Comments on health insurance exchanges in the US context

Massachusetts, as part of its health reform plan, constructed an exchange where health insurance plans could be relatively standardized and sold to consumers. Commonwealth Choice products sold on the exchange are placed into three tiers, Gold, Silver and Bronze; Gold plans have less cost sharing and Bronze plans have the most. The tier of a plan is determined by its actuarial value, which can be stated as the percentage of medical costs that a plan would cover if a nationally standardized population were run through the plan.

In some ways, the Massachusetts exchange is like Carmax, the used car retailer in the US. Carmax inspects all the cars it purchases. It offers fixed price sales - there's no negotiation on the price. Financing is done separately from the purchase, so the terms of each deal are more transparent to the consumer.

The US will likely have an insurance exchange, or multiple insurance exchanges, in health reform. There are two questions, whether or not insurers can sell products outside the exchange, and whether or not there can be competing exchanges - progressives would probably like one national exchange, whereas I've heard some Republicans say they want it to be so that each state can have one or more. For example, the Senate Finance Committee's policy options paper suggests that one option may be to allow several competing exchanges; I believe this is at the insistence of the Republicans.

Allowing competing exchanges would be idiocy. Consider the case of Countrywide Financial. In the US, financial institutions can choose their own regulator. Countrywide chose the Office of Thrift Supervision, which is supposed to oversee regular banks. However, Countrywide was involved in originating and securitizing subprime mortgages - a more complex business. I'll grant that more than one regulator dropped the ball, but OTS was home to several of the biggest blowups - AIG, IndyMac and Washington Mutual were also under their oversight.

In fact, a Washington Post article argues that OTS was known for being a lenient regulator, and may well have lobbied Countrywide to come under their umbrella.

Countrywide Financial's decision to reconstitute itself as a thrift and come under the OTS umbrella was a victory for Darryl W. Dochow, the OTS official in charge of new charters in the Western region, home to Washington Mutual, IndyMac and other large thrifts.

In the late 1980s, Dochow had been the chief career supervisor of the savings-and-loan industry, and federal investigators later concluded he played a key role in the collapse of Charles Keating's Lincoln Savings and Loan by delaying and impeding proper oversight of that thrift's operations.

Dochow was shunted aside in the aftermath and sent to the agency's Seattle office. Several of his former colleagues and superiors say he eventually reestablished himself as a credible regulator and again rose in the organization. Dochow did not return a phone call requesting an interview, and OTS said he declined to give one.

As early as 2005, Angelo R. Mozilo, then the chief executive of Countrywide, approached OTS about moving out from under the supervision of the Office of the Comptroller of the Currency, which regulates national commercial banks. In 2006, Dochow and his OTS colleagues met with Countrywide at its headquarters in Calabasas, Calif., in a room decorated with color photos of the company's float entries in the annual Tournament of Roses parade. One depicted a big bad wolf, with arms outstretched, huffing and puffing on a brick house.

Senior executives at Countrywide who participated in the meetings said OTS pitched itself as a more natural, less antagonistic regulator than OCC and that Mozilo preferred that. Government officials outside OTS who were familiar with the negotiations provided a similar description.

"The general attitude was they were going to be more lenient," one Countrywide executive said. For example, he said other regulators, specifically OCC and the Federal Reserve, were very demanding that large banks not allow loan officers to participate in the selection of property appraisers. "But the OTS sold themselves on having a more liberal interpretation of it," the executive said.

Winning Countrywide was important for OTS, which is funded by assessments on the roughly 750 banks it regulates, with the largest firms paying much of the freight. Washington Mutual paid 13 percent of the agency's budget in the fiscal year ended Sept. 30, according to OTS figures. Countrywide provided 5 percent. Individual firms tend to make a larger difference to OTS finances than other bank regulators because the agency oversees fewer companies with fewer assets.

Polakoff said in an interview that the main reason Countrywide sought a new charter was that OTS was a better fit because it regulated banks that focus on mortgage lending. He said he challenged Mozilo: "If you're looking for a weak regulator, and if you're calling us because you think we're a weak regulator, stop now. We will walk away."

Polakoff said Mozilo told him, "That is absolutely not the reason we're even talking to you about a charter." Mozilo declined to be interviewed for this article.

But critics in government and industry said Countrywide's shift from OCC oversight to that of OTS was evidence of a "competition in laxity" among regulators eager to attract business. "Institutions should not be able to find a safe haven in one regulator from the reasonable concerns of another regulator," said Karen Shaw Petrou of Federal Financial Analytics, referring to the Countrywide episode.

