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Bob Meade - Actuarially speaking

How many readers would like to buy their auto, home, health, or life insurance from a company that does not make a profit? Probably not many. What if that unprofitable company offered better rates than anyone else? While some might be tempted to accept the lower rate offer, good judgment would probably lead most people to purchase their policy from a more stable, and profitable, company.

The first rule of insurability is that the insured's risk cannot cause loss to the multitude simultaneously. By pooling large numbers of people across a broad base into insurable risk categories, no one, or many, individual losses can cause loss "to the multitude, simultaneously". It's the work of the insurance company actuaries to determine the odds on how many of the insured in their pool will suffer loss at any given time.

The reason for mentioning actuaries, and their importance, is to highlight how those actuarial functions change, or cease to exist, in the Affordable Care Act, aka "Obamacare". Some examples.

— Under Obamacare, no one can be denied insurance based on a pre-existing condition. Without question, no one wants to deny insurance to someone who needs it. However, without question, the increased cost to the insurance companies will result in increasing the premium cost to other, more healthy people.

Another issue is, what if a young healthy person decides to pay the "fine" rather than purchase insurance? Later, that individual becomes seriously ill and requires very costly surgery or other medical care. It appears that under Obamacare, that person cannot be denied coverage on demand. If that's the case, the insurance companies will have to include that potential into their actuarial calculations, thereby forcing those who do comply with the law to essentially pay for those who don't.

— The president has told us that under the Affordable Care Act, insurance companies must pay out in benefits, a minimum of 80 percent of what monies are collected in premiums. This presidential edict that insurance company overhead cannot exceed 20 percent of the premiums collected sounds good, but is it really? Years ago I took some insurance courses. One of the things I learned was that (at that time) 65 percent of the first year's premium went to underwriting, policy issuance, claim processing, and sales commissions, etc. While there may be some difference in today's numbers, the only way the insurance companies can comply with the edict is to have a relatively low turnover in policy holders. If a business seeking health insurance for their employees has a high personnel turnover rate, an insurance company simply cannot provide insurance without substantially increasing premium costs. It is for this reason that MacDonald's was given a presidential waiver, early on.

— Another much talked about issue is to be able to buy insurance "across state lines". This "sounds good" solution is a nightmare and kills off any semblance of actuarial input. Under Obamacare, no mention is made of "tort reform". However, without such reform the rising costs of malpractice insurance will continue to grow. For example, a number of OB-GYN physicians have decided to retire because, depending on the state and location, the cost of malpractice insurance is excessively high.

For example, (using 2009 numbers) internal medicine physicians in Minnesota would pay about $4,000 a year for malpractice insurance but in Florida, their cost would be $56,000. For general surgeons in Minnesota, malpractice insurance would be in the $10,000 range, but in Florida, $90,000. One of the most costly coverage is for OB-GYNs. In Minnesota they paid about $17,000, while in Florida, the annual premiums were upwards of $200,000. Of course the physicians have no choice but to set their prices to their patients to cover these costs.

In these examples, if Florida's doctor's (or Florida's citizens) rushed to buy their insurance across state lines in Minnesota, actuarially, Minnesota's insurers would have to raise their premium rates to reflect the Florida realities, which would thereby increase the rates paid by the Minnesota (and other state's) physicians. Of course these increases would be imposed on the patients in those other states.

— This leads to the need for "tort reform", which been totally ignored. Litigation costs are a healthy part of medical expenses. The examples cited above are not fairy tales, they are reality. While the federal government has ignored the litigation problems, the State of Pennsylvania enacted some fairly simple tort reform laws that have caused malpractice lawsuits to drop over 40 percent yearly. These two measures weren't draconian, they were common sense. The first rule change was that attorneys had to obtain a certificate of merit showing that medical procedures in a case didn't meet accepted standards before they could file their case. The second was that they could only file the lawsuit in the county in which the alleged malpractice took place; ergo, no "venue shopping". Can you imagine the impact on malpractice insurance costs if those two simple rule changes were made across all the states?

The choice becomes, do we let insurance companies continue to make actuarially sound judgments, or do we let the government simply raise taxes to cover their naively poor judgments?

(Bob Meade is a Laconia resident.)

Last Updated on Wednesday, 31 December 1969 07:00

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Diana Lacey - Laboring for less

Do you have a funny feeling that your paycheck isn't stretching as far these days? If you do, you're not alone.

