Thursday, July 26, 2012

Agent in the Clink: Update

Last week, we reported on the unfortunate case of Aloha State insurance agent Kathleen Kau, who was recently sentenced to 10 years in prison for raiding her clients' insurance policies. We wondered what kind of life insurance policy came with a checkbook (as described in the original article), and reached out to the reporter and to TransAmerica.

We were unable to connect with the former, but yesterday got this answer from Cindy Nodorft (she's in Transamerica's Corporate Communications area):
"Thanks for your inquiry.  I’ve learned that the policy at issue was part of a block of business assumed by Transamerica Life Insurance Company that allowed policyholders to obtain policy loans.  This practice was discontinued in about 2005."
I guess that makes sense, although I'd never heard of carriers issuing checkbooks with loans. It strikes me that this sounds more like a line of credit than a typical loan, but at least we now have an answer.

Thanks, Cindy!

From the P&C Files: Iran, Shipping, Insurance and Oil

Although we primarily concern ourselves with life and health insurance, we're certainly no strangers to the Property and Casualty side of the biz. This item in the Washington Free Bacon Beacon (oops, sorry), piqued my interest:

"The insurance industry and ... lawmakers are attempting to water down a new Iran sanctions bill that would penalize any company that underwrites Iranian affiliates"

Since this is rather outside my bailiwick, I turned (again) to our resident on-call P&C guru, Bill M, who helped me get my head around it.

Here goes:

Acme Industries, which ships oil-drilling equipment to Iran, calls AIG (hey, it's called American International Group for a reason) for a quote. AIG asks all the pertinent questions (including what's being shipped, from where, to where, etc) and generates a quote. Acme likes what it sees, and purchases the policy.

Six months later, Acme is sanctioned for "bolstering the Iranian oil industry."

Under the bill currently wending its way through the House, AIG would then also be sanctioned.

The "prominent lawmakers" mentioned above would prefer to let AIG (or whomever) off the hook.

This item raises a number of questions:

First, would it have mattered if Acme had already been sanctioned before seeking that AIG quote? Are "sanctions" to this process what speeding tickets are to auto insurance?

Second, what if Acme had bought the policy from a broker in London? After all, it's not unreasonable to presume that a carrier might have offices in other countries in addition to a presence here.

If you have experience in this market, we'd appreciate any thoughts you might have on this.

Wednesday, July 25, 2012

ObamaTax: Told ya so

Bob mentioned this last night, but I wanted to toss in my 2¢. Regular IB readers won't be surprised that:

I think that's lowballing it, and here's why:

First, the ridiculously onerous MLR requirements, which add nothing of value but do add lots of extra costs to group plans. Determining who's eligible, calculating employees' shares, and tracking down former employees who might have been covered for only a month sounds like a great reason to bail.

Second, those much-touted  small business tax credits (subsidies) were a complete bust; how bad is it when you can't even pay employers to offer group health plans?

Third, what about all those companies with, say 55 or 60 employees? They're over the mandate threshold, but not exactly in Fortune 500 territory. Letting go one or two folks might work (to get back below the threshold), but a dozen? Just doesn't sound viable. Smartest alternative? Dump the group and eat the fine.

Okay, maybe that's more like a quarter's worth.

Cavalcade of Risk #162: Come and get it!

Van Mayhall hosts this week's collection of interesting risk-related posts. Don't miss it.

Tuesday, July 24, 2012

Bye Bye Benefits

About one in 10 employers plan to drop health coverage when key provisions of the new health care law kick in less than two years from now, according to a survey to be released Tuesday by the consulting company Deloitte.

read more . . .

And now, the Anti-MVNHS©

Yesterday, we reported on the sad fate awaiting seniors who trust the Much Vaunted National Health System© to keep them alive. As we noted, many are forced onto a lethal "pathway," denied fluid and meds.

In response to this growing scandal, "the anti-euthanasia charity Alert is distributing cards to patients to prevent this happening. The cards simply read: 'Please do not give me the Liverpool Care Pathway treatment without my informed consent or that of a relative.'"

