be reduced, the price of covering the uninsured will come way down. Put differently, the only way to have a sustainable universal health care system is to control costs.

In an ideal world, Congress and Mr. Obama would find the $90 billion to cover all the uninsured now. But if they don’t, health care reform is not an all-or-nothing proposition.

E-mail: leonhardt@nytimes.com
More Articles in Business » A version of this article appeared in print on May 13, 2009, on page B1 of the New York edition.

Credit Based Insurance Scoring

Don't miss another insurance headline, sign up for
the industry's most comprehensive newsletter!
Michigan's Top Court to Rule on Credit-Based Insurance Scoring
http://www.insurancenewsnet.com/article.asp?neid=opr_oajMBA-rSCJUdPj5xHZZ9_qUzneFe9vzXofy_pq1aVH8RoBSjAnG9wqwYyBH

Michigan's Top Court to Rule on Credit-Based Insurance Scoring Caroline J Saucer The Michigan Supreme Court will determine whether the state may ban the use of credit-based insurance scoring in underwriting, addressing a four-year-old dispute between insurance companies and state regulators.
The court will hear arguments in the case pitting insurance companies and the Insurance Institute of Michigan against the state Office of Financial and Insurance Regulation. An August 2008 state Court of Appeals ruling overturned a lower-court decision preventing the state from banning the practice.
In March, state regulators began challenging rate filings that use credit-based insurance scoring as a factor. The state blocked 17 automobile insurance rate filings and three homeowners filings before being blocked by a ruling from Barry County Circuit Court Judge James H. Fisher (BestWire, April 10, 2009). The insurance institute and the Michigan Insurance Coalition had filed to prevent the state from denying rate filings while appeals continue; both insurers and the state had petitioned the Supreme Court to take the case.
"The Supreme Court recognized that both parties asked the court to take the case, that this case deserves some immediate attention," said Jeffrey Junkas, public affairs director, Midwest Region for the American Insurance Association.
Court proceedings are scheduled for October 2009. Insurance scoring has been a legal issue in Michigan since 2004, when Gov. Jennifer Granholm and then-Commissioner Linda Watters proposed a new state rule to reduce base rates by prohibiting the use of insurance scoring for homeowners and auto insurance.
"This is good news for Michigan consumers," OFIR Commissioner Ken Ross said in a statement. "After four years of waiting, we are hopeful that the court resolves this issue in favor of Michigan drivers.â?ť
The OFIR has said it regards rates and premiums developed using insurance scoring as unfairly discriminatory and not in compliance with Michigan's Insurance Code. Insurers have defended the use of credit-based insurance scoring as an accurate and fair tool.
The top five writers of homeowners multiperil insurance in Michigan in 2008, according to A.M. Best state/line data, were: State Farm Group, with 20.4% market share; Auto-Owners Insurance Group, 14.5%; Auto Club Group, 10.2%; Hanover Insurance Group, 9.3%; and Allstate Insurance Group, 8%.
The top five writers of private passenger auto insurance in Michigan in 2008, according to A.M. Best Co. state/line product information, were: State Farm Group, with 18.6%; Auto Club Group, with 16%; Auto-Owners Insurance Group, with 9.5%; Progressive Insurance Group, with 8.6%; and Hanover Insurance Group Property and Casualty Cos., with 7.8%.
(By Sean P. Carr, senior associate editor, BestWeek: Sean.Carr@ambest.com)
(c) 2009 A.M. Best Company, Inc.

The Michigan Supreme Court will determine whether the state may ban the use of credit-based insurance scoring in underwriting, addressing a four-year-old dispute between insurance companies and state regulators. The court will hear arguments in the case pitting insurance companies and the Insurance Institute of Michigan against the state Office of Financial and Insurance Regulation.

---

For more insurance news, visit InsuranceNewsNet.com
Don't miss another insurance headline, sign up for our free newsletter today.
Want your company's news featured on Insurance News Net? Click Here

Reply

Forward

Double Taxation of Life Insurance?

Obama Proposes New Taxes on Dealers, Life Insurance (Update3)

• Delicious
• Digg
• Facebook
• LinkedIn
• Newsvine
• Propeller
• Yahoo! Buzz
• Close

By Ryan J. Donmoyer

May 11 (Bloomberg) -- President Barack Obama proposed raising money to pay for his health-care overhaul by imposing $58 billion in new taxes on securities dealers, life insurance products and Americans with valuable estates.