In September 2007, six months after helping orchestrate the arrival of Countrywide under OTS, Dochow was promoted to head the agency's Western region.

He had arrived just in time for the second savings-and-loan crisis.

Allowing several competing insurance exchanges in the same geographic area would invariably mean that one will weaken its standards to attract more business. This would be bad - poorly designed insurance products have left many people in debt. For example, a policy might offer poor coverage for cancer care or for diabetes. There is reason to believe that many of these products were intentionally designed poorly - so as to attract healthier people, which has so far been the main way the insurance companies have competed for business.

Allowing the sale of insurance products outside the exchange would actually be a bad idea as well. Aside from the insurance plans of large employers (who normally offer fair terms and generous subsidies), insurers might want to sell skimpy plans to healthy people. That will undermine the whole purpose of the exchange; it is likely that a method called risk adjustment will be used to redistribute funds among plans according to the health status of their members, so that plans with sicker enrollees will get more money (and their enrollees will continue to pay the same premium), but having a significant market outside the exchange will undermine the accuracy of risk adjustment. It would be acceptable to only allow people to receive income-related federal subsidies within the exchange, but then there's the question of what happens to people who work for a large employer but can't afford insurance even with the employer's subsidy. Those are questions someone else can work out.

NY Times: GM, Detroit and the Fall of the Black Middle Class

Many middle class African-American families have jobs connected to the manufacturing industry. The decline of the auto industry is having particularly pronounced effects on African-American middle class families in Michigan, as this particularly sad story chronicles.

AFSCME: Catholic Bishops releases principles on unionization in Catholic hospitals

The American Federation of State, County and Municipal Employees announced that the US Conference of Catholic Bishops released a statement, Respecting the Just Rights of Workers: Guidance and Options for Catholic Health Care and Unions, which provides important guidelines on unionization in Catholic hospitals. Many hospitals, including Catholic hospitals, have been hostile to unions. In contrast, at least one previous Pope (unfortunately, I don't recall who right now) made statements favorable to unions.

While I disagree with a number of Labor's stances, it is a fundamental human right for workers to be able to organize, if they choose. It is deeply wrong for any employers to interfere with their choices, and to the extent that religious hospitals were doing so, that would be doubly shameful.

Leadership 2: Quack pastor urges his flock to bring their guns to church

I've heard that you should never start with telling people how NOT to do something. Michelle Obama is doing the right thing. This second post on the topic of leadership features someone doing the wrong thing in a spectacular way: the New York Times has a story on Pastor Ken Pagano, who urged his congregation to bring their guns INTO THE CHURCH this Saturday night where they will hold a raffle, firearms safety lessons and a picnic.

LOUISVILLE, Ky. — Ken Pagano, the pastor of the New Bethel Church here, is passionate about gun rights. He shoots regularly at the local firing range, and his sermon two weeks ago was on “God, Guns, Gospel, and Geometry.” And on Saturday night, he is inviting his congregation of 150 and others to wear or carry their firearms into the sanctuary to “celebrate our rights as Americans!” as a promotional flier for the “open carry celebration” puts it.

“God and guns were part of the foundation of this country,” Mr. Pagano, 49, said Wednesday as he sat in the small brick Assembly of God house of worship, where a large wooden cross hung over the altar and two American flags jutted from the side walls. “I don’t see any contradiction in this. Not every Christian denomination is pacifist.”

The bring-your-gun-to-church day, which will include a $1-raffle of a handgun, firearms safety lessons and a picnic, is another sign that the gun culture in the United States is thriving despite, or perhaps because of, President Obama’s election in November.

...

The celebration will feature lessons in responsible gun ownership, Mr. Pagano said. Sheriff’s deputies will be at the doors to check that openly carried firearms are unloaded, but they will not check for concealed weapons.

“That’s the whole point of concealed,” Mr. Pagano said, adding that he was not worried because such owners require training.

It is true that not all Christians denominations are pacifist. But we worship Christ, not guns and not the flag. This idiot worships all three, which means that he worships guns and the flag more than Christ. Jesus said you can't serve more than one master. I disagree, frankly, but when your masters are nationalism and violence, you certainly can't serve God.

Arkansas and Georgia recently rejected efforts to allow people to carry concealed weapons in church. Watching the debate in Arkansas was John Phillips, pastor of the Central Church of Christ in Little Rock. In 1986, Mr. Phillips was preaching in a different church there when a gunman shot him and a parishioner. Both survived, but Mr. Phillips, 51, still has a bullet lodged in his spine.