Labor Day is an occasion for celebrating working people in this country. But sadly, N.H.'s workers are working harder, are more productive and yet aren't making a dime more. In fact, we're all making less. According to a just-released report from Sentier Research, the U.S. median household income is down more than 4 percent since the recession ended. Add that to what we lost during the recession itself, and we're all making 6.1 percent less than we were in 2007.

Especially hard-hit are families in which someone has been unemployed, in part because when they get back to work they're not making as much. One study indicates that jobs in categories that tend to pay low wages account for about six in ten of the new jobs added during the economic recovery. Five of the six fastest-growing jobs are in classifications that pay lower-than-average wages.

There is a special group of workers doing better than they were in 2007 though. CEOs got a 16 percent raise last year alone, according to the consulting firm Equilar. And earlier this week, it was announced that the nation's five biggest banks are on track to pay out at least $23 billion in bonuses this year (perhaps million-dollar paychecks don't go as far as they used to either). Big business is booming again and reporting record profits, but the gap between them and us is larger than ever because prosperity is not being shared broadly — it's intentionally being funneled to the top.

It doesn't have to be this way.

This Labor Day we should ask ourselves why we labor in the first place. For millions of Americans, we don't go to work every day as a labor of love — we go to earn a decent living, feed our families, build and keep a home, save for retirement, contribute to our communities and so much more. We labor for more, not less. No matter who you are, where you're from or what job you do, in this country everyone who works hard should be able to have a decent life. But it is going to take a lot of work — labor of love kind of work — to turn the current situation around. Workers of all stripes will need to raise their collective voices and demand that they share in the prosperity they create through their labor in this country. In the past few years, adjunct professors at the Community College System of New Hampshire and Plymouth State University did just that. They are now standing up and using their voices to bring home more to their families, not less. Their efforts will benefit their communities and the students they teach will learn that they too will need to take action for more, not less.

Why? Because those who possess the wealth and power are, for the most part, unwilling to change its distribution. Their control over the nation's economy has put the American middle class well on its way to extinction. The labor workers contributed generations before us to create the middle class can be taken for granted no longer by the majority of workers in this country. It is beyond time for workers to join forces and have their voices heard on the job, in neighborhoods and at the voting polls. Through working collectively, we can and must create a nation in which everyone can fully participate.

So this Labor Day, I hope you will take on a new labor of love. Making a personal commitment to end this labor for less economy is a good place to start. If you need help in learning more about the next steps to take, call a union member you know or call us.

(Belmont resident Diana Lacey is president of the State Employees' Association of NH/SEIU Local 1984.)

Last Updated on Sunday, 01 September 2013 08:44

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Susan Estrich - Chemical weapons

There have to be lines.

We are not in the business of regime change. We cannot be the world's police. There are civil wars we won't stop, abusive leaders we won't depose, corrupt governments we will decline to see as such.

But there have to be some things that even the worst and most abusive leaders cannot do with impunity, and using chemical weapons against their own people has to be one of them.

It's obviously not about numbers, because there are other ways and other means, and dead is dead, and sadly, innocent civilians are frequent targets in the many wars in the world that we don't and can't stop.

The irony of the current situation is that it is the military — and especially Joint Chiefs Chairman Gen. Martin Dempsey — that has been very reluctant, hesitant and downright against American military involvement in Syria. Indeed, Sen. John McCain went so far (too far) as to suggest that Dempsey and the president are at fault for signaling to Syrian President Bashar al-Assad that he could get away with this.

I don't think any such signal was given.

If others do, that is all the more reason why the line must be drawn.

Why are there certain weapons that must not be used? It is like the child's question at Passover. There are many detailed answers out there right now, but the shortest one is because a civilized world must mean something. Human life must have value.

And responsibility means something.

It is August in California, the last week before school starts. Who wants to think about this?

What has always astonished me about the newspapers from the 1930s is just how much information there is on the front pages about Hitler, tucked right in with the weather and sports.

Assad has the world's attention. He may or may not get away with this — and possibly for reasons having nothing to do with us and about which we can do nothing. We are not, after all, in the regime change business. Drawing lines in the sand is another matter.

Few things are as disturbing to watch as an anti-American demonstration in some city across the globe. And it is clear, you can see and hear, that they hate us — you and me, our families and our faiths, we who try so hard, so many of us, to be generous and tolerant and fair. And this, as my mother would ask, is what we get for it?

The United States will not be more popular with those who hate us if we stand up for what is right. They won't see it that way.

The world won't be safer. Iran is threatening that if we attack they'll attack Israel, and Israelis are trying on gas masks, and by the way, what about Egypt?

