Big health insurance rate hikes are plummeting

The number of double-digit rate increases requested by health insurers has plummeted over the past four years, according to a Friday report from the Obama administration.

Researchers combed through data available from the 15 states that publicly post all requests for rate increases in the individual market. They found that, in 2009, 74 percent of all requests came in above 10 percent. By 2012, that number had fallen to 35 percent. Preliminary data for 2013, which only cover a handful of states, shows 14 percent of rate increases asking for a double-digit bump. Here’s what this looks like in chart form:

rate increases

Does Obamacare get credit? The administration thinks so: Officials there argue that this has a lot to do with the health law’s rate review program, which requires all rate hikes above 10 percent to undergo additional regulatory scrutiny. Each of the rates gets reviewed by a state or federal regulator and determined “reasonable” or “unreasonable.”

The provision started in September 2011, and that’s right when you see the steep decline in big rate hikes start.

“The sharp drop in requests for increases of 10 percent or more is most likely the result of the increased scrutiny that rate increases of 10 percent or more now receive,” the report states.

One other possible explanation: Over this time period, there has also been a big slowdown in the rate of health care cost growth. That began in 2009, so it’s not completely impossible that the health insurance industry, noticing that trend, began pricing individual market products at lower rates.

The administration has considered that idea though and looked at the large group market to test it. If the health cost slowdown really was driving lower premiums, the thinking went, it would show up across all insurance products.

It didn’t: Researchers did not see a similarly large drop in rate request in the group market.

It’s worth keeping in mind that the health insurance rate hikes that the Obama administration has access to are only those that are posted publicly online. It’s possible that there’s something different about the 15 states represented here from those that are less transparent with their insurance markets.

At the same time, the data do represent about one-third of the entire individual market and the states represented are geographically diverse, from Florida to Washington.

Source : washingtonpost[dot]com


Chinese cyberspies have hacked most Washington institutions, experts say

Start asking security experts which powerful Washington institutions have been penetrated by Chinese cyberspies, and this is the usual answer: almost all of them.

The list of those hacked in recent years includes law firms, think tanks, news organizations, human rights groups, contractors, congressional offices, embassies and federal agencies.

The information compromised by such intrusions, security experts say, would be enough to map how power is exercised in Washington to a remarkably nuanced degree. The only question, they say, is whether the Chinese have the analytical resources to sort through the massive troves of data they steal every day.

READ: Zero Day — A special report on the threat in cyberspace

“The dark secret is there is no such thing as a secure unclassified network,” said James A. Lewis, a cybersecurity expert at the Center for Strategic and International Studies, which has been hacked in the past. “Law firms, think tanks, newspapers — if there’s something of interest, you should assume you’ve been penetrated.”

The rising wave of cyber-espionage has produced diplomatic backlash and talk of action against the Chinese, who have steadfastly denied involvement in hacking campaigns. A strategy paper released by the Obama administration Wednesday outlined new efforts to fight the theft of trade secrets.

Cyberspying against what could be called the “information industry” differs from hacks against traditional economic targets such as Lockheed Martin, Coca-Cola and Apple, whose computer systems contain valuable intellectual property that could assist Chinese industrial or military capabilities.

Instead, journalists, lawyers and human rights workers often have access to political actors whose communications could offer insight to Chinese intelligence services eager to understand how Washington works. Hackers often are searching for the unseen forces that might explain how the administration approaches an issue, experts say, with many Chinese officials presuming that reports by think tanks or news organizations are secretly the work of government officials — much as they would be in Beijing.

“They’re trying to make connections between prominent people who work at think tanks, prominent donors that they’ve heard of and how the government makes decisions,” said Dan Blumenthal, director of Asian studies at the American Enterprise Institute, which also has been hacked. “It’s a sophisticated intelligence-gathering effort at trying to make human-network linkages of people in power, whether they be in Congress or the executive branch.”

China’s aggressive effort

Russia and some other nations also are said to engage in cyber-
espionage against private companies and institutions, but security experts and U.S. officials say China’s effort is the most aggressive and comprehensive. The infor­mation-technology staffs of private groups have scrambled to neutralize the intrusions, often hiring outside specialists to expel hackers and installing monitoring systems to keep them out.

