How They Raise Premiums, Deny Claims, and Refuse Insurance to Those Who Need it Most
4. State Farm
10. Liberty Mutual
The U.S. insurance industry takes in over $1 trillion in premiums annually.3 It has $3.8 trillion in assets, more than the GDPs of all but two countries in the world (United States and Japan).
Over the last 10 years, the property/casualty insurance industry has enjoyed average profits of over $30 billion a year. The life and health side of the insurance industry has averaged another $30 billion.
The CEOs of the top 10 property/casualty firms earned an average $8.9 million in 2007. The CEOs of the top 10 life and health insurance companies earned even more—an average $9.1 million. And for the entire industry, the median insurance CEO’s cash compensation still leads all industries at $1.6 million per year.6
Profits Over Policyholders
But some companies have discovered that they can make more money by simply paying out less. As a senior executive at the National Association of Insurance Commissioners (NAIC), the group representing those who are supposed to oversee the industry, said, “The bottom line is that insurance companies make money when they don’t pay claims.”7 One example is Ethel Adams, a 60-year-old woman left in a coma and seriously injured after a multi-vehicle crash in Washington State. Her insurance company, Farmers, decided the other driver had acted intentionally and denied her claim, contending that an intentional act is not an accident. Another example is Debra Potter, who for years sold Unum’s disability policies until she herself became disabled and had to stop working. All along, Potter thought she was helping people protect their future, but when her own time of need came, she was told her multiple sclerosis was “self reported” and her claim denied—by Unum, the very company whose policies she had sold. In cases like these, and countless others, the name of the game is deny, delay, defend—do anything, in fact, to avoid paying claims. For companies like Allstate, there are corporate training manuals explaining how to avoid payments, portable fridges awarded to adjusters who deny the most claims, and pizza for parties to shred documents.
The insurance industry is in dire need of reform. For too many insurance companies, profits have clearly trumped fair dealing with policyholders. The industry has done all it can to maximize its profits and rid itself of claims. Allstate CEO Thomas Wilson outlined the strategy when he said the company had “begun to think and act more like a consumer products company.”176 Allstate has enjoyed a return double that of the S&P 500, but its policyholders have suffered cancellations, nonrenewals, and punishing loss-prevention techniques.177 Wilson has been unrepentant: “Our obligation is to earn a return for our shareholders.”178 Wilson is one of many insurance leaders who have lost sight of their legal and ethical responsibility to policyholders. Now they answer only to Wall Street. The time is due for insurance reform that will level the playing field for consumers.
Allstate—The Worst Insurance Company in America
CEO: Thomas Wilson 2007 compensation $10.7 million (predecessor Edward Liddy made $18.8 million in compensation and an additional $25.4 million in retirement benefits)
One company stood out above all others. Allstate’s concerted efforts to put profits over policyholders has earned its place as the worst insurance company in America. According to CEO Thomas Wilson, Allstate’s mission is clear: “our obligation is to earn a return for our shareholders.” Unfortunately, that dedication to shareholders has come at the expense of policyholders. The company that publicly touts its “good hands” approach privately instructs agents to employ a “boxing gloves” strategy against its own policyholders.1 In the words of former Allstate adjuster Jo Ann Katzman, “We were told to lie by our supervisors—it’s tough to look at people and know you’re lying.