Obama almost certainly will be attacked at home from all directions, as he usually is these days, for doing too little and too much, too soon and too late, for trying to find some balance in debates, which increasingly lack any at all.

So what?

I keep thinking about the young American men and women, somewhere in the world, who will be sending out the message loud and clear that there are some lines that cannot be crossed with impunity, some rules that even lawless regimes must follow, and that somebody, somewhere, actually does give a damn.

Godspeed to them.

(Susan Estrich is a professor of Law and Political Science at the University of Southern California Law Center. A best-selling author, lawyer and politician, as well as a teacher, she first gained national prominence as national campaign manager for Dukakis for President in 1988.)

Last Updated on Friday, 30 August 2013 10:42

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Michael Barone - FDR made big government look easy

Evidence of the astonishing incompetence of the Obama administration continues to roll in.

It started with the stimulus package. One-third of the money went to public employee union members — a political payoff not very stimulating to anyone else. Billions went to green energy loans, like the $500 million that the government lost in backing the obviously hapless Solyndra.

Infrastructure projects, which the president continues to tout, never seem to get built. He's been talking about dredging the port of Charleston, for example, to accommodate the big container ships coming in when the Panama Canal is widened.The canal widening is proceeding on schedule to be completed in 2014. The target date for dredging the port of Charleston: 2024.

Then there's Obamacare. Barack Obama has already said the administration will not enforce the employer mandate, will not verify eligibility for insurance subsidies and will not require employer-provided policies to cap employees' out-of-pocket costs. The Constitution's requirement that the president take care to faithfully execute the laws apparently does not apply.

Obamacare administrators continue to miss deadlines set by the health-care law — 41 of 82 of them, according to Forbes' Avik Roy's reading of Congressional Research Service report.

Then there's the Dodd-Frank financial regulation law. According to the law firm Davis Polk, the administration as of July had missed 62 percent of the deadlines in that law.

All of which indicates incompetence in drafting or in implementing the legislation — likely both. We have a president who delights in delivering partisan speeches to adoring audiences but doesn't seem interested in whether his administration gets results. But I blame someone else, someone who has been dead these last 68 years. I blame Franklin D. Roosevelt. I blame Roosevelt for making big government look easy — and politically rewarding.

He set an example that most of his successors — Obama is just the latest — have a hard time duplicating.

Roosevelt certainly had his defects. As his best and generally admiring biographer Conrad Black notes, he was devious, largely ignorant of economics, cruel to subordinates, vacillating on many issues. But he had a great gift for picking the right person for the right job — if he thought the job was important.

For the unimportant jobs — well, anyone politically useful would do and, if the job suddenly became important, the appointee would be sent off on some diversionary errand.
Roosevelt's knack for picking the right man (or right woman: Frances Perkins was a fine secretary of labor) is the central theme of Eric Larrabee's wonderful 1987 book, "Commander in Chief."

Larrabee shows how FDR selected the unflappable George Marshall to organize a vastly expanded Army, the splenetic Ernest King to lead an aggressive Navy, the grandioloquent Douglas MacArthur to dramatize the side conflict in the South Pacific and the emollient Dwight Eisenhower to hold together fractious Allied coalition forces. No other president has made such excellent military appointments right off the bat.

Roosevelt's knack is apparent in domestic appointments, as well. He picked social worker Harry Hopkins to run a winter work relief program in late 1933. In two weeks Hopkins had 4 million on the payroll. When spring came, Roosevelt ordered the program shut down. In two weeks, the payroll was down to zero.

After that, Roosevelt trusted Hopkins to deal with political bosses — and with top-level negotiations with Winston Churchill and Josef Stalin during World War II.

Interior Secretary Harold Ickes, Hopkins's bureaucratic rival, was a stickler for detail and scourge of graft. But he spent billions bringing in big projects under budget and on time.

Roosevelt picked some good regulators, too — stock speculator Joseph Kennedy to set up the Securities and Exchange Commission, Utah banker Marriner Eccles to run the Federal Reserve.

FDR's knack for choosing the right person for important jobs resulted from some unknowable combination of knowledge and intuition. It also showed an overriding concern for getting results.

It's not clear that Barack Obama shares that determination. In his defense, he has made some high-quality appointments, and Roosevelt's administrators did not face today's tangle of legalistic requirements and environmental restrictions.

But New Deal legislation tended to run dozens of pages rather than thousands. And some unworkable laws were overturned by the Supreme Court.

