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OpenMarket: Insurance

  • You’re a SIFI, Charlie Brown

    September 5, 2014 7:37 AM

    “Good grief!”


    That’s what the Charlie Brown, star of comic strip Peanuts and cartoon spokesman for the MetLife insurance firm, might say about the government’s actions against MetLife yesterday.


    The Financial Stability Oversight Council (FSOC), an unaccountable, secretive task force of financial bureaucrats created by the Dodd-Frank “financial reform” bill that was rammed through a Democrat-controlled Congress in 2010. Yesterday, FSOC designated MetLife as a “systemically important financial institution” or SIFI. This means that the federal government officially considers MetLife to be “too big to fail” and subject to the same Dodd-Frank bailout regime set up for banks.


    Many firms would see being tagged as a too-big-to-fail SIFI as a blessing. As CEI argues in our constitutional challenge to the FSOC, part of our comprehensive lawsuit against Dodd-Frank, the SIFI designation confers on a firm a strong competitive advantage, as investors know the government won’t let it fail. That’s why big banks and MetLife competitor AIG, who have already received billions in taxpayer bailouts, have eagerly embraced their SIFI status.


    But MetLife, to its great credit, has public stated it’s not too big to fail and does not want the special privileges that come with the SIFI status. MetLife’s Chairman and CEO Steven A. Kandarian declared publicly last year, “I do not believe that MetLife is a systemically important financial institution.”


    Unlike AIG and the big banks, MetLife has never taken a dime in taxpayer bailouts. And all it is asking for now is not a handout, but for the federal government to keep its hands off of the successful business model MetLife has utilized for decades to provide insurance to many satisfied customers.


  • Dodd-Frank Is Obamacare for Non-Health Insurance

    July 7, 2014 1:48 PM

    “If you like your life, home, and auto insurance, you can keep them.”


    President Obama didn’t make this promise when he signed into law the Dodd-Frank financial overhaul on July 21, 2010, as he did regarding the health insurance law – Obamacare – that he signed into law a few months earlier that year. But as syndicated columnist Jay Ambrose points out, “if the Dodd-Frank regulatory law does what is now plotted, though he will still share responsibility for the insurance provision that, along with others, could bloody lots of noses.”


    As Dodd-Frank approaches its fourth anniversary, Obama is singing its praises. He told National Public Radio on July 2 that Dodd-Frank is “an unfinished piece of business, but that doesn't detract from the important stabilization functions” it has provided


    Yet even to lawmakers from Obama’s own party, this “financial reform” legislation is looking more and more like a destabilizing force – much like the so-called “reform” of health insurance. Even at the outset, there were many similarities. Both Obamacare and Dodd-Frank contained about 2,500 pages that were rammed through a Democrat-controlled House and Senate at breakneck speed. Because of the length of the law and speed of passage, many did not understand and/or hadn’t read the bills.


    Also as with Obamacare, unintended consequences of Dodd-Frank almost immediately began to surface. First, there was a sharp reduction in free checking due to the price controls on debit card transactions from the Durbin Amendment. Then, community banks and credit unions – including some with close to zero foreclosures – found the “qualified mortgage” rules so costly and complex that they slowed down or stopped altogether the issuance of new mortgages. Then, with regard to a provision with no plausible connection to sound banking and finance, domestic manufacturers found themselves having to trace back numerous materials they utilize to determine if they had originated as “conflict minerals” from the Congo.


    But the latest unintended consequence may be the one that bears the most striking similarity to Obamacare. Just as health insurance premiums and deductibles skyrocketed due to Obamacare’s many mandates, so too may those of life, home and car insurance due to provisions of Dodd-Frank. Life insurance rates alone could soar by $5 billion to $8 billion a year, according to the respected economic consulting firm Oliver Wyman. And as with Obamacare, choices of policies will be more limited and some policies may even be canceled.


