Archive for March 31st, 2010

Looks like mandatory health insurance coverage is, well, VOLUNTARY … no kidding

March 31, 2010

Once again, Speaker Pelosi was right “You’ll find out what’s in the bill when we pass it”.

Take the individual mandate: the provision that requires all people carry health insurance — even healthy non-consumers of health case services. They must play for ObamaCare’s fragile economics to work.  You see, it’s these people overpaying for their health insurance (i.e. premiums far exceed claims) that subsidizes the heavy users (i.e. claims far exceed premiums).

More than a dozen states have united to test the constitutionality of the individual mandate, arguing that the Feds can’t compel citizens to buy specific products simply as a condition of citizenship.  Feds argue that they can based on the supremacy (of Fed over states) and commerce (Feds can regulate interstate commerce) clauses in the constitution.

Regardless of how that turns out, there’s an interesting twist: though folks will be asked to ante in tax fines on their 1040s if they haven’t bought health insurance, the bill explicitly bans the IRS from enforcing the law.  There can be no criminal or civil penalties, no liens or seizures (whew, citizen’s big screen TVs are fancy cars out of reach), and no penalties or interests. 

The law is enforced by the ever powerful word “PLEASE”.

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Excerpted from Verum Serum, The Individual Mandate Farce, March 25, 2010

One of the more controversial elements of ObamaCare is the mandate for most individuals to purchase insurance beginning in 2014.

Democrats who orchestrated the passage of this bill are mandating not only that the young and healthy obtain insurance, but also that even their most fervent liberal constituents must purchase this coverage from the evil, private insurance industry.

Republicans for their part have focused on the fact that this mandate will be enforced via threat of a financial penalty (or tax), with the added assumption that it is the dreaded IRS which will be enforcing this. And sure enough, it’s already been reported that the IRS anticipates hiring possibly in excess of 15,000 additional personnel to deal with the collection of the individual mandate, and other tax related provisions within the bill.

However, it turns out that the Democrats who crafted this bill hamstrung the ability of the IRS or any other federal agency to enforce or collect on this mandate. Here is what the federal Joint Committee on Taxation had to say about this issue in a report released earlier this week:

Individuals who fail to maintain minimum essential coverage in 2016 are subject to a penalty equal to the greater of: (1) 2.5 percent of household income in excess of the taxpayer’s household income for the taxable year over the threshold amount of income required for income tax return filing for that taxpayer under section 6012(a)(1);67 or (2) $695 per uninsured adult in the household. The fee for an uninsured individual under age 18 is one-half of the adult fee for an adult. The total household penalty may not exceed 300 percent of the per adult penalty ($2,085). The total annual household payment may not exceed the national average annual premium for bronze level health plan offered through the Exchange that year for the household size…

The penalty applies to any period the individual does not maintain minimum essential coverage and is determined monthly. The penalty is assessed through the Code and accounted for as an additional amount of Federal tax owed. However, it is not subject to the enforcement provisions of subtitle F of the Code. The use of liens and seizures otherwise authorized for collection of taxes does not apply to the collection of this penalty. Non-compliance with the personal responsibility requirement to have health coverage is not subject to criminal or civil penalties under the Code and interest does not accrue for failure to pay such assessments in a timely manner.

“Subtitle F of the Code” is the portion of the tax code which grants the IRS the authority to assess and collect taxes.

In other words, as the law is written the federal government has no legal authority to enforce this mandate, nor will it have any recourse to collect any penalties that go unpaid!

This is bad news for those who believe in the merits of the mandate and the bill in general.

Without an effective mechanism of enforcing the individual mandate, the entire system is likely to collapse.

WHY WOULD ANYONE OBTAIN INSURANCE COVERAGE PRIOR TO NEEDING IT? This was already going to be a problem with the relatively low cost of the penalty, but take away any meaningful enforcement of the individual mandate and it is a complete and total joke.

The net result will be an ever increasing shift of healthcare costs on to those who remain in the insurance system (or to tax payers), and possibly even the bankruptcy of the insurance industry.

Nice work guys.

Full article:
http://www.verumserum.com/?p=13582

Posted in Health Care / Medical Insurance | 2 Comments »

Anybody see a pattern here ?

March 31, 2010

Hint: phonied-up cost estimates and pay-offs to unions.  Who could have ever imagined ?