The eight new proposals, outlined in budget documents released today, are in addition to more than $1 trillion in tax increases over the next decade the president wants to impose beginning in 2011. Those would include higher rates for top earners and restrictions on tax-avoidance techniques commonly used by U.S.-based multinational corporations.

Frank Keating, president of the Washington-based American Council of Life Insurers, warned against imposing the new taxes. “Seventy-five million American families rely on the products offered by life insurers for their financial and retirement security,” Keating, the former Republican governor of Oklahoma, said in a statement. “This is absolutely the wrong time to make it more expensive for families to obtain the security and peace of mind our products provide.”

Today’s proposals are aimed at making up a projected shortfall in an earlier plan to limit high earners’ deductions for charitable gifts, mortgage interest, investment expenses and other items. That proposal, criticized by Democrats and Republicans in Congress, now is projected to raise $266.7 billion over the next decade, down from an estimate of $318 billion in February.

Obama also would raise $24.2 billion over the decade by adjusting rules for valuing assets in estate planning.

‘Changed Somewhat’

“The composition of the additional revenue measures has now changed somewhat, with the addition of new enforcement measures and loophole closers,” Budget Director Peter Orszag wrote on a White House blog.

Another proposal would raise $1.2 billion over the next decade by stopping hedge fund managers from using equity swaps to avoid withholding taxes on dividends paid to their offshore holding companies.

The tax increases would help offset the cost of Obama’s proposals to permanently rebate part of the 12.4 percent Social Security payroll tax and continue lower tax rates enacted under President George W. Bush for people earning less than $200,000.

‘Ordinary Rates’

The budget would tax income from “day-to-day” dealer activities at “ordinary rates,” ending their ability to pay a lower rate on most of their income. That would raise $4.2 billion along with proposals to change tax accounting rules for sales of corporate stock and for convertible debt.

The special law for options dealers, enacted in 1981 at the behest of then-Chicago Congressman Dan Rostenkowski, lets them pay a blend of capital gains and ordinary tax rates on their income. It works this way: 60 cents of each dollar earned by an options dealer is taxed at the 15 percent capital gains rate while the remaining 40 cents is taxable at ordinary rates as high as 35 percent. Combined, the effective tax rate is 23 percent.

“There is no reason to treat dealers in commodities, commodities derivatives dealers, dealers in securities and dealers in equity options differently than dealers in other types of property,” an explanation of the proposal said. “Dealers earn their income from their day-to-day dealing activities and should be taxed at ordinary rates.”

Life Insurance Changes

The life insurance provisions would modify tax rules when policyholders sell their coverage to investors to receive immediate benefits, and would reduce a deduction that life insurers claim when they manage assets in separate accounts. Another provision would further restrict tax benefits associated with corporate-owned life insurance. Those proposals would raise $12.7 billion through 2019.

The document gives details on proposals to keep corporations and individuals from avoiding about $210 billion in taxes from 2011 through 2019 by shifting income to offshore tax havens.

Obama last week spelled out the biggest changes, including the proposed repeal of three corporate techniques that would otherwise save U.S.-based multinationals $190 billion in U.S. taxes through 2019.

The revenue gained from those proposals would fund a permanent tax credit for research and experimentation expenses, which economists say generally creates jobs.

Treasury officials told reporters today the international provisions were designed to strike a balance between ending tax incentives that promote overseas investment at the expense of domestic expansion. The proposals have received a chilly reception on Capitol Hill including from key Democrats such as Senate Finance Committee Chairman Max Baucus, a Montana Democrat.

Grassley’s Concerns

Iowa Senator Charles Grassley, the top Republican on the finance committee, said he still has concerns.

“If the proposal is, in effect, a job-killing tax increase on domestic businesses for no good reason, then the president will lose my support,” he said.

One new proposal would raise $3 billion by limiting companies’ ability to transfer intangible property such as trademarks and patents to low-tax countries. The budget proposes limiting interest deductions for U.S. companies nominally headquartered in places such as Bermuda. That would raise $1.2 billion over the next decade.

Other proposed corporate changes would end a tax-accounting technique called “last in, first out,” that primarily benefited oil and gas companies when oil topped $100 a barrel and is widely used across industries.

Accurate Measure

The accounting method has been commonly used since the 1930s and is viewed as the most accurate measure of income for financial statement purposes, according to the nonpartisan congressional Joint Committee on Taxation.

Republican senators in April 2006 suggested ending use of the method but backed off after Exxon Mobil Corp. Chairman and Chief Executive Officer Rex Tillerson called the proposal a “backdoor windfall-profits tax.”