There is no greater poster child for insurance industry greed than Allstate. According to CEO Thomas Wilson, Allstate’s mission is clear: “our obligation is to earn a return for our shareholders.”9 Unfortunately, that dedication to shareholders has come at a price. According to investigations and documents Allstate was forced to make public, the company systematically placed profits over its own policyholders. The company that publicly touts its “good hands” approach privately instructs agents to employ a hardball “boxing gloves” strategy against its own policyholders.10 Allstate’s confrontational attitude towards its own policyholders was the brain child of consulting giant McKinsey & Co. in the mid-1990s. McKinsey was tasked with developing a way to boost Allstate’s bottom line.11 McKinsey recommended Allstate focus on reducing the amount of money it paid in claims, whether or not they were valid. When it adopted these recommendations, Allstate made a deliberate decision to start putting profits over policyholders. The company essentially uses a combination of lowball offers and hardball litigation. When policyholders file a claim, they are often offered an unjustifiably low payment for their injuries, generated by Allstate using secretive claim-evaluation software called Colossus. Those that accept the lowballed settlements are treated with “good hands” but may be left with less money than they need to cover medical bills and lost wages. Those that do not settle frequently get the “boxing gloves”: an aggressive litigation strategy that aims to deny the claim at any cost. Former Allstate employees call it the “three Ds”: deny, delay, and defend. One particular powerpoint slide McKinsey prepared for Allstate featured an alligator and the caption “sit and wait”—emphasizing that delaying claims will increase the likelihood that the claimant gives up.12 According to former Allstate agent Shannon Kmatz, this would make claims “so expensive and so timeconsuming that lawyers would start refusing to help clients.”13 Former Allstate adjusters say they were rewarded for keeping claims payments low, even if they had to deceive their customers. Adjusters who tried to deny fire claims by blaming arson were rewarded with portable fridges, according to former Allstate adjuster Jo Ann Katzman. “We were told to lie by our supervisors. It’s tough to look at people and know you’re lying.”14 Complaints filed against Allstate are greater than almost all of its major competitors, according to data collected by the NAIC.15 In Maryland, regulators imposed the largest fine in state history on Allstate for raising premiums and changing policies without notifying policyholders. Allstate ultimately paid $18.6 million to Maryland consumers for the violations.16 In Texas earlier this year, Allstate agreed to pay more than $70 million after insurance regulators found the company had been overcharging homeowners throughout the state.17 After Hurricane Katrina, the Louisiana Department of Insurance received more complaints against Allstate— 1,200—than any other insurance company, and nearly twice as many as the approximately 700 it received about State Farm—despite the fact that its rival had a bigger share of the homeowners market.18 Similarly, in 2003, a series of wildfires devastated Southern California, destroying over 2,000 homes near San Diego alone and killing 15 people. State insurance regulators received over 600 complaints about Allstate and other companies’ handling of claims.19 Allstate says the changes in claims resolution tactics were only about efficiency.20 However, the company’s former CEO, Jerry Choate, admitted in 1997 that the company had reduced payments and increased profit, and said, “the leverage is really on the claims side. If you don’t win there, I don’t care what you do on the front end. You’re not going to win.”21 For four years, Allstate refused to give up copies of the McKinsey documents, even when ordered to do so repeatedly by courts and state regulators. In court filings, the company described its refusal as “respectful civil disobedience.”22 In Florida, regulators finally lost their patience after Allstate executives arrived at a hearing without documents they had been subpoenaed to bring. Only after Allstate was suspended from writing new business did the company, in April 2008, finally agree to produce some 150,000 documents relating to its claim review practices.23 Still, some commentators believe many critical document were missing.
Allstate’s “boxing gloves” strategy boosted its bottom line. The amount Allstate paid out in claims dropped from 79 percent of its premium income in 1996 to just 58 percent ten years later.25 In auto claims, the payouts dropped from 63 percent to just 47 percent.26 Allstate saw $4.6 billion in profits in 2007, more than double the level of profits it experienced in the 1990s. In fact, the company is so awash in cash that it began buying back $15 billion worth of its own stock, despite the fact that the company was simultaneously threatening to reduce coverage of homeowners because of risk of weather-related losses.27 Despite its treatment of policyholders, Allstate’s recent corporate strategy has focused on identifying and retaining loyal customers, those who are more likely to stay with the company and not shop around. The target demographic, as former Allstate CEO Edward Liddy said, is “lifetime value customers who buy more products and stay with us for a longer period of time. That’s Nirvana for an insurance company.”28
