Archive for March, 2010

AIG Did Not Ignore Red Flags, Judge Says

March 31st, 2010 by admin | Comments Off | Filed in insurance facts, insurance news, insurance specialists

Reuters reported earlier this week that a federal judge in Manhattan has dismissed a shareholder lawsuit against AIG. The suit accused both current and former American International Group, Inc., directors and executives of ignoring the “red flag” warning signs that lead to the insurers near-demise and necessitated $180 billion in Federal bailout funds.

On Tuesday, U.S. District Judge Laura Taylor Swain accepted the insurers argument that the shareholders, led by the Louisiana Municipal Employees Retirement System pension fund, were equally culpable since they failed to ask the board of directors to either take action or demonstrate the futility of doing so. Mark Herr, a spokesman for AIG, said that the New York-based company was satisfied with the 44-page long ruling.

In the ruling, the complaint, which sought remedies on behailf of AIG which included both restitution and “extraordinary” equitable relief, was labeled “derivative.” In it, AIG officials were accused of ignoring the potential for catastrophic losses due to credit default swaps, largely connected to subprime mortgage-related debt, through its AIG Financial Products division. Those losses led to the series of bailouts that gave the Federal government with an almost 80% stage in the company. Meanwhile AIG has been selling off assets to repay its debt to the government.

The complaint also alleged that the health and risk management practices of AIG had been overstated by the company, which resulted in corporate assets being wasted in many ways, which included:

  • authorization of a costly stock buyback and divident increase just prior to a liquidity crises in September, 2008
  • awarding excessive salaries to former chief executive Robert Willumstad
  • awarding excessive severance pay to Willumstad’s predecessor Martin Sullivan and former AIG Financial Products president Joseph Cassano
  • granting “lavish” retention bonuses to employees within Cassano’s unit

In addition, the complaint also said that the plaintiffs thought seeking help from the board would be useless, because “wrongdoers” dominated the board at the time, and they didn’t believe the directors would be inclined to “sue themselves” for their actions, exposing themselves to potential personal liability. Judge Swain, however, said that the shareholders were unsuccessful at demonstrating that the directors were either disinterested or independent, or that they had not properly exercised their business judgment.

A lawyer for the Louisiana fund did not return Reuter’s requests for contact. AIG shares closed down 26 cents on Tuesday on the NYSE; Swain’s decision was handed down after the U.S. Markets had closed.

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NC Drivers Pay $1350/Year Due to Road Conditions

March 29th, 2010 by admin | Comments Off | Filed in auto insurance, insurance news

Here’s another reason to save money on auto insurance in North Carolina: the road conditions will cost you the equivalent of an extra tank of gas every week.

Last week, a national transportation group released the results of a study which estimated that drivers in the two largest urban areas in North Carolina lose an average of $1,350/year due to pot holes, perilous roadways, and longer-than-usual waits in traffic, car repairs and “accidents where roadway design likely contributed to a wreck.”

The study was completed by a nonprofit group called TRIP, based in Washington, and was based primarily on federal highway and traffic safety statistics. Some of the state “transportation boosters” are hoping the results will spur the North Carolina legislature to approve new fund raising methods for road construction. Several years ago, the state had an estimated $65 billion funding gap through the year 2030, between projected transportation needs and available sources of funds.

Will Wilkins, executive director of TRIP explained, “North Carolina is falling behind in maintaining its major roads, bridges and highways and the state lacks adequate funding with numerous projects that would greatly enhance economic development in the state.”

North Carolina did receive $838 million in federal stimulus funds for ready-to-build roads and bridges, but that is merely a short-term solution for a state with a population that is expected to increase by a third to 12 million people, and vehicle travel is expected to increase by 45 percent over the next twenty years.

At a news conference in Raleigh, North Carolina Transportation Secretary Gene Conti agreed with TRIP’s findings, saying, “The bottom line is our needs are growing in North Carolina. Our revenue stream is not. We need to continue to work hard and do more with less, but I don’t think at the end of the day that’s going to get the job done.”

TRIP’s findings said that in Charlotte, costs above “normal” driving and maintenance averaged $1,351/year, with a similar average of $1,350/year in Raleigh-Durham. Drivers in Winston-Salem and Greensboro still pay more than average, about $900/year. This number is less because those cities are less congested. Throughout the state, deteriorating and congested roads, and those which lack improved safety features result in a cost of $5.7 billion to North Carolina drivers. The state ranks fourth-lowest in the country for per-mile capital spending on its roadways, and has the second-largest state-maintained highway system. Wilkins discouraged the calculation of a statewide driver average because only the three metro areas had available congestion statistics.