  • CEI Podcast for January 23, 2014: CEI Appeals Affordable Care Act Lawsuit Verdict

    January 23, 2014 11:26 AM

    General Counsel Sam Kazman explains the case's importance not just for health care, but for the rule of law.


  • Obamacare Quadruples Rates for Some, Subsidizes Some Wealthy Who Retired Early

    September 30, 2013 3:02 PM

    Due to Obamacare, North Carolina "will see individual-market" health insurance rates "triple for women, and quadruple for men."


    In Tennessee, Obamacare will triple men's premiums, and double women's, in the market for individual health insurance.  Nationally, Obamacare will increase men's premiums by 99 percent, and women's by 62%.


    Kathy Kristof of CBS MoneyWatch describes experiencing a 67 percent spike in her premiums, for a worse policy than she had before:


    The promise that you could keep your old policy, if you liked it, has proved illusory. My insurer, Kaiser Permanente, informed me in a glossy booklet that “At midnight on December 31, we will discontinue your current plan because it will not meet the requirements of the Affordable Care Act.” My premium, the letter added, would go from $209 a month to $348, a 66.5 percent increase that will cost $1,668 annually. . .the things that mattered to me — that I would be able to limit my out-of-pocket costs if I had a catastrophic ailment — got worse under my new Obamacare policy. My policy, which has always paid 100 percent of the cost of annual check-ups, had a $5,000 annual deductible for sick visits and hospital stays. Once I paid that $5,000, the plan would pay 100 percent of any additional cost. That protected me from economic devastation in the event of a catastrophic illness, such as cancer.


    Kaiser’s Obamacare policy has a $4,500 deductible, but then covers only 40 percent of medical costs for office visits, hospital stays and drugs. Out-of-pocket expenses aren’t capped until the policyholder pays $6,350 annually.


    Meanwhile, some wealthy early retirees have figured out how to qualify for Obamacare subsidies at taxpayer expense.  They do this by living on tax-free income and deferring their receipt of taxable income—an option not available to people who have to work for a living.  As the commenter Alan Lovchik noted yesterday,


    Hey you RICH early retirees who are not on Medicare yet and are buying your own medical insurance!! The Affordable Care Act of 2010 (Obamacare) will give you TOTALLY FREE insurance coverage.  You must be rich enough to take advantage, so the poor and middle class are probably left out of this wonderful opportunity.


  • MoveOn admits: "[I]f younger, healthier people don't participate, then costs will skyrocket and Obamacare will fail."

    August 30, 2013 1:14 PM

    MoveOn.org yesterday sent me an appeal asking for $5 to help fund a $250,000 social media campaign supporting ObamaCare targeted to reach young adults. Here’s why they need my five bucks:


     [R]ight-wing groups have launched a multi-million-dollar campaign to torpedo Obamacare before it even gets started. Their plan: Mislead young people about how the law works so they get scared and don't enroll. The problem is that it really could work because if younger, healthier people don't participate, then costs will skyrocket and Obamacare will fail. [Emphasis in original]


    MoveOn.org footnotes a Washington Post article, which explains that last sentence. From the Post Wonkblog article by Sarah Kliff: “Young adults tend to have lower medical bills, which would hold down premiums for the entire insurance market. If only the sick and elderly sign up, health costs would skyrocket.”


    So, as MoveOn itself acknowledges, ObamaCare is based on using insurance premiums from younger, healthier people to subsidize health care for older, sicker people. Yet, that is exactly the correct information free market and conservative groups opposed to ObamaCare are trying to get to young folks, so that they understand the racket they are being cajoled to join.


    So then what does the “multi-million dollar right-wing misinformation campaign” aimed at young adults entail? It seems that the purpose of MoveOn.org’s social media campaign is to keep the wool pulled over young people’s eyes to protect them from the painful reality that ObamaCare is a con game designed to fleece them. Otherwise, why would they sign up for it?


