Provision in Obamacare Likely to Force Up Cost of Many Family Plans

In an ongoing trend, unrelated to Obamacare, companies have been passing on more and more healthcare costs to employees.

However, an ACA gotcha has impacted the way costs are passed on, with families taking a bigger hit than individuals at many companies.

Please consider Companies Prepare to Pass More Health Costs to Workers.
Many employers are betting that the Affordable Care Act's requirement that all Americans have health insurance starting in 2014 will bring more people into their plans who have previously opted out. That, along with other rising expenses, is prompting companies to raise workers' premium contributions, steer them toward high-deductible plans and charge them more to cover family members.

The changes as companies roll out their health plans for 2014 aren't solely the result of the ACA. Employers have been pushing more of the cost of providing health insurance on to their workers for years, and firms that aren't booking much sales growth due to the sluggish economy are under heavy pressure to keep expenses down.

A quirk of the Affordable Care Act could make it more appealing for companies to raise rates for family coverage than for individuals, said Vivian Ho, a Rice University health-care economist.

Starting in 2015, companies employing 50 or more people must offer affordable health-care coverage to anyone working 30 hours a week or more. But affordability is measured using the cost of individual coverage, capping the cost at 9.5% of income, Ms. Ho said. Raising family rates could help companies recoup costs without running afoul of that limit, she said.

Gannett Co., which owns more than 80 newspapers and 23 television stations, expects one factor in its increased health costs to be the addition of more employees to its insurance plans due to the ACA rules, according to a person familiar with the company's projections.

To address an overall increase in costs, Gannett has replaced the two plans for families it used to offer its workers with a single high-deductible plan that requires employees to pay the first $3,000 of medical costs each year, according to workers at the Indianapolis Star, one of the company's papers. For those with individual coverage, who make up a little over half of Gannett's insurance pool, the figure is $1,500.

The company also scrapped a sliding scale that let lower-income workers pay lower premiums. For some employees, the result was a 60% jump in monthly premiums for family coverage, to $575 from about $360.

Gannett said more than half of its employees will see premiums fall by 12%.

United Parcel Service Inc. made headlines in August when it said that it would bar spouses from its nonunion health plan if they could get coverage at their own jobs. The company said it expected to see an increase in its health-care costs in part from adding employees to its plan who currently opt out.

About 6% of employers ban coverage for spouses who can get it elsewhere, and another 6% impose an explicit surcharge for covering a spouse, according to Mercer. American Electric Power Co., for example, began imposing a $50 monthly surcharge this year to cover spouses with access to insurance at their own workplace. AEP said 92% of its employees usually sign up for coverage, so it doesn't expect a surge of new enrollment.

In another shift this year, companies have become increasingly aggressive about steering employees toward plans in which they pay more of the initial costs for their care in exchange for lower premiums.

Trucking and logistics company Ryder System Inc. has replaced one of its two insurance options with one such high-deductible plan. Ryder is encouraging employees to choose the new option in part by raising the cost of more traditional coverage.
Winners and Losers

Half of Gannett employees will see a 12% drop in premiums. But others will see a 60% rise. And for those who do see premiums decline, the drop will be solely because they are forced into high deductible plans.

Obamacare created a pool of winners and losers, with some of the losers far worse off than before. Many people were hardly affected at all, at least initially. In aggregate, ACA did nothing to lower overall costs, it just shifted costs around in an inefficient manner, making things worse than before. 

The most widely reported "success" has been the enrollment of tens of thousands of people into Medicaid. Because of cost sharing that kicks in later, many states are likely to regret that effort.

Mike "Mish" Shedlock

Schedule for Week of December 1st

This will be a very busy week for economic data with several key reports including the November employment report on Friday, New Home sales for September and October on Wednesday, and the 2nd estimate of Q3 GDP on Thursday.

Other key reports include the ISM manufacturing index on Monday, November vehicle sales on Tuesday, the ISM service index on Wednesday, and the October trade deficit report on Wednesday.

----- Monday, December 2nd -----

9:00 AM ET: The Markit US PMI Manufacturing Index for November.  The consensus is for an increase to 54.2 from 51.8 in October.

ISM PMI10:00 AM ET: ISM Manufacturing Index for November. The consensus is for a decrease to 55.5 from 56.4 in October.

Here is a long term graph of the ISM manufacturing index.

The ISM manufacturing index indicated expansion in October at 56.4%. The employment index was at 53.2%, and the new orders index was at 60.6%.

10:00 AM: Construction Spending for September and October. The consensus is for a 0.5% increase in September, and a further 0.5% increase in October construction spending.