In addition to oil companies, the repeal of last in, first out would hit retailers, automakers and makers of non-automotive heavy equipment, textile companies, consumer products firms, drug companies, alcohol and tobacco manufacturers and wholesalers when prices rise, according to tax experts.

For individuals, Obama’s budget assumes Congress will continue to index the alternative minimum tax for inflation. The AMT is a parallel system that can impose higher rates on families earning between $75,000 and $500,000 when their deductions are too high relative to their income.

Executives at private-equity firms, venture-capital firms, some hedge funds and other partnerships that receive “carried interest” in their profits would see their tax burdens nearly triple.

Most of their carried interest is taxed at the 15 percent rate for long-term capital gains. Obama is asking Congress to tax the profit share as ordinary income, arguing that it is a form of wages. Under his plan, most executives would pay 39.6 percent.

To contact the reporter on this story: Ryan Donmoyer in Washington at rdonmoyer@bloomberg.net

Last Updated: May 11, 2009 16:16 EDT

Blogged with the Flock Browser

Will Auto Insurance pay for Police runs?

Police look to program
for recovering tax dollars

by CHRIS GRAY
Observer Staff Writer

      The Romeo Police Department will attempt to recoup costs for time spent at accident scenes.
       With more than 90 percent of traffic crashes in the Romeo area caused by non-taxpaying residents, the department hopes to establish a fund recovery program this summer to restore taxpayer money spent on officers responding to motor vehicle accidents.
       Currently, Romeo residents pay a total of 12.0 general operating millage, part of which pays for basic fire and police services like criminal protection and investigation. The majority of services rendered at a motor vehicle crash, though, are outside the scope of these basic provisions.
       Last year, the Romeo Police Department responded to almost 180 motor vehicle accidents. Police Chief Greg Paduch said close to 97 percent of accidents are caused by non-taxpayers, forcing those that do pay taxes in the community to shoulder the burden of motor vehicle responses without gaining any benefits.
       "Village taxpayers pay for police patrol and enforcement of criminal activity," Paduch said. "The amount of minutes we use at a scene and writing that report takes us away from patrol duties or protecting taxpayers."
       To relieve residents and recycle funding back to the village, Paduch said the department will pursue a partnership with the Cost Recovery Corporation (CRC) based in Dayton, Ohio.
       CRC's program for police agencies has existed since 2004, though the corporation itself has served other emergency services since 1999. The program works by having officers log the time spent at accident scenes. This is collected at the end of a month, and when CRC receives the amount, it bills the at-fault driver's insurance company for that time. If a driver is uninsured, they are directly billed.
       "The money recovered goes back into the village's general fund," Paduch said.
       He said this will not cause an increase to taxes for the village, and there are no out-of-pocket costs from local residents for the program. Any fees CRC requests are billed to the insurance companies, not the police department.
       "This isn't double taxation, and taxes will not be raised because of this," he said.
       Accident victims will not see an increase in their premiums due to the implementation of the program, according to CRC's Web site. Insurance rates are controlled by the State Insurance Commissioner, who adjusts premiums based on a driver's risk factor regardless of the program.
       As of now, 56 percent of insurance companies participate in CRC's program. Paduch said there weren't any specific figures, but the money recovered from these accidents would be in the thousands.
       "It's enough to make it worthwhile," he said.
       Before any recovery can begin, the Village Council must review and approve an ordinance that would allow the program to take place. Paduch estimates a contract between the department and CRC could be signed and implemented a month after an ordinance is improved. The ordinance could be reviewed as early as the Village Council's regular May meeting.
       The village has a similar ordinance in place now, as the Bruce-Romeo Fire Department uses a different company to recover costs in the same fashion.

Government Health Insurance?

Pro-Con: Should health-care reform include a government insurance program that competes with the private sector? No

Proponents want to create a government health insurance program that
would be available to working Americans and their families, arguing it
would be more efficient than private insurance.
Opponents fear
that it is a straight line to a government-run health system by putting
private insurers out of business. Congress would give the government
plan the power to dictate prices so it could artificially under-price
private plans and drive them out of this “marketplace.”
Many people then would be left with little or no choice, as employers
would drop their coverage and send their workers into the public plan.
This massive crowding out of private insurance would undermine the employment-based coverage of most Americans under age 65.
Once
private plans have been driven out, people will realize that the
government plan will not be able to sustain the quality and quantity of
benefits promised. Government will begin to ration care and services,
driving out innovation.