Loyalty only runs one way, however. While Allstate focuses on customers who will stick with it for the long haul, the company is systematically withdrawing from entire markets. Allstate or its affiliates have stopped writing home insurance in Delaware, Connecticut, and California, as well as along the coasts of many states, including Maryland and Virginia.29 In Louisiana, Allstate has repeatedly tried to dump its policyholders. In 2007, the company tried to drop 5,000 customers just days after the expiration of an emergency rule preventing insurance companies from canceling customers hit by Katrina. Allstate dropped them for allegedly not showing intent to repair their properties. After an investigation by the Louisiana Insurance Department, Insurance Commissioner Jim Donelon said, “[A]t best, it was a very ill-conceived and sloppy inspection program. At worst, they wanted off of those properties.”30 Allstate also used an apparent loophole in the law by offering its policyholders a “coverage enhancement” which the company would later argue was a new policy, and thus exempt from non-renewal protection.31 In Florida, Allstate has dropped over 400,000 homeowners since 2004.32 The move has landed Allstate in trouble with regulators because the company appears to be keeping customers if they also have an auto insurance policy with Allstate. Florida law prohibits the sale of one type of insurance to a customer based on their purchase of another line of coverage.33 Allstate officials have acknowledged that most of the 95,000 customers nonrenewed in 2005 and 2006 were homeowners-only customers. The company ran afoul of regulators in New York for the same reason, and was forced to discontinue the practice.34 In California, while other major homeowner insurers, including State Farm and Farmers, agreed to cut rates, Allstate demanded double-digit rate increases in what the former insurance commissioner described as an “exit strategy.” John Garamendi, now the Lieutenant Governor, said, “[T]hey’ve said they want to get out of the homeowners business in a market that is competitive, healthy and profitable.”35 Consumer advocates have also complained that Allstate put an ambiguous provision in homeowners’ policies that may have deceived some policyholders into thinking they had coverage for wind damage when they did not. Socalled “anti-concurrent-causation” clauses state that wind
and rain damage—damage covered under the policy— is excluded if significant flood damage occurs as well. Therefore, those with policies covering wind and rain damage and “hurricane deductibles” still faced the prospect of learning, only after a catastrophic loss, that they had no coverage.36 In 2007, then U.S. Senator Trent Lott sponsored legislation requiring insurers provide “plain English” summaries of what was and what was not covered in order to stop this kind of abuse. “They don’t want you to know what you really have covered,” said Lott.37
10. Liberty Mutual
CEO: Edmund F. (Ted) Kelly 2005 compensation $27 million
Like Allstate and State Farm before it, Liberty Mutual hired consulting giant McKinsey & Co. to boost its bottom line. The McKinsey strategy relies on lowering the amounts paid in claims, no matter whether the claims were valid or not. By all accounts, Liberty Mutual has not become as notorious as its rivals for the deny, delay, and defend tactics that McKinsey encouraged. However, that has not stopped the company from leading the way in complaint rankings and stories of short-changed victims.171 In fact, Liberty Mutual is facing a glut of litigation from its own vendors who say the company’s cost-cutting has resulted in poor claims processing and a spike in lawsuits.172 Like several other big property casualty insurers, Liberty Mutual has also begun abandoning policyholders across the country. The company has pulled out of many states—not only hurricane susceptible states such as Florida and Louisiana, but also northern states such as Connecticut, Rhode Island, Maryland, Massachusetts, and much of New York. A 2007 New York Times article highlighted Liberty Mutual policyholders James and Ann Gray of Long Island. The Grays were “nonrenewed” by Liberty Mutual despite the fact that they lived 12 miles from the coast and had “been touched by rampaging waters only once, when the upstairs bathroom overflowed.” In fact, Liberty Mutual and its big name competitors have left more than 3 million homeowners stranded over the last few years.173 New York regulators chastised Liberty Mutual for tying nonrenewals to whether a policyholder had an auto policy or other coverage, against state law.174 Liberty Mutual has also gone where even its big property casualty rivals Allstate and State Farm have feared to tread by trying its hand at massive corporate fraud. While the likes of AIG, Zurich, and ACE settled charges that they colluded with broker Marsh & McLennan in a huge bidrigging fraud, Liberty Mutual remains the only insurance company that refuses to concede guilt. The fraud centered around fake bids that companies submitted to Marsh in order to garner artificially inflated rates. Liberty Mutual claims its business practices were lawful and that regulators’ settlement demands are “excessive.”175
The 96-year-old magazine, known for its revered writers and sophisticated audience, is being consumed by a labor dispute.
Writers for The New Yorker have been known to refer to the editor, David Remnick, as “Dad,” so there was something a little illicit about their decision to gather without him back in 2018 at a Windsor Terrace apartment.
Some 20 of the writers, many of them marquee names, were getting together to decide how to react to the surprise announcement that their less heralded colleagues — fact checkers, copy editors, web producers, social media editors — were forming a union and demanding raises.