In a telephone interview, he said he found the idea of “packing in the pew” abhorrent.

“There is a movement afoot across the nation, with the gun lobby pushing the envelope, trying to allow concealed weapons to be carried in places where they used to be prohibited — churches, schools, bars,” Mr. Phillips said.

“I don’t understand how any minister who is familiar with the teachings of the Bible can do this,” he added. “Jesus didn’t say, ‘Go ahead, make my day.’ ”

Mr. Pagano takes such comments as a challenge to his faith and says they make him more determined.

“When someone from within the church tells me that being a Christian and having firearms are contradictions, that they’re incompatible with the Gospel — baloney,” he said. “As soon as you start saying that it’s not something that Christians do, well, guns are just the foil. The issue now is the Gospel. So in a sense, it does become a crusade. Now the Gospel is at stake.”

Radicalism can be a good trait in a leader if it is directed at the right cause. In Pagano's case, it is clearly not - what he is doing should be abhorrent to most Christians whether or not they are advocates of strong gun controls. Additionally, instability is not a trait that we look for in leaders.

Series on leadership: A First Lady Who Demands Substance (Washington Post)

During the Clinton efforts to reform healthcare in the US, I remember being a little uncomfortable at how much authority Hillary Clinton was assuming. The US elected Bill, but not Hillary. I recognize that that feeling is an effect of gender roles in society. I also do remember thinking that perhaps Hillary should run for Senate if she wanted a leadership role - at the time I didn't know that there was no Senate seat for DC. In any case, Hillary later ran for Senator, got it, and was nominated to be Secretary of State.

Hillary Clinton and Michelle Obama were accomplished leaders in their own right before their husbands were elected as President. Clinton had several board positions, such as the Children's Defense Fund and Wal-Mart (urk). Obama held a VP of Community and External Affairs position at the University of Chicago Hospitals before her husband's campaign. She previously had several prominent government and non-profit positions.

Of course, now she's in DC. Her role as First Lady brings several expectations that conflict with her professional abilities. No doubt, after her husband leaves office, she will not have trouble finding leadership roles elsewhere. However, her present position constrains her.

What she makes of her office remains to be seen. It is a secondary office to the President's. I would say that she should seek leadership positions outside the White House, but I'm not sure that's really possible - any position she achieves might be seen as nepotism. However, the Washington Post does have a story on how she is aggressively moving to redefine her position.

For weeks, Michelle Obama had been telling her staff and closest confidantes that she wasn't having the impact she wanted. She is a woman of substance, with a background in law, public policy and management, who found herself relegated to role model in chief. The West Wing of the White House -- the fulcrum of power and policy -- had not fully integrated her into its agenda. She wanted more.

So, earlier this month, she changed her chief of staff, and now she's changing her role.

Her new chief of staff, Susan Sher, 61, is a close friend and former boss who the first lady thinks will be more forceful about getting her and her team on the West Wing's radar screen. The first thing Sher said she told senior adviser David Axelrod, whom she has known for years: When I call, "you need to get back to me right away."

...

In the past couple of weeks, Obama has been more vocal about the specifics of the president's health plan, and she will play a substantive role in promoting it. She will soon announce the creation of an advisory board to help military families. And she will be the face of the administration's United We Serve, a summer-long national service program, which she launched on Monday. Even her social events have a message: She let congressional families know that before the annual White House barbecue today, the 500 guests are expected to show up at Fort McNair to stuff camp backpacks with goodies for the children of military personnel.

Obama has also taken stock of her family life, which she has found to be more constrained than she expected. She has concluded that there's really only one road toward some semblance of a private life for them -- and it leads away from the White House.

Her role includes many elements of interacting with the community. The Post reports that she's recruited seasoned, driven professionals for her staff.

At work, Obama runs her office like a business in which she is chief executive. She doesn't want to micromanage, she has made clear; she wants to delegate. Up and down the hall are professional women with whom she has a longtime connection and whom she trusts to execute her vision. Rogers, another friend from Chicago, has an office just a few feet away. Also nearby is Jocelyn Frye, whom Obama met at Harvard Law School and who is the first lady's policy director. A family law advocate and expert on equal opportunity employment law, Frye is also a link to the D.C. community. She grew up in Washington and still lives a few blocks from her parents' house in the Michigan Park area of Northeast. She has pointed the first lady to homeless shelters, soup kitchens and schools.

She's also moving to support the President's agenda, and positioning herself within the Administration to do so.