There are more than six million drivers in North Carolina.

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House Approves Companion Bill to Healthcare Overhaul

March 26th, 2010 by | Comments Off | Filed in health insurance

Days after passing the healthcare overhaul bill that took the better part of a year to hammer out, the United States House of Representatives approved the companion package yesterday. The companion package had already been approved by the House before, but after the vote on the main bill, the Senate parliamentarian ordered two minor provisions regarding the revamp of student loans be removed.

According to the parliamentarian, the provisions in question did not adhere to reconciliation rules requiring they have a budgetary impact.

The Senate’s vote on the changes came after about 40 Republican-created amendments designed to derail the bill or force the Democrats to play politics were killed. The final tally was 56-43.

As the debate on healthcare drew to a close, and the bills were passed, the Morgan Stanley Healthcare Payor index of health insurers rose 0.4 percent, only slightly higher than the broader market. A similar increase was seen by UnitedHealthGroup and Aetna.

Several major American manufacturers said the overhaul would cause enormous increases in after-tax costs. Deer & Co., a farm equipment company, said it expected an increase of $150 million to its healthcare costs. Similarly, Caterpillar estimated it would see an increase of over $100 million.

Robert Gibbs, spokesman for the White House said the first-year increase is due to the healthcare law closed an accounting loophole. “Our bill simply closes the loophole that allows them to deduct that money one time by not counting it as income,” he told reporters on Air Force One.

The House vote was 220-207.

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Missouri Court Issues Ruling in Medical Malpractice Case

March 25th, 2010 by admin | Comments Off | Filed in health insurance, insurance news

Two days ago, the Missouri Supreme Court made a ruling that narrowed the scope of a 2005 state law that limits the amount of money that may be awarded in medical malpractice cases has slightly narrowed the scope of a 2005 state law limiting how much money can be awarded to people in medical malpractice cases, however, it’s only a partial victory. While the ruling on March 23 did give a victory to people who were injured prior to 2005, it did not address the larger issue of whether or not the lawsuit limits violate other constitutional rights.

The originaly 2005 “tort reform” law was a priority for then-Governor Matt Blunt and his largely Republican-led state legislature, who said limiting payouts would also limit liability insurance premiums for doctors, helping to ensure that healthcare in Missouri remained available and affordable. One of that law’s main provisions reduced the cap for non-economic damages such as pain and suffering to a flat $350,000 per medical malpractice lawsuit. That limit became effective for any suit filed after August 28, 2005, and represented a significant decrease over the previous limit of $579,000, which had been adjusted for inflation each year, and was assumed to apply to multiple parties in a given lawsuit.

The case at the center of the issue was that of James and Mary Klotz of St. Louis. In 2006, they filed a lawsuit alleging that James Klotz had contracted a staph infection which subsequently led to additional health problems, during the implantation of a pacemaker in March, 2004. At the time, a jury awarded James more than $2 million, and also awarded more than $500,000 to Mary, with more than half of their combined total comprised of non-economic damages. However, a trial judge later reduced James’ non-economic damages to the the 2005-imposed cap, and eliminated them completely from monies awarded to Mary, because the same law required that they be counted under her husband’s total.

The Missouri Supreme Court sad the state’s constitution includes a prohibition on retroactive laws, which means the Klotzes -and anyone else whose injuries occurred before the 2005 law took effect – cannot be held to those caps. That decision means that the Klotzes will receive hundreds of thousands more dollars.

In an interview with the Associated Press, James Klotz said, “I’m glad I won, but I’m in pain all the time. I’d gladly give up all the money just to have my whole life back together.”

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Healthcare Bill Passes

March 22nd, 2010 by admin | Comments Off | Filed in alternative health plans, health insurance

Late Sunday night, the United States House of Representatives passed the much-debated healthcare reform bill in a 219-212 vote, with all the Republicans, and thirty-four Democrats, voting against its passage. The bill, which instigates the most dramatic changes to our healthcare system in four decades, now goes to President Obama for his signature, which will turn it into law. It has already been approved by the Senate.