The writers discussed whether they should follow their junior colleagues into the NewsGuild, and whether the magazine treated writers fairly.
George Packer broke with the magazine’s tight-lipped traditions by sharing details of his own deal with Condé Nast. He told his colleagues that after years of reporting from Iraq, he had requested and received health insurance before the birth of his first child. Other writers were shocked, according to several people who were there. Under The New Yorker’s structure, even some of the best-known writers are considered “contractors,” and their bosses had given them the impression that health insurance was not a possibility.
An organizer for the NewsGuild who was present, Nastaran Mohit, told the writers she had avoided involving them in the original organizing drive because she knew how close many of them were to management, and she was worried they’d snitch.
But she also said the NewsGuild believed the writers were misclassified as contractors, when they were really akin to full-time employees, and she laid out a path for them to join the union. She told them, two people in the room said, that the guild could protect them from being fired and could even defend them against misguided editorial choices, if, for example, an editor — she cited Arianna Huffington — suddenly wanted everyone to write about sleep.
What happened next was not exactly a scene out of “Norma Rae.” Emily Nussbaum, a television critic, said she would expect to be fired if she wasn’t doing a good job, according to two people there. Nobody was interested in a union rep coming between them and Mr. Remnick on editorial decisions.
Then Ben Taub, an investigative reporter, asked her why Ms. Mohit had told their unionizing colleagues that the NewsGuild was also organizing the writers. When she denied it, he theatrically produced a printed-out screenshot of a WhatsApp message that Ms. Mohit had sent to some 80 of the unionizing employees. In the message, a copy of which I obtained, Ms. Mohit said the union was “in communication” with the writers but could not “be open and public with the fact that we are organizing the staff writers.”
The writers in the room had been invited merely to a meeting to understand what the existing union drive meant for them, Mr. Taub said, and had no sense that they were secretly being organized. He said it was misleading.
“Bluntly, re: NewsGuild, what it comes down to for me is that I would never hire an agent who had lied to or about me,” Mr. Taub wrote to a WhatsApp group for staff writers after the incident. (The NewsGuild’s president, Susan DeCarava, said in response to questions about the exchange that it “does not comment on confidential organizing conversations.”)
The meeting’s host, Adam Davidson, had already been among the writers talking to Mr. Remnick about setting up a health care plan for writers. He summarized what he saw as the “consensus view” in another WhatsApp message to colleagues. (The contents of the writers’ group messages were shared with me on the condition I only quote people by name with their permission. Some of the material in this article is also drawn from reporting on this topic by my colleagues Noam Scheiber and Marc Tracy.)
“None of us want to do anything that could jeopardize the magazine we love. We don’t want so strong a union that mediocrity reigns and it’s impossible to get rid of poor performers. We actually kind of like the feeling that we need to continue to earn our place,” wrote Mr. Davidson, who is no longer a staff writer but still contributes to The New Yorker. “BUT, most of us would like to be able to get health insurance.”
The unionization effort has created an uncomfortable moment for the writers at The New Yorker, who have the kind of jobs and influence every journalist wants but few attain. It has set off reflections on their status and revealed the rare bond and unusual deference many of them feel toward Mr. Remnick.
About a month after the meeting at Mr. Davidson’s apartment, about 40 of the writers met in the community room at a West Village apartment building. The gathering was, many noted, probably the first time that so many of the magazine’s scattered staff members had ever been in one room, and someone invited the Magnum photographer Peter van Agtmael to document it. Jane Mayer came from Washington, and Lawrence Wright flew in from Austin, Texas. They sat in a big circle and, like the millennials only a few of them are, shared details of their own compensation arrangements.
The conversation made clear how inconsistent benefits and pay were among writers, and many left angry at Condé Nast over the opaque and uneven system. But they were also suspicious of the NewsGuild, and began a parallel set of meetings with its rival, the Writers Guild of America, East.
Neither effort has gained traction.
Many of the writers, it seemed, valued their independent contractor status. Some, led by Tad Friend and Jia Tolentino, used the threat of a union — and the suggestion that Condé Nast had illegally classified many of them as contractors, which the company disputes — to set up a process by which some writers could become employees with health benefits. A deal was finalized late last month.