Grace-Marie Turner, the Galen Institute

Blogged with the Flock Browser

Should You Tune Up Your Auto Insurance Policy?

By BankingMyWay.com Staff
Your car gets regular maintenance … oil changes, tire rotation and engine checks, but what about your auto insurance policy?

Once you buy an auto insurance policy,
you may feel like you’ve done your due diligence, but your
insurance coverage needs regular maintenance just like your car. As the
circumstances in your life change, so too should your level of
coverage. Additionally, you may now qualify for discount programs that
you didn’t before. In order to make sure you get the appropriate
level of coverage at the best price, you should “tune up” your policy once a year.

Here are some things you should consider when updating your auto insurance:

Has your family makeup changed?

If you have gotten married since you bought your policy, you’ll need
to add another driver. Conversely, if you got divorced, you can take
your ex-spouse off your policy. If you have had children, you’ll
need to update your number of dependents for personal injury protection
purposes.

Is your teen driving?

If your teenage child got his/her license and will be driving your car, you need to
adjust your policy accordingly. This can increase your premiums
significantly, but failing to do so can cost you dearly if your child
has an accident, especially if someone gets hurt. On the other hand, if
your child goes to college or leaves your house, you can save on your premiums by removing him/her from your policy.

Has your work situation changed?

If you started your own business and are now using your car for business
purposes, your policy needs to reflect that. Additionally, if you move
closer to work or started using public transportation, you may be able
to get any surcharges for daily commuting taken off.

Has your economic status changed?

If you’ve gone up on the financial ladder, that means you now have
more assets to protect. You may want to look at increasing your
liability coverage or adding an umbrella policy to your insurance.
Alternatively, if you find yourself with less money to pay your
insurance premiums, you might want to lower your coverage level.
It’s wise to buy as much car insurance as you can afford and as is appropriate for your needs, but if your premiums are causing you financial difficulty, temporarily scaling your coverage
back to legal minimums may help ease some of the hardship.

Do you need comprehensive and collision coverage?

If your car is old and is no longer worth a lot of money, you may want to
drop your comprehensive and collision coverage. These features cover
damage to your car, but they may not be worth their cost if your car is
not worth much.

Are you getting all the discounts you can?

Most car insurers will discount your premium for having multiple cars or
other policies with the company. If you consolidate all of your
insurance coverage at one company, you can probably save. Additionally,
if you have been with a company for a long time and/or have a good
driving record, you may be able to get more discounts. Find out all the
programs your insurer offers to see if you can qualify for any.

Finally, ask yourself if your auto insurance company is the best one for you or if you can save by switching to another company.

Blogged with the Flock Browser

How Do We Pay for Health Care?

Taxing Those With Insurance to Pay for Those Without

By REED ABELSON

Published: May 7, 2009

It is an alluring way to pay for the ambitious plan to expand health coverage to the nearly 50 million people who are now uninsured. Simply put, the government would tax the people who already have the most expensive health benefits, as provided by their employers.

By one Congressional estimate, taxing this “Cadillac coverage,” as some call it, could yield $100 billion in revenue over five years. No wonder Senator Max Baucus, the Montana Democrat who is a leader of the health reform effort, seems keen on the idea. And although the candidate Barack Obama criticized the notion last year when Senator John McCain promoted it, the concept now has some support in his administration as part of an overhaul of the health care system.

“There aren’t that many pots of gold to pay for health reform,” said Jonathan Oberlander, a health policy expert at the University of North Carolina. But Mr. Oberlander and some other experts say Congress may have a difficult time devising a new tax on health benefits that does not threaten to do more harm than good.

If the plan is not designed carefully, they say, the additional taxes could affect many workers who are far from affluent and put the cost of adequate coverage further beyond the reach of many Americans. Some critics also warn that the taxes could undermine the employer-based coverage that is the bedrock of the nation’s health insurance system.

The details have not yet been worked out. But critics say a tax could add to the burden of many employees, who already pay a hefty portion of their own insurance premiums and have additional out-of-pocket costs in the form of deductibles and annual co-payments.

And many people have high-priced insurance that is expensive for reasons unrelated to the quality of the coverage because they live in a high-cost city or work for a small business with old or sick employees.

“We too often equate expensive health insurance with generous health insurance, and they’re not the same,” Mr. Oberlander said. “It’s not clear that you are going after ‘Cadillac’ health plans at all.”

Right now, the amount that an employer spends on a worker’s health insurance is not taxed as income, and employees can pay their share of premiums with before-tax earnings. The proposals being debated in Congress would start considering some part of the value of the health benefit as income and tax it accordingly.