Yet such efforts do not always succeed, security experts say. Hackers often build secret “back door” access to computer systems or redouble their efforts to penetrate again once they’ve been purged.

Source : washingtonpost[dot]com

The Sequester: Absolutely everything you could possibly need to know, in one FAQ

At the end of the month, the dread sequester is set to take effect. Hands up if you know what exactly that means — and be honest. Don’t worry, we’re here to set you straight. Follow along for answers to some of the most-asked questions about the impending cuts.

What is the sequester?

The sequester is a group of cuts to federal spending set to take effect March 1, barring further congressional action.

Where did it come from?

President Obama signs the Budget Control Act into law. (Pete Souza/White House)

The sequester was originally passed as part of the Budget Control Act of 2011 (BCA), better known as the debt ceiling compromise.

It was intended to serve as incentive for the Joint Select Committee on Deficit Reduction (aka the “Supercommittee”) to come to a deal to cut $1.5 trillion over 10 years. If the committee had done so, and Congress had passed it by Dec. 23, 2011, then the sequester would have been averted.
Obviously, that didn’t happen.

Wasn’t this supposed to happen at New Year’s?

President Obama, Vice President Biden and congressional leaders working out the fiscal cliff deal, which would delay the sequester for two months. (Pete Souza/White House)

President Obama, Vice President Biden and congressional leaders working out the fiscal cliff deal, which would delay the sequester for two months. (Pete Souza/White House)

Yes. The Budget Control Act originally stipulated that the sequester cuts would take effect at the beginning of 2013. Together with the expiration of the Bush tax cuts and the payroll tax cut, this would have amounted to a giant fiscal contraction, almost certainly throwing the United States into another recession. The combination of policies came to be known as “the fiscal cliff.”

A deal was reached to avert the cliff, in which the sequester was delayed to March 1.

What gets cut?

The cuts are evenly split between domestic and defense programs, with half affecting defense discretionary spending (weapons purchases, base operations, construction work, etc.) and the rest affecting both mandatory (which generally means regular payouts like Social Security or Medicaid) and discretionary domestic spending. Only a few mandatory programs, like the unemployment trust fund and, most notably, Medicare (more specifically its provider payments) are affected. The bulk of cuts are borne by discretionary spending for either defense or domestic functions.

What is exempted?

Food stamps are exempt from the sequester. (For The Washington Post)

Most mandatory programs, like Medicaid and Social Security, and in particular low-income programs like Temporary Assistance for Needy Families (TANF, or welfare) and the Supplemental Nutritional Assistance Program (SNAP, or food stamps) were exempt from the sequester.

How much gets cut?

sequester_breakdownThe 2013 sequester includes:

  • $42.7 billion in defense cuts (a 9.4 percent cut).
  • $28.7 billion in domestic discretionary cuts (a 8.2 percent cut).
  • $9.9 billion in Medicare cuts (a 2 percent cut).
  • $4 billion in other mandatory cuts (a 7.6 percent cut to nondefense programs, and a 10 percent cut to mandatory defense programs).

That makes for a total of $85.4 billion in cuts.

More will be cut in 2014 and later; from 2014 to 2021, the sequester will cut $87 to $92 billion from the budget every year. Those higher numbers reflect those cuts’ effects in January and February, which were unaffected by the sequester this year.

Will any programs actually end?

No wasteful programs, like Alaska's infamous Bridge to Nowhere (above), will be eliminated. Instead, almost every program will see an across-the-board cut. (Knik Arm Bridge and Toll Authority)

No wasteful programs, like Alaska’s infamous Bridge to Nowhere (above), will be eliminated. Instead, almost every program will see an across-the-board cut. (Knik Arm Bridge and Toll Authority)

Nope. The sequester cuts discretionary spending across-the-board by 9.4 percent for defense and 8.2 percent for everything else. But no programs are actually eliminated. The effect is to reduce the scale and scope of existing programs rather than to zero out any of them.

What notable programs get cut?