----- Tuesday, December 3rd -----

Vehicle Sales>All day: Light vehicle sales for November. The consensus is for light vehicle sales to increase to 15.7 million SAAR in November (Seasonally Adjusted Annual Rate) from 15.2 million SAAR in October.

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the October sales rate.

----- Wednesday, December 4th -----

7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:15 AM: The ADP Employment Report for November. This report is for private payrolls only (no government). The consensus is for 185,000 payroll jobs added in November, up from 130,000 in October.  

U.S. Trade Exports Imports8:30 AM: Trade Balance report for October from the Census Bureau.

Imports increased and exports decreased slightly in September.

The consensus is for the U.S. trade deficit to decrease to $40.2 billion in October from $41.8 billion in September.

New Home Sales10:00 AM: New Home Sales for September and October from the Census Bureau.

This graph shows New Home Sales since 1963. The dashed line is the August sales rate.

The consensus is for an increase in sales to 425 thousand Seasonally Adjusted Annual Rate (SAAR) in October from 421 thousand in August. 

10:00 AM: ISM non-Manufacturing Index for November. The consensus is for a reading of 55.5, up from 55.4 in October. Note: Above 50 indicates expansion, below 50 contraction.

10:00 AM: Trulia Price Rent Monitors for November. This is the index from Trulia that uses asking house prices adjusted both for the mix of homes listed for sale and for seasonal factors.

2:00 PM: Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

----- Thursday, December 5th -----

8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to increase to 322 thousand from 316 thousand last week.

8:30 AM: Q3 GDP (second estimate). This is the second estimate of Q3 GDP from the BEA. The consensus is that real GDP increased 3.1% annualized in Q3, revised up from the advance estimate of 2.8%.

10:00 AM: Manufacturers' Shipments, Inventories and Orders (Factory Orders) for October. The consensus is for a 1.2% decrease in October orders.

----- Friday, December 6th -----

8:30 AM: Employment Report for November. The consensus is for an increase of 180,000 non-farm payroll jobs in November, down from the 204,000 non-farm payroll jobs added in October.

The consensus is for the unemployment rate to decrease to 7.2% in November from 7.3% in October.  A key will be if the participation rate increases too, reversing the sharp decline last month.

The following graph shows the percentage of payroll jobs lost during post WWII recessions through October.

Percent Job Losses During RecessionsThe economy has added 7.8 million private sector jobs since employment bottomed in February 2010 (7.2 million total jobs added including all the public sector layoffs).

There are still almost 1.0 million fewer private sector jobs now than when the recession started in 2007.

8:30 AM ET: Personal Income and Outlays for October. The consensus is for a 0.3% increase in personal income, and for a 0.3% increase in personal spending. And for the Core PCE price index to increase 0.1%.

9:55 AM: Reuter's/University of Michigan's Consumer sentiment index (preliminary for December). The consensus is for a reading of 75.5, up from 75.1 in November.

3:00 PM: Consumer Credit for October from the Federal Reserve. The consensus is for credit to increase $15.0 billion in October.

‚Subprime MBS With a Government Guarantee‘

Dean Baker is unhappy:

Subprime MBS With a Government Guarantee: [Creative Commons]: Way back in the last decade we had a huge housing bubble which was propelled in large part by junk loans that were packaged into mortgage backed securities (MBS) by Wall Street investment banks and sold all around the world. Unfortunately few people in policy positions are old enough to remember back to the this era, which is why they are now in the process of altering rules so that investment banks will be able to put almost any loan into a MBS without retaining a stake.
As Floyd Norris explains in his column this morning, the Dodd-Frank financial reform has a provision requiring investment banks to retain a 5 percent stake in less secure mortgages placed in the MBS they issue. This gives them an incentive to ensure that the mortgages they put into an MBS are good mortgages. However the definition of a secure mortgage has been gradually weakened over time. Originally many considered the cutoff to be a 20 percent down payment, which is the traditional standard for a prime mortgage. This was lowered to 10 percent and then 5 percent, even though mortgages with just 5 percent down default at four times the rate of mortgages with 20 percent down. 
Norris tells us that the latest proposed rules would allow mortgages with zero down payment to be placed into pools with no requirement that banks maintain a stake. This change would mean that banks would have the same incentive as in the housing bubble years to put junk mortgages in MBS. If this rule is coupled with the Corker-Warner proposal for having a government guarantee for MBS, it will mean that banks will likely find it far easier to pass on junk and fraudulent mortgages going forward than they did in the years of the housing bubble.
Further facilitating this process is the gutting of the Franken amendment. This amendment (which passed the Senate with 65 votes) would have required investment banks to call the Securities and Exchange Commission (SEC) to pick a bond rating agency for a new MBS. This removed the conflict of interest where bond rating agencies would have an incentive to give a positive rating in order to get more business. In the conference committee, the amendment was replaced by a requirement that the SEC study the issue. After two and a half years the SEC issued its study and essentially concluded that picking bond rating agencies exceeded its competence. This left the conflict of interest in place.
If Congress wants to set up the conditions for another housing bubble fueled by fraudulent mortgages it is doing a very good job.