Representative Charles B. Rangel, the New York Democrat who is chairman of the House Ways and Means Committee, which presides over tax legislation, made clear on Wednesday that he opposed a change in the tax treatment of health benefits.

And employer groups and labor officials have also come out against the idea. They say taxing benefits could endanger the current system of employer-based coverage, which now is responsible for insuring nearly two-thirds of Americans who are under 65 years old and have coverage.

“If we began to tax employee benefits, there would be mutiny at the gate,” said J. Randall MacDonald, an I.B.M. executive who is chairman of the HR Policy Association, which represents corporate human resource professionals. “It’s just counterintuitive to the problem we’re trying to solve.”

The challenge for Congress, aside from the political battles already stirring, is whether policy makers can come up with a proposal that addresses opponents’ concerns, by limiting the tax to the wealthy, or otherwise fine-tuning it.

Proponents argue that the revenue could be raised by taxing only the most expensive policies for those people who can afford the few hundred or thousand dollars at stake — money they say is essential to government’s ability to provide basic coverage to more people.

“We need the money,” said Len Nichols, a health economist at the New America Foundation, which supports overhauling the current insurance system to give more people access.

Some supporters of these plans say the current system gives an advantage to people who get coverage from their employer and to people with high incomes.

“There is a huge consensus that this is inequitable and unfair tax treatment,” said Robert E. Moffitt, a policy analyst with the Heritage Foundation, which has long supported changing the tax laws and contends this is an area that might have significant bipartisan support.

What is more, some economists and policy analysts say the current system encourages overly generous coverage, which they say helps drive up the cost of medical care by keeping patients insulated from the true costs.

“One of the arguments for doing it is trying to achieve higher value through the health care system,” said Katherine Baicker, a health economist at the Harvard School of Public Health.

But the political opposition remains fierce.

Union officials, for example, say that the proposed policy could translate into higher taxes for some of its members, many of whose contracts call for generous health benefits. “Capping the tax exclusion would undermine the place where most Americans now get their coverage, before we have built a proven effective, sustainable alternative to employer-based plans,” said Gerald M. Shea, an official with the A.F.L.-C.I.O. in recent testimony before Congress.

And there is little doubt that more expensive coverage does not always mean more generous coverage. Small companies, for example, typically pay more for the same benefits than large employers do. And some companies pay more in premiums because more of their employees are older or sicker.

Moreover, the cost of insurance varies in different parts of the country, so that someone with the same plan in New York or California will pay more than someone in North Dakota.

Congress may be able to balance these issues. But the problem, some policy analysts say, is that if a grand compromise ends up too narrowly defining the group of people who will end up paying the new tax, the amount of money raised might not be enough to make a difference in paying for health reform.

“I think it’s got some traction, but what happens when push comes to shove?” asked Paul
Fronstin, an analyst for the Employee Benefit Research Institute, who recently completed a lengthy analysis of changing tax policy.

“If it’s not going to buy them much, why do it?” he asked.

Next Article in
Health (9 of
41) »
A version of this article appeared in print on May 8, 2009, on page B1 of the New York edition.

Blogged with the Flock Browser

Possible Public Health insurance Options

Sources: Senators weigh 3 government health plans

By RICARDO ALONSO-ZALDIVAR – 12 hours ago

WASHINGTON (AP) — Senators are considering three different designs for a new government health insurance plan that middle-income Americans could buy into for the first time, congressional officials said Friday. Officials familiar with the proposals said senators plan to debate them in a closed meeting next week. The officials spoke on condition of anonymity because details of the controversial plans have not been released.

Creating a public plan is one of the most contentious ideas in the debate over how to overhaul the nation's health care system to cover the uninsured and try to restrain costs.

President Barack Obama and many Democrats say a government option would serve as a check to keep the private insurance industry honest.

Insurers fear the government would use its power to drive them out of business. And Republicans call a public plan in the legislation a dealbreaker, dashing hopes for bipartisan legislation for overhauling the health insurance system. Employer groups are also opposed.

The three approaches being discussed are:

_Create a plan that resembles Medicare, administered by the Health and Human Services department.

_Adopt a Medicare-like plan, but pick an outside party to run it. That way government officials would not directly control the day-to-day operations.

_Leave it up to individual states to set up a public insurance plan for their residents.

But many key details would still have to be fleshed out.

Among them is whether the public plan would be open to everyone, or be limited to small businesses and individuals purchasing coverage on their own.