Provisions of the health-care law that expand benefits for home-bound elderly, certain early retirees and coal miners will likely cost more than expected, say analysts and even some of the measures’ proponents.

The programs would expand home health services for the elderly and disabled and aid health plans covering retirees too young for Medicare.

The program for home-bound elderly, called Community Living Assistance Services and Supports, or Class, would help keep older people in their homes longer and reduce federal nursing-home expenses.

The provision was supported by several labor unions, which would have a chance to expand their memberships by organizing an expanded corps of home health workers.

The Congressional Budget Office warned last year that the Class program’s own benefits eventually would grow so large that it would drain the government’s finances. “The Class program would inevitably add to future deficits…by more than it reduces deficits in the near term”.

Rep. Frank Pallone (D., N.J.), chairman of the House health subcommittee and a main sponsor of the measure, said those concerns were overblown. “It’s pretty clear the way it’s been set up that it’s self-sustaining,” he said. The legislation requires the government to charge higher premiums if needed, he said.

The second program, to subsidize health-care plans that cover lots of retirees under age 65, will benefit cities and states as well as old-line manufacturing firms. The United Automobile Workers has made the federal reinsurance subsidy a top priority in recent years. Detroit’s unionized auto makers and parts makers have pushed thousands of UAW workers into early retirement as they retrenched in the past decade.

Excerpted from WSJ: Weighing the Cost of New Health Programs, MARCH 29, 2010 http://online.wsj.com/article/SB10001424052748703312504575142143632354272.html?mod=WSJ_hps_MIDDLEThirdNews

 

Posted in Health Care / Medical Insurance | Leave a Comment »

Diageo’s martini recipe: not just dirty, down & dirty … blame it on the economy.

March 31, 2010

Takeaway: During the era of excess, brand cache was largely derived from sky-high prices as carefree consumers enjoyed opportunities to showcase and indulge in their abundances. However, like most businesses, spirit makers now face a ‘new normal.’

Diageo has found that its customers demand the same style at substantially lower prices and has concluded that many of its premium products have fallen out of fashion.

In response to this challenge, the company will launch a new ‘cheap chic’ brand of vodka as a direct attack on competitors such as Constellation Brands, which offers more moderately-priced labels.

Marketers stayed tuned: Is cheap chic here to stay? Or is it a short-term strategy aimed to ease dormant consumers back into the market in hopes that they will trade up to torpid top-shelf titans?
 
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Excerpt from Wall Street Journal, “New Label, Made in Sweden, Will Go Up Against Constellation’s ‘Cheap Chic’ Svedka Brand” by David Kesmodel, March 24, 2010.
 
Diageo plans to unveil a Swedish vodka in the U.S. this summer in a direct assault on Constellation’s Svedka, a fast-growing “cheap chic” brand that has stolen market share from Diageo’s Smirnoff and other vodkas.

The strategy suggests Diageo may not feel confident that the industry will be able to boost prices much in the next 12 to 18 months or begin seeing consumers move back toward upscale brands.

Diageo’s new Rökk, its first Swedish-made vodka in the U.S., is part of a flurry of new liquor products that the London drinks giant is rolling out in the U.S.

The new products, many of which are midpriced brands, show how Diageo is trying to appeal to drinkers that are reaching for relatively inexpensive—yet distinctive— brands in the sluggish economy. Many of the moves reflect how times have changed in an industry long focused on introducing upscale brands that tend to carry higher profit margins.

Vodka is the biggest category in the U.S. spirits industry. Sales of vodka are growing at the second-fastest rate after the much-smaller Irish whiskey segment.

The industry has engaged in heavy discounting to woo consumers, cutting into revenue for Diageo.

Svedka, a Swedish import, posted a 34% increase in volume last year, reaching 2.8 million cases, according to Beverage Information Group.

Rökk will sell for roughly $13 for a 750-milliliter bottle, a similar price to Svedka. Rökk also will compete against such Swedish imports as Absolut, which sells for about $20 and is the No. 2 vodka in the U.S. after Diageo’s Smirnoff.

Edit by BHC
 
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Full Article:
http://online.wsj.com/article/SB10001424052748704211704575139891106275422.html

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Posted in Mktg - Pricing, Mktg - Product Line Mgnt | Leave a Comment »