The Pope’s Rhetoric

I see that the pope has decided to weigh in on economic issues:

“Some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world,” Francis wrote in the papal statement. “This opinion, which has never been confirmed by the facts, expresses a crude and naive trust in the goodness of those wielding economic power and in the sacra­lized workings of the prevailing economic system.”

A few reactions:

First, throughout history, free-market capitalism has been a great driver of economic growth, and as my colleague Ben Friedman has written, economic growth has been a great driver of a more moral society.

Second, "trickle-down" is not a theory but a pejorative used by those on the left to describe a viewpoint they oppose.  It is equivalent to those on the right referring to the "soak-the-rich" theories of the left.  It is sad to see the pope using a pejorative, rather than encouraging an open-minded discussion of opposing perspectives.

Third, as far as I know, the pope did not address the tax-exempt status of the church.  I would be eager to hear his views on that issue. Maybe he thinks the tax benefits the church receives do some good when they trickle down.

Excellent Article to Comprehend the Valley

This morning, a thoughtful Sloper sent me this excellent article about the Silicon Valley and how it has broken into two sweeping classes: the rich (Zuck, Sandberg, et. al.) and those who mow their lawns, wash their cars, watch their kids, get their groceries, and otherwise deal with the mundane aspects of life as a [...]

Things to Read for Your Lunchtime Procrastination on November 30, 2013

Over at the WCEG Equitablog:


  1. Evan Soltas: "U1 through U6 don't collapse to one single measure of unemployment... [but] to... two dimensions... the narrow side and... the farther-out reaches of unemployment.... Narrower definitions of unemployment are improving more quickly than wider definitions of unemployment... labor markets are probably looser than the normal measures suggest... underemployment [is] a real, serious concern..."

  2. Jonathan Bernstein: The minimum wage and the post-policy GOP: "When both parties are healthy... popular, high-priority policy preferences of one party are bundled with the popular, high-priority policy preferences of the other. However, what exactly do Republicans have[?]... The Republican policy cupboard is pretty much empty.... It’s not clear that Republicans would accept any deal, given their paranoia about primary challenges based on accepting any kind of accommodation with the Kenyan socialist in the White House... conservatives are rejecting getting some of their priorities passed if it means accepting anything that Democrats want.... This just isn’t how the American political system is supposed to work. There really is an opportunity here for a deal that could enact popular policy ideas from both sides. But thanks to a dysfunctional Republican Party, it’s very hard to see it happening."

  3. Francesco Saraceno: What is Mainstream Economics?: "Paul Krugman and Simon Wren-Lewis have been widely criticized... as defending 'mainstream' economics that spectacularly failed.... Krugman has a point, a very good one, when claiming that standard textbook analysis is (almost) all you need to understand the current crisis.... The point is what we define as 'textbook analysis'. Krugman refers to IS-LM models. But these... disappeared from graduate curricula because supposedly too simplistic, not grounded on optimization, not intertemporal, and so on and so forth.... They were nowhere to be found during my graduate studies at Columbia (certainly not a freshwater school). None of the macro I studied in graduate school (Real Business Cycle models, or their fixed-price variant proposed by New Keynesians)... could give me insight.... The IS-LM model with minor amendments (most notably properly accounting for expectations to deal among other things with liquidity traps) remains a powerful tool to understand current phenomena. The problem is that it is not mainstream at all. What bothers me in Krugman’s post is the word 'standard', not 'textbook analysis'."

  4. Charlie Stross: Trotskyite singularitarians for Monarchism! A political speculation: "The 20th century spanned the collapse of the Monarchical System, the rise and fall of Actually Existing Socialism, a bunch of unpleasant failed experiments in pyramid building using human skulls, and the ascent to supremacy of Neoliberalism and the Washington Consensus. In 2007/08, the system malfunctioned spectacularly: it's clearly unstable and has huge problems, but what's going to replace it?... Neo-reactionaries... are effectively libertarians who have thrown up their hands in disgust.. and the appropriate political solution to the problem is to go back to aristocracy... Geeks for Monarchy.... We have Accelerationism... the notion that rather than halting the onslaught of capital, it is best to exacerbate its processes to bring forth its inner contradictions and thereby hasten its destruction.... Despair is a common reaction to defeat, as is Stockholm syndrome.... Libertarians... assumed [neoliberalism] would bring about the small government/small world goals.... As it becomes clear that the fruits of neoliberalism are instability and corporate parasitism rather than liberty and justice for all--is it unreasonable of them to look to an earlier, superficially simpler settlement?"