Every morning, Rogers and Sher attend White House Chief of Staff Rahm Emanuel's 8:15 staff meeting. Johnston, a newcomer to Obama's circle but a White House veteran, and Katie McCormick Lelyveld, the first lady's press secretary, sit in on White House press secretary Robert Gibbs's daily message meeting. As part of the president's domestic policy team, Frye meets with its staff weekly. Senior aides David Medina and Trooper Sanders work on national service and international issues, and Norris remains close to the office in her new job at the Corporation for National and Community Service.

They're all focused on raising the stakes. "It isn't just about hugging," Sher said. "Whatever she talks about will bring press and interest, but it's important that she's not just talking [but] actually moving forward on those issues."

I want to see Michelle Obama assume a role that is commensurate with her skills. The US did not elect Michelle as President or to any other formal leadership position, and it will cause many people discomfort if she crosses a line by assuming authority she has not earned. However, it also does not serve society if we disenfranchise the spouses of our elected leaders.

Structuring an employer mandate in US health insurance

In the US, health insurance has traditionally been the responsibility of the employer to provide. Since the 1980s, with a secular shift towards part time work, many employers stopped giving health benefits. Costs have risen so fast that small employers have found it particularly difficult to provide benefits - they face higher administrative costs than larger firms, and in small firms, having one or two sick employees can cause the firm's premiums to rise significantly. Low-margin employers - like Wal-Mart, which makes little money off the sale of each item and compensates by volume - have often been unwilling to provide benefits as well. In their defense, labor costs are a relatively high cost for them, and increasing labor costs will cut their margins by a large amount.

For reference, examples of high margin employers are software firms, pharmaceutical companies, and investment banks before the subprime fiasco. Examples of low margin employers include grocery stores, agriculture firms, and investment banks after the subprime crisis.

We want employer dollars on the table in health reform. We don't want them dumping their workers into the health insurance exchange(s) where the workers will get Medicaid or public subsidies - essentially passing off costs onto the taxpayer. However, we also don't want to burden smaller and less profitable firms, which are a large engine of economic growth. Large low-margin employers like Wal-Mart have less or no excuse - indeed, in response to criticisms, Wal-Mart has been extending benefits to workers.

The Center on Budget and Policy Priorities has a piece on how to properly structure an employer mandate so that it's fair to smaller firms and firms with lower margins. In short:

Protect small firms by exempting them from the requirement. Congress can, for example, subject to “play or pay” only those firms whose total payroll exceeds a certain amount. (That threshold amount should be kept at a relatively modest level, however, so that a sufficient share of firms must meet the requirement. Consideration also could be given to applying the requirement to firms whose payroll falls below the threshold but whose average wages for full-time-equivalent work are above some high level so that, for example, a 6-person law firm with high salaries does not escape the requirement.)

Base the size of employers’ required payment on the size of their payroll rather than the number or type of employees. A per-employee requirement would disadvantage firms with larger numbers of low-wage workers compared to firms with smaller numbers of highly paid workers.

Adjust the fee imposed on employers who do not meet the requirement according to the size of the employer’s payroll in order to lessen the burden on smaller employers. Different proposals would impose a fee of 3 percent to 8 percent of payroll. These fees could be graduated — for example, 1 to 3 percent on the first one or several million dollars of payroll beyond the initial exempt amount, rising gradually to higher percentages for the portion of a firm’s payroll that exceeds various multi-million-dollar threshold levels.

Phase in the employer responsibility requirement over a few years. The fee rate could be increased, and/or the exemption level for small payrolls decreased, as health care reform makes coverage more affordable for modest-size employers.

In defining the “play” requirement, base the employer’s contribution to the worker’s coverage on the cost of coverage that meets a minimum essential benefits standard.

Gov Mark Sanford (South Carolina) on issues of marriage

From On the Issues:

No civil unions; define one-man-one-woman marriage

Q Should South Carolina recognize civil unions between same-sex couples?
A: No.
Q: Should South Carolina restrict marriage to a union only between a man and a woman?
A: Yes.
Source: 2002 SC Gubernatorial National Political Awareness Test Nov 1, 2002

I rarely comment on politicians' extra-marital affairs. I do not condone the practice, but they're usually personal errors.

However, as most US readers know, Gov Sanford admitted yesterday to an affair with a woman in Argentina who was a close friend. He is free to continue to hold his present anti-LGBT stance, and advocates should not condemn him for that. However, he had best refrain from commenting on the issue in the future - people would laugh in his face.

Additionally, there are some indications that key staffers did not know where he was during his 5-day absence. He could well have asked staff to mislead the media if asked, but if he did not make proper provisions for a change of command while he was away, this would be very poor governance.