The National Institutes of Health will see budget cuts in the billions if the sequester goes through. (J. Scott Applewhite/Associated Press)

Here are just a few. Note that these are full year cuts, except where otherwise noted; the actual cuts will be about 5/6 the size, due to the delay:

  • Aircraft purchases by the Air Force and Navy are cut by $4.2 billion.
  • Military operations across the services are cut by about $16 billion.
  • Military research is cut by $7.5 billion.
  • The National Institutes of Health get cut by $2.5 billion.
  • The Centers for Disease Control and Prevention are cut by about $500 million.
  • Border security is cut by about $900 million.
  • Immigration enforcement is cut by about $500 million.
  • Airport security is cut by about $500 million.
  • Head Start gets cut by $406 million, kicking 70,000 kids out of the program (note: post-delay estimate).
  • FEMA’s disaster relief budget is cut by $580 million.
  • Public housing support is cut by about $3 billion.
  • The FDA is cut by $319 million.
  • NASA gets cut by $1.5 billion.
  • Special education is cut by $1.3 billion.
  • The Energy Department’s program for securing our nukes is cut by $1 billion.
  • The National Science Foundation gets cut by about $600 million.
  • The FBI gets cut by $742 million.
  • The federal prison system gets cut by $549 million.
  • State Department diplomatic functions are cut by $1 billion.
  • Global health programs are cut by $670 million; the Millenium Challenge Corp. sees a $71 million cut, and USAID a cut of about $450 million.
  • The Nuclear Regulatory Commission is cut by $85 million.
  • The SEC is cut by $117 million.
  • The United States Holocaust Memorial Museum is cut by $4 million.
  • The Library of Congress is cut by $48 million.
  • The Patent and Trademark office is cut by $242 million.

Will military personnel see their pay or benefits cut?

President Obama greets Australian troops, who are actually totally safe from the sequester. (Saul Loeb/AFP/Getty Images)

Pay: no. Benefits: yes. While military salaries are exempt from the sequester, benefits like tuition assistance and the TRICARE program (which provides health care to personnel and their families, among others) are not.

How much will federal employee salaries get cut?

The federal employees in this picture are going to be very disappointed by how much the sequester punishes the public. (Scott Olson/Getty Images)

Technically, no, but effectively, yes. The Congressional Research Service has written that a sequester may not “reduce or have the effect of reducing the rate of pay an employee is entitled to” under their federal pay scale. However, the sequester is likely to cause furloughs, which amount to unpaid time off, or, basically, a pay cut.

How many people will lose their jobs?

Depends who you ask. Stephen Fuller, an economist at the libertarian-minded George Mason University, puts the number at 2.14 million jobs lost. That includes the direct loss of 325,693 jobs from defense cuts (including 48,147 civilian employees at the DoD) and 420,529 jobs from non-defense cuts (including 229,116 federal workers — the rest, by and large, are contractors). The rest of the jobs losses are indirect, resulting in a 1.5 point increase in the unemployment rate. However, Fuller’s estimates predate the delay in the sequester passed in December, and other analysts are more measured. Macroeconomic Advisers estimates the sequester will add only 0.25 points to the unemployment rate, a sixth of the impact Fuller predicts.

What will this do to the economy?

The CBO estimates that the combined federal fiscal tightening taking place in 2013 is knocking 1.5 points off GDP growth for the year. Of that, about 5/8 of a percent (or 0.565%) is due to the sequester. Macroeconomic Advisers similarly estimates that the sequester will shave off 0.6 points from the year’s growth rate. George Mason economist Stephen Fuller’s estimates are more dramatic, putting the loss of 2013 GDP at $215 billion, reducing the growth rate of GDP by two thirds. However, Fuller’s estimates precede the shrinking of the sequester.

What does Obama want to do about it?

President Obama has been vague on how he’d replace the sequester. (Pablo Martinez Monsivais/AP)

President Obama has been less specific than his colleagues in Congress on how he wants to see the sequester replaced, but he has suggested that, in lieu of a bigger deficit reduction deal, he wants to see the 2013 sequester replaced with a package of tax increases (including loophole closures and increases on the wealthy) and spending cuts.

What do Democrats in Congress want to do about it?