The problem with the Pathway is that it is often "prescribed" without the permission (or knowledge) of the patient or his (or her) advocate. It's an attractive option - for the MVNHS©, natch - because it reduces costs with little or no effort. According to Dr Gillian Craig, a retired geriatrician and former vice-chairman of the Medical Ethics Alliance, "[i]f you are cynical about it, as I am, you can see it as a cost-cutting measure, if you don't want your beds to be filled with old people."

The cards act as garlic to vampires, hopefully fending off over-zealous providers from pulling the plug prematurely. Unfortunately, there doesn't seem to be any way to enforce them; that is, what's the consequence to the provider if that card is ignored? After all, it's the MVNHS© that's footing the bill (hey, it's free health care, right?).

Exchanges, Subsidies and intent

[Note: This post was co-written by Henry Stern and Bob Vineyard]

We've often lamented that it's too bad no one read the ObamaTax bill before they passed it, and with good reason. A fundamental problem is that the 2000+ pages of the bill, and the 13,000+ (so far!) pages of reg's promulgated to enforce it, keep handing up surprises. As we've pointed out, folks in states which opted for Federally-run Exchanges aren't eligible for the ObamaSubsidies, thereby driving their costs even higher.

Or are they?

Cato's Michael Cannon has been, perhaps, the most vocal in pointing out this discrepancy:
"This was no “drafting error.” During congressional consideration of the bill, its lead author, Sen. Max Baucus (D-MT), acknowledged that he intentionally and purposefully made that bailout conditional on states implementing their own Exchanges ... On May 24, the IRS finalized a regulation that says the law’s $800 billion [subsidy funding] will not be conditional on states creating Exchanges"
So what's the big deal?

The following appeared on a forum for insurance professionals in which Bob participates (it's about the ObamaSubsidies noted above):
"If you are ELIGIBLE to join any employer group plan where your portion of the premium is less than 9.5% of your income, then you won't get a subsidy. Next - drumroll please - this also holds true for dependents ... Due to the fact that the EMPLOYEE portion is less than 9.5% of the FAMILY income, the entire family is disqualified from a subsidy even if the employer pays nothing for dependent coverage."
In fact, and this is a real kick in the shins, it doesn't seem to matter whether you actually sign up for the group or not: maybe you found a better deal on the Exchange [ed: hey, it could happen!] and buy it, presuming that the net premium will be less because of the subsidy. Nope.

And it's no better if you do sign up for the group plan:
"Actually, the employer doesn't even have to pay a large portion in order for this to kick many families out of the subsidy ... a family of four must pay $729 in premium to equal 9.5% of their income if they make 400% of FPL. That means that any employer group health plan that charged that employee less than $729 for the EMPLOYEE-ONLY coverage would disqualify him and his dependents from receiving a subsidy. Nice."
And it only gets better worse:

"If you have an increase in earnings, putting you over the limit, part of your subsidy can be taken from you later."
Talk about the gift that keeps on giving.

Bob notes that, unfortunately, this "gift" also comes with more questions than answers:

■ How much intrusion into our lives will be required to determine if someone is entitled to a subsidy?

■ Will everyone's return require an audit (which implies an after-the-fact review)? If you get your subsidy and then an audit later determines you were not entitled to it do you owe the money back plus penalty and interest?

■ Will the IRS be smart enough to run all the calculations?

■ Will this create an additional burden on employers who will then drop health insurance rather than put up with the red tape? Will this exercise remind employers of what they had to go through for MLR rebates and create a backlash?

■ Will Dudley be able to save Nelle from being blown up by Snidely?

And he points out that the only real answer we have is that this latest wrinkle illustrates how impossible this law will be to execute, and how much money will be wasted trying to implement and enforce it.

Our forum participant continues:
"How many will qualify [for the subsidies]? The government estimated 20 million. I hope they're closer than their estimates for PCIP enrollment. Their estimates for the small business health insurance premium subsidy was as much of a flop."
As we've pointed out here, the PCIP program, while itself laudable, has thus far enjoyed underwhelming success.

The lynchpin here is whether or not HHS Secretary Shecantbeserious, and her colleagues the Revenooers, can make their interpretation rule stick. So far, the law says what HHS (and, of course, Chief Justice Roberts) says it says.

Time (and, of course, November 6th) will tell.