And that has left the most prominent writers mainly watching from the sidelines in recent weeks as a bitter labor dispute has consumed their beloved magazine. The New Yorker is now working out the final details of a contract, and people on both sides appeared optimistic they would reach an agreement this week. They’ve agreed on a $55,000 starting salary and are hashing out issues like caps on potential health care cost increases, people familiar with the talks said — even as the Guild threatens a strike.
Many writers have tweeted in support. But no writers turned up at a protest outside Condé Nast headquarters on May Day, and none appeared to be present at a march outside the home of Condé Nast’s global chief content officer, Anna Wintour, on June 8.
The conflict has seized the attention of the industry not just because of the employees’ glee at holding the brand hostage in public, but also because it highlights big questions facing contemporary media. How much power can employers exercise over their employees? Are junior employees apprentices or a permanent creative underclass? And as the labor movement seeks to level the playing field, will the stars go along?
It’s all particularly personal at The New Yorker, where the campaign has pitted a culture built on personal relationships and deep trust against a group of employees who reject the idea that they should be subject to the whims of any boss, no matter how benign.
The easiest-to-understand element of the dispute involves the wages of the production employees, the group that includes everyone from fact checkers to social media editors. Some salaries start as low as $42,000 a year, and remain under $60,000 after 20 years on the job.
But other tensions revolve around the sense that the junior jobs only rarely offer promotions into the ranks of writers, and no clear career path.
Neither of these issues is new. In 1976, a group of employees got fed up with flat wages and, among other things, a 50 percent cut to the magazine’s annual psychiatric benefit, and brought in the union (then the Newspaper Guild) to set things right. The editor, William Shawn, responded with pained, elegant letters, warning that collective bargaining would undermine the “friendly, gentle, free, informal, democratic atmosphere” that made The New Yorker special. The employees ultimately backed down, rejecting the notion of unionism for what seemed in part to be cultural reasons.
An editor there, Daniel Menaker, wrote years later that he was “embarrassed about the ineffectuality and yes, ordinariness of the Guild people we’d come in contact with,” but also that Mr. Shawn’s conduct had been revealing — a classic case of liberals “turning to the right when the capitalist chips were down — just as I had been told, from my childhood on, liberals usually do.”
The New Yorker writer Janet Malcolm was asked during a libel case how compensation was set. “By the whim of the editor,” she replied.
These days, however, the NewsGuild has the cultural wind at its back. A labor movement revival began when Gawker employees joined the W.G.A. in 2015 and has continued apace. There’s been nothing like it since the 1930s. (I’ve had a front-row seat to that and continue to at The New York Times, and wrote about the trend last year.)
And unlike organizers in the 1930s, the NewsGuild has social media. It never rains on a Twitter picket line. Writers who are skeptical of the union’s tactics — some told me they object to its confrontational social media style — have bitten their tongues or deleted critical tweets. In one recent Zoom call, writers even complained to Mr. Remnick of their fears of being bullied on Twitter if they diverge from union talking points.
And underlying much of the 2021 labor tensions are political tensions. The younger generation of employees is to the left of its elders on issues of substance. The New Yorker’s union, for instance, tweeted and then deleted its “solidarity with Palestinians from the river to the sea,” a phrase that some interpret as threatening violence.
Virtually all of The New Yorker writers I spoke to said they supported the union’s core economic goals, and believed the junior staff members deserve pay increases. The union includes 120 people and there are about the same number of staff and contributing writers. Many, including Ms. Nussbaum and Ms. Mayer, have spoken out in favor of the union’s current posture. But some also shun its blunt and adversarial language.
Some of the writers are also worried about the impact of a strike. On one recent Zoom call with union leaders, Mr. Wright, a former Teamster and longtime W.G.A. member, warned that a strike could last months and do immense damage.
But many writers also see what The New Yorker offers as a good deal: a prestigious place to publish that allows them to retain the rights to their work. It’s also a gateway into the real money — books, movies, speaking gigs or other opportunities in the broadening economic landscape for brand-name writers. Those opportunities now also include newsletter platforms like Substack, and a new start-up called Puck, a digital magazine in which star writers get a cut of the subscription business and a share of the company.
That dynamic poses a threat to both traditional, top-down media institutions and organized labor.