Sens. Patty Murray (seated, left) released Senate Democrats’ sequester plan. (Mike Theiler/Reuters)

House Democrats, led by Budget Committee ranking member Chris Van Hollen, proposed replacing the $85 billion in 2013 sequester cuts with a mix of tax increases — including a “Buffett rule”-style minimum tax on income above $1 million and repeal of tax subsidies for oil companies — and spending cuts, notably including a reduction in farm subsidy payments to farmers and an increase in flood insurance premiums.

Most of these policies would be spread over a decade rather than falling entirely in 2013.

Senate Democrats, led by Budget Committee Chairwoman Patty Murray, introduced the American Family Economic Protection Act, which replaces the 2013 sequester with $110 billion in spending cuts and tax increases, spread out over the course of a decade. Like the House plan, these policies include a “Buffett rule,” the closure of tax loopholes for oil companies and cuts to farm subsidies. Additionally, the Senate bill cuts military spending in excess of the sequester’s cuts.

Both the Senate and House Democrats’ plans allow the sequester to take effect at the beginning of 2014.

What do Republicans in Congress want to do about it?

House Speaker John Boehner, right, has laid out the Republican position on replacing the sequester. (Joshua Roberts/Bloomberg)

As part of John Boehner’s “plan B” approach to avoiding the fiscal cliff (embarked upon after initial talks with the White House broke down), the House on Dec. 20, 2012, passed the Spending Reduction Act of 2012. The plan would have replaced the 2013 defense sequester with a variety of spending cuts, including cuts to food stamps, the Affordable Care Act and Dodd-Frank (including eliminating the “orderly liquidation authority” at the center of the legislation). It would have reduced the size of the domestic sequester in proportion to the $19 billion in discretionary savings included in the bill.

Republicans have conceded that they won’t be able to pass the bill again, even in the House, but it provides a model for what Republicans want in a temporary replacement: no tax increases, no defense cuts and considerable domestic spending reductions.

What do outside groups want to do about it?

The AARP (whose activists are pictured here) is among many groups resisting the sequester’s domestic cuts. (Melina Mara/The Washington Post)

Just about every interest group wants to stop the sequester and just about none wants to see it take effect. Aerospace and defense companies, along with universities reliant on defense research funding, have launched Second to None, a coalition battling the defense cuts. A group of almost three thousand organizations, including the NAACP, AARP, Children’s Defense Fund, the Wilderness Society, Greenpeace, Human Rights Campaign, the Innocence Project, and many, many more, have warned about the impact of the non-defense discretionary cuts in the sequester. Physicians and medical research organizations, including the American Medical Association, the American Pediatrics Association and many others, are resisting the discretionary cuts to medical research, and in particular the National Institutes of Health. Liberal groups like MoveOn and the Working Families Party are also getting in on the action.

The Tea Party-affiliated FreedomWorks has put out a letter calling for ObamaCare to be defunded so as to match the expected post-sequester spending level without letting the sequester take effect.

Source : washingtonpost[dot]com

The mega-merger is back. But will the Obama administration approve?

Not since the bygone days before the financial crisis has there been such a flurry of headlines about big deals. Office Depot and OfficeMax announced plans to merge on Wednesday. Last week, there was Berkshire Hathaway’s $23 billion bid for ketchup king, HJ. Heinz, in addition to the merger between U.S. Airways and American Airlines.

All this news has sent stocks up on Wall Street, where some are hailing the return of the blockbuster merger. But here in Washington, a number of these deals first have to win the approval of antitrust officials — a crowd that looks increasingly tough to please going into President Obama’s second term.

In the last year and a half, the Department of Justice has shown a new willingness to outright block big deals, either by going to trial or convincing companies to scuttle their plans.

The government scored a big win at the end of 2011, stopping the deal between AT&T and T-Mobile, which antitrust officials argued would hurt consumers. The administration also successfully stopped H&R Block from acquiring a low-cost rival, going to court for the first time since 2004 to challenge a merger. And just last month, the division moved to block a proposed deal by beer giant Anheuser Busch InBev to purchase Grupo Modelo, saying it would harm competition.

There’s also a new antitrust cop on the beat. At the beginning of this year, the Justice Department’s antitrust division got its first permanent antitrust chief since August 2011. Fellow lawyers describe William J. Baer as “an antitrust attorney’s antitrust attorney,” someone who has spent his entire career thinking about this area of the law and who won’t be afraid to take cases to court where necessary.