  • Anti-Business and Anti-Freedom: The United Nations Convention on the Rights of Persons with Disabilities

    May 23, 2013 12:38 PM

    In the American Spectator, CEI Vice President for Strategy Iain Murray and Geoffrey McLatchey explain why the Senate should be skeptical of the United Nations Convention on the Rights of Persons with Disabilities, which fell six votes short of the 67 needed for ratification last December.  As they note, "the treaty would enable an enormous increase in the potential power of UN bureaucrats over the American people and undermine national sovereignty."  Moreover, although "CRPD proponents argue that it merely reiterates existing U.S. disability law," this is simply false, based on the treaty's plain language.


    It also delegates authority to a UN committee, they note, resulting in a "loss of U.S. sovereignty." UN committees like to define free speech as discrimination against minority groups in violation of international treaties, making it dangerous to ratify such treaties.  For example, the  U.N. Committee on the Elimination of Racial Discrimination has ruled Germany violated international law by not prosecuting a former legislator for remarks to a scholarly journal about Turkish-immigrant welfare recipients that were deemed racially offensive. The UN committee ruled Germany's failure to prosecute the speaker violated the International Convention on the Elimination of All Forms of Racial Discrimination.

  • Dallas Fed’s Fisher And CPAC’s Fishy Too-Big-To-Fail Event

    March 16, 2013 2:57 PM

    If the Conservative Political Action Conference’s (CPAC) organizers wanted a speaker or panel on the causes of the financial crisis and what to do about too-big-to-fail financial insitutions, they could have chosen from among many conservative and libertarian experts who not only issued prescient warnings about government policies that egged on reckless behavior through subsidies, regulations, and flawed monetary policies, but also offered detailed free-market solutions to prevent future financial crises and taxpayer-funded bailouts


    Such experts include John Allison, president and CEO of the Cato Institute, former chairman and CEO of BB&T Corp, and author of The Financial Crisis and Free Market Cure; Peter Wallison, counsel to the Reagan White House in the 1980s, co-director of the American Enterprise Institute’s program on financial policy studies, member of the Congressionally chartered Financial Crisis Inquiry Commission, and author of the new book Bad History, Worse Policy: How a False Narrative About the Financial Crisis Led to the Dodd-Frank Act; and Fred Smith, founder and chairman of the Competitive Enterprise Institute, where I work, and board member of CPAC’s parent organization, the American Conservative Union.


    All of them sounded the alarms about the dangers of the government-sponsored housing enterprises Fannie Mae and Freddie Mac and mandates such as the Community Reinvestment Act, which encouraged banks to lower standards for borrowers in the name increasing home ownership. In congressional testimony in 2000, Smith warned that if anything goes wrong with the entities, taxpayers could be on the hook for “$200 billion tomorrow.” At the time, his warning was dismissed as exaggerating Fannie and Freddie’s risk, but it turns out he actually underestimated the amount for which taxpayers would later be on the hook.


    Yet for CPAC’s single event on the financial crisis , held today, featured none of these experts. Instead, the sole speaker was Federal Reserve Bank of Dallas President Richard Fisher, who also has been a longtime Democratic operative with a decidedly big-government approach to financial regulation. Trying to appeal to the conservative audience, Fisher opened his speech with an anecdote about meeting President Ronald Reagan in 1984. He didn’t mention his having served in the Carter and Clinton administrations or his unsuccessful 1994 run as a Democrat against Sen. Kay Bailey Hutchison (R-Texas), in which he took standard liberal positions, including opposing school vouchers and supporting the Clinton “assault weapons” ban.


  • The Hostess Bankruptcy And The Threat Of A PBGC Bailout

    November 20, 2012 4:40 PM

    On Friday, November 16, Hostess Brands announced it was shutting down operations after the Bakers, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM), which rejected the company's last contract offer in September, announced it would go on strike. (Today, the two parties entered into a last-ditch negotiation effort today to avoid liquidation.)


    The same day, the Pension Benefit Guaranty Corporation (PBGC), the federally created agency that insures private sector pensions, announced that its deficit had increased from $26 billion to $34 billion over the past year.