  5. Mark Kleiman: Against Symmetry: Republicans-love-being-lied-to Edition: ">Liberals felt sorry for Dan Rather for having used... fabricated documents in reporting on George W. Bush’s derelictions of duty.... But... no liberal blogger--let alone any liberal politician--called Rather a 'hero'.... Contrast Mike Huckabee, who... might actually be President some day. He’s 'shocked' that the 'hero journalist' Lara Logan has been suspended from her job at CBS. It’s simply not the case that the Red Team and the Blue Team are symmetric. Yes, they both act factionally, and both camps include some lunatics. But we don’t let ours run the asylum..."


Barry Ritholtz: "No, David Rosenberg’s Bullishness Was Not 'Purchased for $3M': I was going to write a long point-by-point rebuttal to a Zero Hedge post about David Rosenberg that is factually erroneous, biased, defamatory and just plain wrong; instead, I will offer my correction" | Franklin Fisher: The Stability of General Equilibrium | Franklin Fisher: Disequilibrium Foundations of Equilibrium Economics | Firat Kayakiran & Thomas Biesheuvel: Zeppelins Seen Hauling Caterpillars to Mine Siberia: Commodities | Henry Blodget: Rich People Actually Don't Create The Jobs | The Power Nap Head Pillow | Rudyard Kipling: The Ballad of East and West | Frances Wooley: I have learned one thing at least this year: not to discriminate against apples just because I don't like the colour of their skin |

Liveblogging World War II: November 30, 1943

Farley Mowat on the Sangro River:

One day late in November a friend invited me to accompany him on a visit to Third Brigade, which was then laboriously scrabbling its way northward through the mountains toward the headwaters of the Sangro River, where the Germans had anchored their so-called Bernhard Line. As our jeep bounced over mountain trails, cratered, blown and generally savaged by the demolition experts of First Paratroop Division, we encountered what for me was a new and singularly ugly aspect of war… refugees making their painful way southward. Not before or since have I seen human beings who seemed so pitiable.

We came upon them in little clots and clusters trudging along the roadsides through a veil of sleet. They were clad in unidentiable scraps of black, rain-soaked clothing, and many walked barefoot in coagulating mud that was barely above the freezing point. Shapeless bundles slung over their shoulders, they plodded by with downcast eyes, mute and expressionless. We noticed that there were no men of young or middle years among them. We were soon to find out why.

At Third Brigade Headquarters a grim West Nova Scotia Highlander lieutenant undertook to guide us deeper into an increasingly desolate landscape, and it was he who explained about the refugees:

Before he pulled back, Jerry rounded up all the men and boys fit to work and took them to work on the fortications along the Sangro. We’ve had a few escape into our lines. They tell us they get damn all to eat and are shot out of hand if they don’t work hard enough, or try to escape. They’re kept at it till they drop, then they’re just left lying in the rain and snow to live or die on their own. But that’s not the half of it! Nearly every village on our front has been systematically destroyed. Jerry took everything the people had in the way of food and livestock, then turfed them out, burned what would burn and blew everything else to hell. In one village the bastards blew down the church with women and kids sheltering inside…

They herded most of the rest of the people off toward our lines, warning them they’d be machine-gunned if they turned back. As you can see, we can’t get wheeled transport up here except for jeeps, so they have to walk about ten miles to the rear, except for the sick or mothers with real young kids. We get them out on wheels somehow…. Keep it under your hats, but our boys are so fucking well brassed off about it, they aren’t taking any prisoners. Not those First Para bastards anyhow!

Third Brigade had just occupied one of the demolished villages and we went forward to it on foot. The devastation was virtually total. Nothing remained except heaps of rubble but, despite the cold, the sickly stench of death proclaimed that not all the inhabitants had been able--or had been permitted-- to escape. It was a revolting spectacle.

At the time, the Allied command appears to have been very little disturbed by this barbarism. It was said that the Germans were simply pursuing the “scorched-earth” policy they had developed in Russia, where everything which might conceivably have been of any use to the Russian Army was destroyed, and the civilian population--rendered homeless and destitute--was deliberately converted into a living obstacle in the path of the advancing Russian troops. Presumably because our brass hats considered the scorched-earth policy a legitimate military tactic, the atrocities inicted on the Italian peasants in the Sangro mountains rated no more than a few casual and non-condemnatory references even in the official military histories written after the war.

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