Changes provided by the healthcare reform bill include the extension of health coverage to 32 million previously-uninsured Americans, as well as the imposition of new strictures and taxes on the insurance industry. One crucial change is that insurers will no longer be permitted to deny coverage to people with pre-existing medical conditions.

The vote was the culmination of many battles between Democrats and Republicans, which had taken over Congress during the last year, and resulted in downticks in President Obama’s approval ratings.

Speaking from the White House after the vote, President Obama said, “Tonight, at a time when the pundits said it was no longer possible, we rose above the weight of our politics.”

He also said, “This legislation will not fix everything that ails our healthcare system, but it moves us decisively in the right direction. This is what change looks like.”

The $940 billion bill has been widely criticized by Republican critics who believe it to be an intrusion in the healthcare sector, and that it will increase the deficit, and reduce patients’ choices.

Reuters is reporting that many states are already filing lawsuits to challenge the new insurance law, and it is likely that healthcare will continue to be a major issue in the campaign season leading to midterm Congressional elections in November.

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States Attempt to Counter HealthCare Reform via Bills and Constitutional Amendments

March 19th, 2010 by admin | Comments Off | Filed in health insurance, insurance news

Reuters is reporting that at least 36 state legislatures have introduced bills or resolutions designed to either limit or oppose various aspects of the healhcare reform plan that Congress is still trying to pass. According to the National Conference of State Legislatures, momentum is growing in many states to block the changes either by laws or amendments to state constitutions. In the words of Michael Bird, legislative counsel for the NCSL, “There’s going to be a big free-for-all lawsuit about this.”

The United States House of Representatives is due to vote on the healthcare overhaul, one that would require all Americans to have health insurance but would also provide subsidies to help low- and middle-income workers, this Sunday. The new plan would also ban common insurance practices like refusing coverage to people with pre-existing medical conditions.

According to the NCSL, the state-level opposition efforts, “…in general … seek to make or keep health insurance optional, and allow people to purchase any type of coverage they may choose.”

Earlier today, Democratic House leaders expressed their growing confidence about winning a close vote. If the healthcare reform bill passes the House, it only has to pass the Senate by a simple majority, under the planned procedure regarding the legislation.

Not unlike the partisan politics that have been present during the entire federal process, the state attempts to block healthcare reform are more likely to be present – and successful – in states where Republicans have control of at least one legislative chamber, and of the governor’s office, but so far only two states, Virginia and Idaho, have actually enacted laws, though there is a constitutional amendment that will come before the voters of Arizona this November. In states like New York and Illinois, where the Democrats dominate, there is no such anti-health care reform legislation, at least according to the NCSL.

On Wednesday, Governor C. L. “Butch” Otter of Idaho, signed a bill allowing the state’s attorney general to file a lawsuit opposing the federal healthcare legislation which requires individual citizens to purchase medical insurance.

Otter’s spokesman, Jon Hanian says that the Idaho governor feels that the federal plan is “overreaching,” and likely to increase the medical expenses of state governments. “He’s concerned we can’t afford it,” Hanian said. He also added that the Republican Otter is “…disappointed in how the Democrat-led U.S. Congress is handling the legislation.”

On Thursday, White House spokesman Robert Gibbs was dismissive of the states’ complaints. According to the latest version of the bill, all states would receive additional funding to cover the Medicaid costs expected to increase as a resuld of the reform, including 100% federal coverage for new enrollees through 2016. Medicaid is jointly administered by the federal and state governments, and provides healthcare to the poor.

Nevertheless, the states are concerned that they will have to be responsible for the cost of healthcare, and believe that the reforms infringe on their powers under the tenth amendment of the U.S. Constitution’s Bill of Rights., which says, “…powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states.”

Gibbs is firm that the tenth amendment is not being breeched, saying, “What we’re about to pass and sign into law will meet Constitutional muster,” he said.

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Company Wellness Programs: They’re Not Just for the Big Guys Anymore

March 16th, 2010 by admin | Comments Off | Filed in alternative health plans, health insurance

It’s no secret that large corporations have been cutting costs by encouraging employees to use on-site, in-house wellness programs, some replete with healthy dining facilities and gymnasiums. However, wellness programs aren’t just for big companies any more. In fact, two Illinois-based medium-sized businesses, Mechanical Devices, Co. (Bloomington) and the Town of Normal have implemented wellness programs of their own, and are finding that their employees are happier – and healthier – as a result.