Roosevelt's example shines through history. But Obama's continuing stumbles show that it's a hard — and politically damaging — example to follow. Big government these days is harder than FDR made it look.

(Syndicated columnist Michael Barone is senior political analyst for The Washington Examiner, is a resident fellow at the American Enterprise Institute, a Fox News Channel contributor and co-author of The Almanac of American Politics.)

Last Updated on Thursday, 29 August 2013 08:14

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Jim Hightower - Getting ahead on the backs of others

Having been raised in a small-business family and now running my own small outfit, I always find it heartwarming to see hardworking, enterprising folks get ahead.

So I was really touched when I read that, even in these hard times, one extended family with three generations active in their enterprise is hanging in there and doing well. Christy, Jim, Alice, Robbie, Ann and Nancy are their names — and with good luck and old-fashioned pluck, they have managed to build a fairly sizeable family nest egg. In fact, it totals right at $103 billion for the six of them. Yes, six people, 100-plus billion bucks. That means that these six hold more wealth than the entire bottom 40 percent of American families — a stash of riches greater than the combined wealth of some 127 million Americans.

How touching is that?

The "good luck" that each of them had is that they were either born into or married into the Walton family, which makes them heirs to the Walmart fortune. That's where the "pluck" comes in, for the world's biggest retailer plucks its profits from the threadbare pockets of low-wage American workers and impoverished sweatshop workers around the world.

Four of the Walton heirs rank as the sixth, ninth, 10th and 11th richest people in our country, possessing a combined net worth of $95 billion. But bear in mind that "net worth" has no relationship to worthiness — these people did nothing to earn their wealth; they just inherited it. And, as Walmart plucks more from workers, the heirs grow ever luckier. In recent years, while the wealth of the typical family plummeted by 39 percent, the Waltons saw their wealth grow by 22 percent — without having to lift a finger.

How odd then that the one-percenters (on in this case, the 1/100 of one-percenters) are hailing themselves as our country's "makers," while snidely referring to workaday people as "takers." With the Waltons, it's the exact opposite.

Indeed, you'd think that the Bentonville billionaires would realize that their fortunes are tied directly to these disparage. Apparently, they're unaware that America's economic recovery cannot truly be measured in the performance of the stock market but instead should be gauged by the sock market.

Most economists, pundits and politicos see today's boom in stocks and say: "See, the recovery is going splendidly!" But they should go to such stores as Kohl's, Target and even the Walton's very own Walmart and find out what's selling.

The answer would be socks. Even in the present back-to-school season (usually the second-biggest buying spree of the year), sales are sluggish at best, with customers foregoing any spending on their kids except for socks, underwear and other essentials.
This is not only an economic indicator but also a measure of the widening inequality in America. The highly ballyhooed "recovery" has been restricted to the few at the top who own nearly all of the stocks, get paychecks of more than $100,000 a year and shop at upscale stores. But meanwhile, the many don't have any cash to spare beyond necessities. Walmart's chief financial officer seems puzzled by this reality. There is, as he put it last week, "a general reluctance of customers to spend on discretionary items."

Golly, sir, why are those ingrates reluctant? Could it be because job growth in our supremely wealthy country has been both lackluster and miserly? Yes — jobs today are typically very low paying, part-time and temporary with no benefits. Mr. Walmart-man should know this, since his retail behemoth is the leading culprit in downsizing American jobs to a poverty level in order to further enrich those at the very top, including Christy, Jim, Alice, Robbie, Ann and Nancy. In recent months, corporate honchos at the Arkansas headquarters have directed Walmart managers not to hire at all or to concentrate on hiring temporary and part-time workers, while cutting the hours of many full-time employees

Since the Great Recession "ended" in 2009, Walmart has slashed 100,000 people from its U.S. workforce, even as it added some 350 stores. In addition, while the giant banked more than $4 billion in profit just in the last three months, the chieftains changed the corporate rules to make it harder and costlier for employees to get Walmart's meager health care plan.

Yet, executives wonder why customers aren't buying "discretionary" items. Hello — even your own workers can't afford to buy anything in the store besides socks.

(Jim Hightower has been called American's most popular populist. The radio commentator and former Texas Commissioner of Agriculture is author of seven books, including "There's Nothing In the Middle of Road but Yellow Stripes and Dead Armadillos" and his new work, "Swim Against the Current: Even Dead Fish Can Go With The Flow".)

Last Updated on Wednesday, 28 August 2013 11:32

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