Before joining the Justice Department, Baer worked at Arnold & Porter and served as director of the Federal Trade Commission’s competition bureau, which shares antitrust enforcement responsibilities with the Department of Justice.

Expectations are high because President Obama has promised since 2008 to “reinvigorate” antitrust enforcement.

During Obama’s first term, there was a measured start at the Department of Justice, where a officials approved a number of big deals after adding some restrictions on how the companies could behave. The division ultimately gave the greenlight to controversial mergers like the Ticketmaster deal with Live Nation, Comcast’s acquisition of NBC Universal from General Electric, and Google’s purchase of travel software company ITA.

Critics who wanted more aggressive enforcement said the division was too timid about bringing cases to court. Antitrust enforcers have also not built a monopoly case against a major U.S. company in the mold of the government’s long battle with Microsoft in the 1990s.

Daniel Crane, an antitrust professor at the University of Michigan Law School, said the Obama administration may not have leapt out of the gate in the first term because the economy was in a free fall. Crane has done research showing that during economic crises, antitrust enforcement tends to take a back seat.

“It’s very hard to mount a very vigorous antitrust campaign when you’re looking at a lot of businesses that are failing,” said Crane.

But now that things have stabilized, he added, “It would not surprise me to see more vigorous enforcement of antitrust in the second term.”

Source : washingtonpost[dot]com

FBI probes suspected insider trading in H.J. Heinz buyout

The FBI has launched a probe into suspected insider trading activity that took place one day before H.J. Heinz announced that it would be acquired for $28 billion by a private investment consortium.

The FBI confirmed the criminal investigation on Tuesday, days after the Securities and Exchange Commission froze a Swiss account that the agency said was used by “certain unknown traders” to make “highly suspicious” trades in advance of the Heinz deal.

“We are consulting with the SEC to determine if a crime was committed,” said Kelly Langmesser, a spokeswoman in the FBI’s New York office.

In a complaint filed in federal court in Manhattan, the SEC alleged that the traders used a Goldman Sachs customer account in Zurich to buy certain options for $90,000. Those options were worth $1.7 million after the Heinz acquisition was announced.

Goldman Sachs was not accused of any wrongdoing, and a spokesman said the company is cooperating with the investigations.

It’s unclear how the activity came to the SEC’s attention. But the size and timing of the trades raised suspicions, especially since the account had no history of trading Heinz stock in the previous six months, the SEC said in its court filing.

“Irregular and highly suspicious options trading immediately in front of a merger or acquisition announcement is a serious red flag that traders may be acting on confidential non-public information,” Daniel M. Hawke, chief of the agency’s market-abuse unit, said in a statement.

The trades took place Wednesday, the last trading day before Heinz revealed that it would be purchased by a consortium made up of 3G Capital and Berkshire Hathaway.

A spokesman representing the two companies declined to comment on the investigations. Berkshire Hathaway is a major shareholder of Washington Post Co. stock.

The SEC froze the traders’ assets on Friday, even though it could not determine their identities. Speed was of the essence because the agency did not want the traders to cash in on the deal until the agency completed its investigation, said Sanjay Wadhwa, senior associate director at the SEC’s New York regional office.

The defendants, who are either foreign traders or traders trading through foreign accounts, “now have to make an appearance in court to explain their trading if they want their assets unfrozen,” Wadhwa said in a statement.

Source : washingtonpost[dot]com

Will higher taxes on the rich derail California’s economic comeback?

SAN FRANCISCO — If there’s anyplace in the country where rising tax rates should choke off an economic recovery, it’s California. On top of the federal tax hikes that kicked in last month, the state has just raised income taxes on its wealthiest residents to the highest levels in the nation, a move that conservatives warn will drive millionaires and their companies to other states, taking jobs and growth with them.

The increases come as California’s economy continues a remarkable turnaround. A year ago, the state was a mess, with double-digit unemployment, a bottoming-out housing market and scary budget deficits. Now, hiring is up faster than the national average, and the housing market is regaining strength. Even the state budget is back in the black.

What happens to the economy here over the next year will be a case study for policymakers in Washington, who are paralyzed by similar questions of taxation and growth. The early indications, in California, point toward an outcome you might not expect.

