Insurance Companies

Over 2 years ago when we first discussed the fact that "muddle through" had failed, BCG noted that "there were only painful ways out of this mess." The most painful truth, they suggested, was that "the only way to resolve the massive debt load is through a global coordinated debt restructuring... which will have to be funded by the world's financial asset holders: the middle-and upper-class' who will have a ~30% one-time tax on all their assets to look forward to as the great mean reversion finally arrives and the world is set back on a viable path." However, given the delay (and worst progression), Ken Rogoff warns that temporary wealth taxes may well be a part of the answer for countries in fiscal trouble today, and the idea should be taken seriously; but they are no substitute for fundamental long-term reform to make tax systems simpler, fairer, and more efficient.

Obesity rates have increased at least slightly so far in 2013 across almost all major demographic and socioeconomic groups, according to Gallup's latest study. The largest upticks between 2012 and 2013 were among those aged 45 to 64 and those who earn between $30,000 and $74,999 annually - which 'coincidentally' is perfectly in the cohort that is 'disincentized' to work by the growing shadow of bought votes and entitlements. So, the question then becomes, is the considerable spike in 2013 that is so evident below the "peak" in obesity rates as the government is forced to introduce more haircuts on its foodstamp program? Time will tell...

Americans who sign up for Obamacare will be getting a big surprise if they expect to access premium health care that may have been previously covered under their personal policies. Most of the top hospitals will accept insurance from just one or two companies operating under Obamacare. Watchdog.org looked at the top 18 hospitals nationwide as ranked by U.S. News and World Report for 2013-2014. We contacted each hospital to determine their contracts and talked to several insurance companies, as well. The result of our investigation: Many top hospitals are simply opting out of Obamacare.

• US admits surveillance on foreign governments ‘reached too far’ (FT)
• He must be so proud: Obama halted NSA spying on IMF and World Bank headquarters (RTRS)
• Obamacare website gets new tech experts; oversight pressure grows (Reuters)
• R.B.S. to Split Off $61 Billion in Loans Into Internal ‘Bad Bank’ (NYT)
• Draghi’s Deflation Risk Complicates Recovery (BBG)
• Abenomics: Nissan slashes full-year profit forecast 15% (FT)
• Credit Suisse Dismisses London Trader Over 'Unusual Trading' Losses (WSJ)
• RBS avoids break-up with 38 billion pounds 'internal bad bank' (Reuters)
• Twitter Said to Attract More Than Enough Interest for IPO (BBG)

Just when you think the Obama Administration can’t stoop any lower they immediately come in and surprise you.

The debut of Healthcare.gov has been probably the worst launch of a major website in history, millions of Americans are having their current health insurance policies canceled, millions of others are seeing the size of their health insurance premiums absolutely explode, and this new law is going to result in massive numbers of jobs being lost.  It is almost as if Obamacare was specifically designed to wreck the U.S. economy. Americans are going to pay far more for health care, the quality of that care is going to go down, they are going to have to deal with far more medical red tape, and thousands upon thousands of U.S. employers are considering getting rid of the health plans that they offer to employees altogether due to Obamacare.  If the U.S. health care system was a separate nation, it would be the 6th largest economy on the entire planet, and now Obamacare is going to absolutely cripple it.  To say that Obamacare is an "economic catastrophe" would be a massive understatement. Of course we were assured that it wouldn't turn out this way.

The big question is whether it will function as intended and survive permanently. There is a serious risk that it will not. The potentially fatal flaw in Obamacare is the very same feature that appeals most to its supporters: the ability of even those with a serious preexisting health condition to buy insurance at the standard premium. The biggest danger to Obamacare’s survival is that many individuals who do not receive insurance from their employer will choose not to insure themselves and will instead pay the fine of just 1% of income (rising permanently after 2015 to 2.5%). The preferred alternative for these individuals is to wait to buy insurance until they are ill and are facing large medical bills. The “wait-to-insure” option could cause the number of insured individuals to decline rapidly as premiums rise for those who remain insured. In this scenario, the unraveling of Obamacare could lead to renewed political pressure from the left for a European-style single-payer health-care system.

