Tag Archives: Insurance

Updates from Chicago Booth

How local productivity growth affects workers near and far
One city’s boom can be felt across a nation
Chicago Booth – When big cities experience an economic boom, you expect an upsurge in wages and growth in those areas. But there’s some nuance: according to Chicago Booth’s Richard Hornbeck and University of California at Berkeley’s Enrico Moretti, one area’s surge particularly benefits low-skilled workers locally—and high-skilled workers elsewhere.

Using total factor productivity (TFP) as a measure of local productivity growth, Hornbeck Amount and Moretti analyzed two decades of data from major US cities to quantify the direct effects on people living in booming cities and the indirect effects on people elsewhere. Allowing for trade-offs between salary and cost-of-living increases, as well as unequal distribution of benefits across different groups, the researchers find that low-skilled workers gained the most from local productivity growth.

But gains extended further afield: a boom in San Diego or Los Angeles, say, was also felt in other cities. And high-skilled workers gained more from productivity growth in other cities. more>

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Why Delaying Obamacare Has Insurers Freaking Out

Insurance

Insurance
(Photo credit: Christopher S. Penn)

By Sam Baker – The health care law essentially strikes a deal with insurance companies: They are required to cover people with preexisting conditions, and they can’t charge people more based on those conditions.

Both of those policies will cost insurers money€”potentially, a lot of it. So the law also includes three tools to minimize their financial risks:

  1. the individual mandate;
  2. subsidies to help people afford insurance; and
  3. a defined window to buy coverage.

If lawmakers start fiddling with those incentives, the equation gets worse for insurers. more> http://tinyurl.com/pdv8ye8

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The income annuity puzzle: Why don’t more people use them?

By Mark Miller – Economists have long argued that there’s a perfect financial product for retirement: the humble immediate income annuity.

But economists also talk about an “annuity puzzle.” Namely, if SPIAS are such a perfect retirement vehicle, why do so few people buy them? Sales totaled $7.7 billion last year, according to LIMRA, the insurance industry research and consulting group. That’s a drop in the bucket compared with IRAs and workplace retirement plans, where $5.3 trillion were invested last year, according to the Investment Company Institute.

“To me, the paper points to the value of pairing an annuity with a long-term care insurance policy,” Michael Kitces says, partner and director of research for Maryland-based Pinnacle Advisory Group.

Insurance companies – start your engines. more> http://tinyurl.com/kw8xnrq

Countdown to healthcare reform

By Linda Stern – In a post-Obamacare future, expect more employers to adopt defined contribution healthcare plans. Instead of providing coverage, they will throw a set amount of cash at workers and have them buy their own coverage on private employer-sponsored exchanges.

That future isn’t here yet.

Workers at big companies probably will face fewer immediate changes than everyone else. But those who buy their own insurance, go without coverage or work for small employers will see dramatic changes in the coverage available to them. Here’s an early take on what to expect and what to do about it now. more> http://tinyurl.com/a9chmol

Auto insurers’ driver tracking hits wall in California

Big Sur, California

Big Sur, California
(Photo credit: the_tahoe_guy)

By Ben Berkowitz – California is turning into a battleground for technology that allows auto insurers to track their customers’ driving behavior and offer them lower premiums, but that privacy advocates reject as an excessive intrusion with serious consequences.

Insurance companies are increasingly installing small boxes in clients’ cars that monitor everything from how much customers drive to their average speeds to where they drive. more> http://tinyurl.com/8nu4jab

Reinventing Financial Services

BOOK REVIEW

Reinventing Financial Services, Authors: Roger Peverelli and Reggy de Feniks.

Reinventing Financial ServicesExcerpts – “Consumers increasingly want to know more about the companies they do business with, and about the specific products and services they buy there. The interest varies from the company ownership structure, the remuneration of top management and corporate policies to labour conditions, production processes and ingredients. Consumers also demand full transparency regarding prices and product features – what exactly do I pay for and what not? – with the ultimate goal of finding the best, cheapest or most ethical offer.”

“What’s remarkable is that when we talk with executives of financial service companies we often find we have to get onto the same semantics page. Financial executives usually think about transparency in terms of the balance sheet. Are all obligations on the balance sheet or are there any so-called offbalance sheet items? That is of course a different perspective than the one the consumer uses.”

“For consumers ‘transparent’ equals ‘easily seen through’, ‘readily understood’ and ‘free from deceit’. Transparency is about openness, making things clear by providing information.”

“Insurers need to give clarity about, and possibly redefine, the exact relationship with their intermediaries. Are they 100% owned by the insurer? Or are there any other interests? Transparency does not only relate to whether a product is easy to understand, but also to all the links in the chain. Insurance intermediaries will be faced by the choice: ‘am I a retailer or a financial advisor?'”

“There is no future in this mixed model. One just cannot be ‘objective and trustworthy’ when one also profits from the actual products being advised. Either intermediaries evolve into true objective advisors, refrain from provisions and build a fee-based business, or they really position themselves as financial retailers with a range of products of one or more insurance companies. And refrain from abusively describing themselves as ‘objective’.” more> reinventingfinancialservices.com

Aside

CONGRESS WATCH CBO and JCT’s Estimates of the Effects of the Affordable Care Act on the Number of People Obtaining Employment-Based Health Insurance The Effects of the Affordable Care Act on Employment-Based Health Insurance Testimony on CBO’s Appropriation Request for … Continue reading

Banks Shouldn’t Be Both Judge and Jury on Credit Defaults

Editorial – Imagine you bought a house and, to insure it, you had to purchase coverage from the homebuilder.

Then imagine a fire nearly destroyed the house, but your ability to collect the insurance depended on a committee of anonymous homebuilders meeting in secret to vote on whether to write you a check. If denied, the panel wouldn’t have to provide an explanation, you wouldn’t be allowed to review the minutes of closed-door discussions and you’d have no right to appeal.

Not a great system. But not dissimilar to the one that governs the world of credit-default swaps.

Panels made up of representatives from large banks, hedge funds, investment firms and other interested parties, formed by the International Swaps and Derivatives Association, decide whether payouts will be made to investors. more> http://tinyurl.com/6pyr6c5

The Bomb Buried In Obamacare Explodes Today-Hallelujah!

By Rick Ungar – The provision of the law, called the medical loss ratio, requires health insurance companies to spend 80% of the consumers’ premium dollars they collect–85% for large group insurers–on actual medical care rather than overhead, marketing expenses and profit.

Today (12/2/11), the Department of Health & Human Services issues the rules of what insurer expenditures will–and will not–qualify as a medical expense for purposes of meeting the requirement. Selling me a health insurance policy is simply not the same as providing me with the medical care I am entitled to under the policy.

We are already seeing the parent companies who own these insurance operations fleeing into other types of investments. They know what we should all know – we are now on an inescapable path to a single-payer system for most Americans and thank goodness for it. more> http://twurl.nl/4pqqry

Health reform: What you’re not getting

By Parija Kavilanz – If you gloss over your benefits materials at open enrollment this year, you may be setting yourself up for a nasty surprise at the doctor’s office.

Many self insured companies will be exempted from some of health reform’s key benefit improvements. If your plan is “grandfathered,” here are some new benefits that won’t apply to your coverage: more> http://tinyurl.com/la6q9kz