    Then yesterday, Hostess announced that  it would pass off its pension liabilities to the PBGC.


    If this looks like an oncoming slow-motion train wreck, that's because it is -- and taxpayers are standing on the tracks.


    Hostess has about $2 billion in unfunded pension liabilities, which would add even more red ink to the PBGC's already strained books. If a growing number of companies shed their pension liabilities on to the PBGC -- a possibility given the American economy's continuing weakness -- the threat of a taxpayer bailout will only grow. AP's Marcy Gordon notes, "If the trend continues, the agency could struggle to pay benefits without an infusion of taxpayer funds."


  • Sandy Beaches, Meet Hurricane Sandy

    November 1, 2012 12:48 PM

    In the wake of Hurricane Sandy, many reminisce of 2005's Hurricane Katrina. With at least a dozen East Coast states in a declared state of emergency, many look toward the Obama administration and FEMA for assistance. With whispers of the incalculable amount of damage done to the East Coast, few bring up the debt that FEMA has incurred, much from the FEMA-administered National Flood Insurance Program.


    The National Flood Insurance Program (NFIP), with the Flood Disaster Protection Act, has made the purchase of flood insurance mandatory in certain areas. NFIP under-cuts private flood insurance companies by offering a lower, government-subsidized price for flood insurance.


    NFIP is around $18 billion in debt, even before the financial effects of Sandy are counted.


    Many homeowners don’t realize that flood insurance is not part of the typical homeowners insurance policy and needs to be purchased separately. Those who know may opt not to purchase it because flood insurance can be just as much as homeowners insurance.


  • Supreme Court Concocts New "Rational (Tax) Basis" Test in Upholding Health Law

    June 28, 2012 2:08 PM

    In a move that seems to have surprised many observers, the Supreme Court today upheld nearly all of the Patient Protection and Affordable Care Act by a 4+1 to 4 majority (I'll explain the math below). Chief Justice John Roberts, who wrote the Court's opinion, joined with the four liberal justices in affirming the individual mandate and essentially all of the Medicaid provisions. The Court's three reliable conservatives, plus Justice Kennedy, wrote in dissent that the entire law should be ruled invalid. The opinions can be read in their entirety here.


    Addressing the question of the individual mandate, Roberts agreed that the mandate was not a proper exercise of Congress's commerce power:


    "The power to regulate commerce presupposes the existence of commercial activity to be regulated. ... As expansive as this Court's cases construing the scope of the commerce power have been, they uniformly describe the power as reaching "activity." ... The individual mandate, however, does not regulate existing commercial activity. It instead compels individuals to become active in commerce bypurchasing a product, on the ground that their failure to do so affects interstate commerce. Construing the Commerce Clause to permit Congress to regulate individuals precisely because they are doing nothing would open a new and potentially vast domain to congressional authority."


    That's the good news. A majority of the Supreme Court Justices recognize that Congress's commerce power is not totally unbridled. Predictably, Justice Ruth Bader Ginsburg wrote a concurring opinion expressing her belief that the mandate WAS in fact a constitutional exercise of the commerce power (explaining the 4+1 majority I mentioned above). Although Justices Breyer, Sotomayor, and Kagan concurred with parts of Roberts's majority opinion, they concurred with Ginsburg on the extent of Congress's commerce power.


    The four-Justice majority also rejected the government's backup argument that the mandate could be justified under Article I, Section 8, Clause 18 (what grade schoolers are taught is the "elastic clause") as "necessary and proper" for effectuating the rest of the Affordable Care Act:


    "The individual mandate ... vests Congress with the extraordinary ability to create the necessary predicate to the exercise of an enumerated power and draw within its regulatory scope those who would otherwise be outside of it. Even if the individual mandate is "necessary" to the Affordable Care Act's other reforms, such an expansion of federal power is not a "proper" means for making those reforms effective."


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