Archive for August 26th, 2009

For glimpse into “health insurance portability”, look at COBRA’s strangle hold …

August 26, 2009

OK, everybody seems to agree that an employee should be able to take his / her healthcare insurance with them if they change jobs or lose their jobs.  It’s called “portability”.  That way, no worry about discontinuous coverage or those pesky pre-existing conditions.

Not so fast.

Yeah, on the surface, portability provides coverage continuity.  But, it may be more apparent than real.

Getting the insurance companies to keep people in the group pools is one thing.  Paying the premiums is another – especially since the former employer won’t be paying the bulk of the premiums.

For a dose of reality, consider COBRA.

Companies (really, their insurance companies) are required by the Consolidated Omnibus Budget Reconciliation Act 0f 1986 (COBRA) to offer departing employees a chance to keep medical insurance if the laid-off workers pay their own premiums.

But, only 1 in 10 departing employees take the COBRA coverage.

Why?

The company stops paying towards the insurance, the individual has to pay the full amount – plus, usually a small administrative adder.

The resulting premiums are high … very high … beyond the reach of most departing employees.

Uh-oh.

 

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Business Week, Why Being Laid Off Is Tougher These Days, July 30, 2009
http://www.businessweek.com/magazine/content/09_32/b4142061715525.htm

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COBRA details:
http://www.dol.gov/ebsa/pdf/cobraemployee.pdf

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Posted in Health Care / Medical Insurance | 1 Comment »

An irony of SEC fines … double jeopardy for shareholders ?

August 26, 2009

The story

Gotcha: “B of A to pay $33M fine over Merrill bonuses”

On August 3,  the Securities and Exchange Commission filed charges  against Bank of America for misleading investors about billions of dollars in bonuses paid to top executives at Merrill Lynch following its purchase of the brokerage giant.

The SEC simultaneously announced that it would settle with the Charlotte, N.C.-based lender, who will pay a penalty of $33 million as a result.

Regulators alleged that Bank of America failed to disclose plans to as much as $5.8 billion in bonuses for fiscal year 2008 in its proxy statement. Instead, Bank of America told shareholders that Merrill had agreed not to pay year-end performance bonuses, according to the SEC.

“Failing to disclose that a struggling company will pay out billions of dollars in performance bonuses obviously violates that duty and warrants the significant financial penalty imposed by today’s settlement,” Robert Khuzami, Director of the SEC’s division of enforcement, said in a statement.

http://money.cnn.com/2009/08/03/news/companies/bank_of_america_sec/index.htm?postversion=2009080315

The Question 

Who really pays fines imposed by the SEC?

Think about it …

B of A misleads shareholders by failing to disclose material information.

Shareholders lose money as B of A stock drops.

SEC fines B of A for misleading shareholders.

B of A pays a fine to the SEC.

Where did the fine’s funds come from?

You guessed it, shareholder’s equity.

So, in the final analysis, shareholders pay a fine for having been mislead.

… and I thought double jeopardy was illegal.

Hmmm.

Note: This one is even more interesting since taxpayers own a chunk of B of A.

So, taxpayers are paying a fine to themselves.

Our government at work …

 

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Posted in Investing, Investments, Stock Market | 3 Comments »