The tax increases approved in November are a big reason the state isn’t staring down another huge budget shortfall or the prospect of issuing IOUs to fill it. They include bumping up the sales tax slightly and raising the top income tax rate to 13.3 percent, which is four percentage points higher than the District of Columbia’s and more than double the rate in Virginia or Maryland.

Yet many economists and some young executives in the state say they don’t worry about that high rate chilling growth. Other factors loom much larger for California’s business and economic health, they say, including whether the state can maintain deep pools of highly skilled talent and, in complicated but important ways, the renewed upward march of housing prices in the Bay Area and beyond.

“I don’t think we should be surprised that the state is growing, nor that California is growing faster than the national economy,” said Christopher Thornberg, an economist and the founding partner of Beacon Economics.

Thornberg gives forecasting presentations to private and civic groups around the state. He pro­jects that even with the tax increases, the state is poised for strong growth in the coming year and is poised to add, not lose, job creators. “In a couple of years in California,” he said, “we’re going to have the problem that we don’t have enough housing, and housing’s too expensive.”

California has the largest state economy; if it were its own country, the state would rank among the world’s top 10. The state often fares worse in recessions than the rest of the nation, and the Great Recession fit the pattern. Housing prices collapsed in the Central Valley and Southern California’s Inland Empire, leaving hundreds of thousands of families in foreclosure and millions owing more on their mortgages than their homes were worth. The state lost more than a third of its construction jobs. Unemployment peaked above 12 percent.

Unemployment is still 9.8 percent in California, two percentage points above the national rate. But by all indications, the state economy has improved rapidly in the past year. California’s unemployment fell by 1.4 percentage points in 2012, compared with a 0.7-point drop for the country as a whole.

Source : washingtonpost[dot]com

Fiscal trouble ahead for most future retirees

For the first time since the New Deal, a majority of Americans are headed toward a retirement in which they will be financially worse off than their parents, jeopardizing a long era of improved living standards for the nation’s elderly, according to a growing consensus of new research.

The Great Recession and the weak recovery darkened the retirement picture for significant numbers of Americans. And the full extent of the damage is only now being grasped by experts and policymakers.

There was already mounting concern for the long-term security of the country’s rapidly graying population. Then the downturn destroyed 40 percent of Americans’ personal wealth, while creating a long period of high unemployment and an environment in which savings accounts pay almost no interest. Although the surging stock market is approaching record highs, most of these gains are flowing to well-off Americans who already are in relatively good shape for retirement.

Liberal and conservative economists worry that the decline in retirement prospects marks a historic shift in a country that previously has fostered generations of improvement in the lives of the elderly. It is likely to have far-reaching implications, as an increasing number of retirees may be forced to double up with younger relatives or turn to social-service programs for support.

“This is the first time that Americans are going to be relatively worse off than their parents or grandparents in old age,” said Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis at the New School for Social Research.

Advocates for older Americans are calling on the federal government to bolster Social Security benefits or to create a new layer of retirement help for future retirees. Others want employers and the government to do more to encourage retirement savings and to discourage workers from using the money for non-retirement purposes.

But those calls have been overwhelmed by concern about the nation’s fast-growing long-term debt, which has left many policy­makers focused on ways to trim Social Security and other retirement benefits rather than increase them.

The economic downturn exacerbated long-term factors that were already eroding the financial standing of aging Americans: an inexorable rise in health-care costs, growing debt among older Americans and a shift in responsibility from employers to workers to plan for retirement.

The consequence is that the nation is facing a huge retirement savings deficit — as much as $6.6 trillion, or about $57,000 per household, according to a U.S. Senate report.

Using data on household finances collected by the Federal Reserve, the Center for Retirement Research estimates that 53 percent of American workers 30 and older are on a path that will leave them unprepared for retirement. That marks a sharp deterioration since 2001, when 38 percent of Americans were at risk of declining living standards in old age. In 1989, 30 percent faced that risk.

The center’s findings are similar to those recently uncovered by researchers at the New School, the Heritage Foundation and the Senate’s Committee on Health, Education, Labor and Pensions.

Source : washingtonpost[dot]com