Also, would the plan reimburse medical providers at discounted Medicare rates or the higher fees that private insurers pay? And would it be financed by tax dollars, or entirely from premiums?

Senators on the Finance Committee will consider the proposals during a closed-door session scheduled for late next week. Committee leaders want to bring a bill to the Senate floor this summer. It's unclear whether a public plan in any form will emerge from Congress.

Citing surveys that show most seniors are happy with Medicare, Democrats say they believe that a public plan would be a political winner. But Republicans counter that it would be a step toward a government-run system in which medical services sooner or later would be rationed.

The majority of Americans now get health insurance through private insurers, about 170 million people in all. Most of them are enrolled in employer-sponsored plans.

A recent report by the Lewin Group, a numbers-crunching firm that serves government and private clients, found that a new government plan could radically alter that landscape — or maybe not.

It depends on the design.

If the public plan were open to all employers and individuals — and if it paid doctors and hospitals the same as Medicare — it would quickly grow to 131 million members, while enrollment in private insurance plans would plummet, the study found.

By paying Medicare rates the government plan would be able to set premiums well below what private plans charge. Employers and individuals would rush to sign up.

But the results would be far different if the government plan was limited to small employers, individuals and the self-employed.

In that smaller-scale scenario, the public plan would get from 17 million to 43 million members, the study said. It found that a government plan could be effective in reducing number of uninsured.

Lewin is a subsidiary of UnitedHealthcare, the nation's largest health insurer. The consulting firm says it makes its own judgments, however. Its work is used by groups on all sides of the health care debate, including supporters of a public plan.

Copyright © 2009 The Associated Press. All rights reserved.

Blogged with the Flock Browser

Property Premiums increasing?

Allstate Has ‘Work to Do’ at Homeowner Unit, CEO Says (Update1)

Share | Email | Print | A A A

By Erik Holm

May 8 (Bloomberg) -- Allstate Corp., the largest publicly traded U.S. home insurer, may raise prices after a first-quarter underwriting loss on residential coverage.

“We have work to do,” in the unit that protects homes and apartments, Chief Executive Officer Tom Wilson said in a conference call with analysts today. “Our homeowners business is not performing the way we’d like it to be.”

The insurer spent about $1.07 for every dollar it collected in residential premiums for its Allstate-branded home coverage in the first quarter because of an increase in claims costs tied to storms on the East Coast, the company said yesterday.

Wilson is seeking to improve results at Northbrook, Illinois-based Allstate’s home and life businesses and reverse investment losses to match results at the profitable auto insurance operation, which provides about two-thirds of revenue. The auto unit is facing pressure amid the recession as drivers pare back coverage and the firm pays claims for clients involved in accidents with the growing number of uninsured motorists.

“We’re not happy with the performance that we have with the homeowner line,” said George Ruebenson, the president of Allstate’s property and casualty business. “We’re taking a harder look,” he said. “Which, as you could probably read between the lines, means more rates in that line.”

Allstate fell $2.65, or 9.6 percent, to $24.95 at 11:36 a.m. in New York Stock Exchange composite trading. The company has dropped 24 percent this year, compared with the 6.7 percent decline in the 21-stock Standard & Poor’s 500 Insurance Index.

Life Insurance

The insurer yesterday posted its third-straight loss on investment writedowns and declines in private equity and hedge fund holdings. Allstate set aside $224 million at its life insurance unit after stock declines raised the cost of meeting obligations to customers that have been promised minimum returns on retirement products.

First-quarter profit before investment losses was 84 cents a share, missing the $1.25 estimate of 14 analysts surveyed by Bloomberg.

To contact the reporter on this story: Erik Holm in New York at eholm2@bloomberg.net.

Last Updated: May 8, 2009 11:47 EDT

Blogged with the Flock Browser

More people driving uninsured?

Drivers drop insurance

Updated: Tuesday, 05 May 2009, 10:50 AM EDT
Published : Monday, 04 May 2009, 5:48 PM EDT

• Jane Santucci

TERRE HAUTE, Ind (WTHI) - More drivers are letting their car insurance lapse because of the sour economy putting themselves and others at risk. If someone cuts coverage and then can't pay the damages, you are left with a much more costly situation.

One car insurance agent said you should make sure you have extra coverage that compensates you if you are hit by an uninsured motorist.

"I see some of my clients dropping full coverage on some of their vehicles. I see them taking that car of the policy that they don't drive very often to reduce the cost. A lot of people are having hard times," John Heaton with Heaton Insurance said.