Linda Fillingham, co-owner and office manager of the 250-employee Mechanical Devices, Co., thought screenings would be a good way to dispense health information to her staffers, and also motivate improvements where they were needed. In 2005, she contacted OSF St. Joseph Medical Center’s Center for Healthy Lifestyles, and the screenings were subsequently held in the employee lunchroom, at her company’s expense.

Of the program, Linda said, smiling, “”It was voluntary but I had to twist some arms. We had close to 80 percent participation.” She added, “It’s totally private. I don’t see individual numbers, just overall numbers.” But she is aware that some people had results that were not what they expected. “It forces people to think about their body. And without a healthy body, you don’t perform as well on the job and don’t perform as well anywhere in life.”

One such employee was Richard Hetherington of Bloomington, who told the Insurance Journal, “I hadn’t been to a doctor in a long time because I felt fine,” he said. But after his screening results showed he had high blood pressure and cholesterol and was on the verge of being diabetic, he made changes like beginning a blood pressure medicine regimen, eating less, and reducing carbohydrates and sodium. Within weeks, he had lost 30 pounds and was able to manage his blood pressure without medicine, reduce his cholesterol and keep his pre-diabetes under control.

Today, Hetherington, who is now 65 years old, continues to control his weight and blood pressure by watching what he eats, riding his bike when the weather allows, and lifting weights when he gets home from work. Of his current health, he said, “I just feel better.”

In addition to annual health screenings, Mechanical Devices also offered smoking cessation classes as part of the company’s preparation to go smoke-free two years ago. “I got 10 to 15 (employees) to stop smoking and everyone else (other smokers) reduced smoking,” Fillingham said.

Quality control employee Jackie Felts joined the eight-week anti-smoking program in January 2007, and, after a plan that included weekly meetings, counseling, advice, and a nicotine patch, finally quit on February 13, 2007.

46-year-old Bloomington resident Felts said, “I feel 100 percent better. I have more energy, I can breathe better, I can do more stuff, I don’t get out of breath. But without the program being offered here, I probably wouldn’t have done it.”

Fillingham added that while the program does cost the company money, she believes that when there are fewer employees having heart attacks and other expensive medical problems there will be savings. “Employees who feel good about themselves do well for you,” she said. “They are your most valuable asset.”

Similarly, the Town of Normal also began offering occasional health and wellness programs for employees several years ago, but according to Geoff Fruin, assistant to the city manager, “…it was a hands-off approach. We presented opportunities to employees but they weren’t changing the workplace culture and keeping the wellness perspective in front of employees. “The employees were wanting more,” he recalled. “And from the town perspective, we want to employ a happy, healthy, productive work force.”

Town officials went to Advocate BroMenn (then known as BroMenn Healthcare) and agreed to a pilot program whereby, beginning in September, 2006, Marcy Kaufman of BroMenn would be the town’s on-site wellness specialist 20 hours a week.

Kaufman now offers health screenings at several town locations, including City Hall, the fire stations, parks and recreation and public works. In addition exercise classes, fitness equipment orientations, lunch-and-learn presentations on topics like improving nutrition and back-safety, are also offered, and employees can sign up to receive emailed newsletters with health tips.

Kaufam is also in charge of fitness incentive programs, such as last summers “Get Fit on 66″ in which employees participating in various wellness activities earned rewards like water bottles, gift cards, t-shirts, and pedometers.

Fruin shared that 213 of the 370 full-time town employees participated in at least one wellness program last year, and that the participation rate continues to increase. An annual survey of employees includes testimonials about weight loss, blood pressure being under control, and cholesterol being reduced, as well as overall healthier eating and exercise habits.

“That is rewarding. We are seeing the beginnings of a culture change here,” Fruin said.

In fact, the town of Normal may already be experiencing a financial benefit.

In 2006, the average increase in health insurance claims for the town was 14.2 percent, against a national average of only 7.9 percent. In 2008 – the most recent year for which data is available – the town’s increase was only 1.3 percent, while the national average was 8.9 percent.

“We think the program played a significant role in helping us reduce the claims’ increase,” Fruin said. “For every dollar we invested in wellness in the first two years of the program, we realized a $4.50 benefit due to a reduction in claims.”

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