Since Obamacare made its debut, discussions have focused on Ted Cruz' efforts to defund the law and the shockingly bad functionality of the Website itself. Fortunately for Obama, polling indicates that Senator Cruz has lost, at least for now, the battle for hearts and minds. The President has not been nearly so lucky on the technological front. If current trends continue, the rollout may go down as the worst major product launch in history. But given the government's enormous resources, it's safe to say that the site itself will ultimately be fixed. But when it is finally up and running, the plan's many deeper, and more intractable, flaws will come into focus. That's when the fun will really begin.

The news keeps going from worse to worse-er for the administration and Obamacare. The latest hit, however, does not revolve around the dysfunctional healthcare.gov website, whose hundreds of millions of lines of faulty code will take a very long time to fix, but relates to Obama's promises that individuals would be able to keep their existing healthcare plans following the rollout of the Affordable Care Act. The truth, as NBC reports, is they can't but what's worse is that Obama knew as early as July 2010 that 40 to 67 percent of customers will not be able to keep their policy. And that's not all: since the 14 millions consumers who buy their insurance individually will be forced into comparable plans, they are all set to experience a "sticker shock" when "opting" for the mandatory alternatives.

In these climax years of industrial technocratic society, two opposing forces shape the destiny of government: the desperate effort to control everything versus the decline of the ability to carry out that effort. The result will be the loss of legitimacy and the collapse of government from the highest levels, moving downward until the real power to make anything work re-sets at a feasible and appropriate level — probably very local. This dynamic is seen very clearly in three spectacles du jour: the “national security” (spying) mess, government-sponsored accounting fraud in finance, and the ObamaCare rollout.

Imagine for a moment what might happen if the government were to get out of healthcare altogether and there would be free competition between all health care service providers. What would happen to prices in that case? It is probably fair to assume that they would come down precipitously even from the low prices free market doctors are already able to obtain for their patients nowadays. It is actually a good bet that the onerous red tape and the likely explosion in costs due to Obamacare will accelerate the move toward a free market in health care – unless the government explicitly forbids it, that is (unfortunately we cannot rule out completely that such tyrannical steps will eventually be taken – the government generally doesn't like it when its 'help' is refused). If so, the Obamacare Act could turn out to become a win-win by mistake so to speak, as more and more people decide to opt out of the system.

• Spot the pattern: Senate Leaders Nearing a Deal (Politico), Senators say debt, shutdown deal is near (USA Today), Senate Leaders in Striking Distance of a Deal (WSJ), U.S. senators hint at possible fiscal deal on Tuesday (Reuters), Senate Debt-Limit Deal Emerging (BBG)
• U.S. debt ceiling crisis would start quiet, go downhill fast (Reuters)
• Uneasy Investors Sell Billions in Treasurys (WSJ)
• BOE’s Cunliffe Says U.K. Is Not in Grip of Housing-Market Bubble (BBG)
• Letta Mixes Tax Cut With Rigor in Post-Berlusconi Italian Budget (BBG)
• Japan Seeks to Export More High-End Food  (WSJ)
• Burberry names Bailey CEO as Ahrendts quits for Apple (Reuters)
• China’s Biggest Reserves Jump Since 2011 Shows Inflow (BBG)

Stunning Facts that Your History, Economics and Business Teachers Never Learned ...

A year or two from now the insurance companies will be getting big increases. Whatever you think of Obamacare today, wait two years, you will come to hate it.

• Hilsenrath: Tense Negotiations Inside the Fed Produced Muddled Signals to Markets (WSJ)
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• Shutdown Costs at $1.6 Billion With $160 Million Each Day (BBG)
• What default? Republicans downplay impact of U.S. debt limit (Reuters)
• Top Bankers Warn on U.S. Debt Proposal (WSJ)
• India to stick with austerity despite looming election (Reuters)
• Japan's Current-Account Surplus Plunges (WSJ)
• Amazon Wins Ruling for $600 Million CIA Cloud Contract (BBG)
• German Factory Orders Unexpectedly Fall on Weak Recovery (BBG)
• Britain's Higgs, Belgium's Englert win 2013 physics Nobel prize (Reuters)
• Supreme Owner Made a Billionaire Feeding U.S. War Machine (BBG)