January 2014


Filed under: Newsletters


Ahh the politics, ACA Figures, Advice……….

Politics

It’s been splattered all over the news how Governor Chris Christi shut down the George Washington Bridge, which connects Ft. Lee, New Jersey to Washington Heights in Manhattan. I personally found it amusing to see how much press this event received. Here we have Chris Christie, who is revered as a pretty honest, straightforward and from my point of view, fairly intelligent kind of guy, doing something as idiotic as closing some lanes on a bridge between two cities. A bridge by the way that I have personally traveled many many times, when I was working at the World Trade Center back in the mid to late 90′s. A bridge that is almost always crammed with cars and trucks that really do “creep” along to get to the other side, albeit from the shear volume of vehicles. As many of you who know me, I’m a pretty logical guy, so it’s inexplicable to me that Gov. Christie, a man who has aspirations of potentially running for CEO of these United States, would do something as adolescent and  “sandbox” as close some lanes on a bridge to poke Mayor of Ft. Lee, New Jersey, Mark Sokolich, in the eye. Now approaching this from a logical point of view, it’s my belief that the Governor has much better things to do with his time than participate in this type of folly. As I was watching this unfold on various news channels, it was interesting to get different perspectives. As I’ve stated in the past, our new media outlets have tremendous influence on all of our points of view, due to the choices they make about who and how much media coverage is allotted for any particular situation. Be that as it may, Founder of Home Depot and billionaire Kenneth Langone had the best summary objective reason for all of the attention. He stated, “you only tackle the guy who has the ball”. It took a second for that to sink in with me, as my immediate related thoughts went to the game of football, which was correct. You see, if Christie is the feared leading candidate for the Presidency, then it makes sense to jump all over him when something like this arises. I just wish that there was equal treatment for the other side, when similar events occur. It would be a great thing if people could draw their own conclusions based on the individual facts at hand. I know, you think I’m naive, but the reality is that the press has a moral obligation to the people of this great country to present objectivity in a manner that allows individuals to come to their own conclusions. We live in a world where the press has its own opinions and strives to drive those opinions to the public and act as a catalyst to influence you. That goes for all media outlets, including; CNN, MSNBC, ABC, CBS, and FOX.

ACA

As some of you will recall from previous newsletters, younger people signing up for the ACA (ObamaCare), must reach critical mass in order for the program to sustain itself. For those of you who did not read that iteration, essentially, younger people who are not “users of health benefits” but will pay premiums, will support people who are using the system on a regular basis. The math on that theory works just fine, except most younger people, those under the age of 28, do not feel they need coverage and therefore are not motivated to purchase. They feel it’s more beneficial, assuming they are not offered coverage from employment, to simply pay the “tax” or “penalty”. As of December 28th, only 24% of those enrollees are between the ages of 18 and 34.Total enrollment as of December 28th is 2,156,000.

More alarming is that only 11% of the total enrollments are people that have not had previous coverage. The emphasis on ACA implementation was to provide coverage for those that either did not have coverage or could not qualify. At the time the law passed, that number was 50 million people. If my math is correct, and it usually is, that means that 237,160 people that did not have coverage, now do. Most of the people who are signing up have either been dropped from other coverage or been given a stipend to offset the costs of coverage. For example, Retiree’s from Time Warner, IBM, GE, The City of Detroit, and many others. Companies that have moved or eliminated coverage for part-time employees include; Home Depot, Walmart and most recently Target. The benefit to the employer? Well, it’s elimination of the liability for claims. If you give an employee a stipend to purchase their own coverage, then the predictability of the risk can be put in in a “box”. For those of you who do not know or understand the health insurance world, most companies like Walmart, Target and Home Depot, self insure. That means they provide a pool of money to cover losses. Then, they hire a TPA (third party administrator) like BCBS to act as the administrator. BCBS provides access to their network for a fee. The company then purchases what is called “reinsurance” that provides coverage for catastrophic type claims. (it’s more complicated than that, but hopefully you get my drift).

So what happens is, the company eliminates the need for reinsurance healthcare for part-time employees, which creates more predictable profitability. So the IBM’s, Targets, and Time Warners of the world, welcome the change to offset some of the liability. From a retiree point of view, the story is a little different. Retirees are normally older and typically higher users. The ACA needs younger people and people that are not high users to have sustainability. Additionally, it was designed to provide coverage to people that did not have coverage, which it clearly is not doing, with 237,160.

So where does all this lead you ask? Well, that is an excellent question. Logically, if the program continues on its current path, there will be big problems with sustainability. I suspect if that happens, there will be a very large Health Insurance Company Government Bailout. The Health Insurance Companies cannot take the liability on and from a business point of view, are in business to make money.

Just as the companies that have moved retirees and part-time workers to the ACA, those companies are looking out for their bottom line. The insurance companies also look at the bottom line and as such, will either raise premiums to offset those additional costs or ask for federal funds…either way, it will come out of your pocket. I’m not trying to be a pessimist here, but the business economics just do not make sense.

Advice

I was trying to determine what advisory items we could discuss this month. I’m always careful about that, because my monthly newsletter is normally not used as a tool to get clients. Nonetheless, people constantly ask me to put a small advice section in each month and so I’m going to start accommodating that request for 2014.

For those of you that have been riding this wave for the last 4.5 years, it may be time to think about safety. My granddad always used to tell me that “pigs get fat and hogs get slaughtered” If you are in retirement or within 10 years of said event, then it makes sense to start looking for ways to preserve your assets. There are several asset classes that can still reflect market gains, while protecting the dollars you have. Additionally, and over the past year or two, several insurance products have come to the marketplace that are worth a look. If this process interests you, please email me and we can have a discussion.

That’s all for this month…

As always, my very best to you and your families.

Kevin


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This information has been provided by a licensed insurance professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting the insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax, trust and estate, or investment advice. Infinite Wealth Advisors is not an investment advisory firm.  Investment Advisory Services provided by NAMCOA® – Naples Asset Management Company®, LLC, a federally registered investment advisor, website: www.NAMCOA.com .