While the union won headlines by marching to Ms. Wintour’s house, which was guarded, disappointingly, by two low-key men in shapeless cotton shirts, Ms. Wintour has no real involvement in The New Yorker. Mr. Remnick reports directly to Condé Nast’s chief executive. He’s in a strong position. The magazine was once a charity case among flush glossies, but its subscription business, which boomed in the Trump years, has given its editor unique leverage: The New Yorker avoided companywide layoffs last year, and has also been left out of the rest of Condé Nast’s painful drive toward centralization.
Mr. Remnick declined to be interviewed, but said in an email that his two goals were “that we achieve our highest editorial ambitions and that we work together with fairness,” adding, “I’ll be glad to see us sign a foundational contract that memorializes our commitment to both.”
Many of the writers I spoke to said they saw Mr. Remnick as caught between an uncompromising union and an ailing parent company. Union activists tend to be less charitable, and feel he’s trying to have it both ways. Gili Ostfield, a production employee and union member, pointedly told HuffPost last week that if The New Yorker tries to print a diminished magazine without striking employees, it will be “a stain on David Remnick’s reputation.”
But the support Mr. Remnick retains among the signature writers is deep. Many talk of him as an adored, slightly feared and somewhat distant father whose approval they always seek. They also have deep confidence in his ability to make their work better.
The moment, of course, seems all the stranger, in that much of the conflict is playing out virtually, while everyone is working remotely.
Mr. Remnick has told some writers that he is simply eager for the conflict to be resolved. The editor, who is 62, has also said he doesn’t plan to follow the example of William Shawn, who ran the magazine until he was nearly 80 and the institution had become a kind of museum of itself.
He has tried to be reassuring, even as the prospect of putting out the print magazine without editorial staff members looms. No matter what happens, Mr. Remnick told writers on one recent Zoom call, he would not ask them to cross virtual picket lines.
Many consumers have been forced to pay for their own lifesaving treatment under shorter-term health plans that have seen enrollment jumps since the Trump administration relaxed restrictions on them, according to a report released Thursday by House Democrats on the Energy and Commerce Committee.
The short-term plans don’t have to comply with the 2010 Affordable Care Act, so they often exclude coverage for pre-existing conditions and charge women more for the same coverage, the yearlong investigation found.
These plans have proliferated since August 2018 when the Department of Health and Human Services issued a rule expanding access, one of the most significant steps to undercut the ACA after GOP lawmakers in Congress failed to repeal it in 2017.
The administration has repeatedly said the plans give consumers more choices and promote market competition, and that they are a boon for people who can’t afford premiums for ACA-compliant plans.
“President Trump has brought more affordable insurance options back to the market, including through allowing the renewal of short-term plans,” an HHS spokeswoman said. “We’ve been abundantly clear that these plans aren’t for everyone, but short-term plans can be an affordable option for millions of men and women left behind by the Affordable Care Act.”
The investigation of 14 companies that sell or help people buy short-term health plans was launched in March 2019. They included UnitedHealth Group Inc. and Anthem Inc. The committee included nine of the major sellers of such plans in the review.
UnitedHealth and Anthem didn’t immediately respond to requests for comment.
The report found an increase of 27%, or more than 600,000 individuals, enrolled in short-term plans during the 2019 plan year compared with the prior plan year, for a total of about three million consumers enrolled.
Enrollment by brokers increased by approximately 60% in December 2018, and by more than 120% in January 2019, compared with previous months. The increases during those months suggests that these plans are benefiting from the ACA’s open-enrollment season, when people can sign up for or re-enroll in insurance plans.
In its review of consumer complaints against insurers selling short-term plans, the committee reported that it found numerous examples of patients who were denied coverage for treatment, leaving consumers on the hook for hundreds of thousands of dollars.
“Coverage limitations vary greatly from plan to plan and insurer to insurer, and limitations are not made clear in marketing materials, making it extremely difficult for consumers to understand what they are purchasing,” according to a summary of the report.
Some plans impose maximums of $500 per policy period for doctor’s office visits, $1,000 a day for hospitalization, $500 per visit for emergency services and $2,500 per surgery for surgeon service, according to the report.
The committee’s investigation found that, on average, less than half of the premium dollars collected from consumers are spent on medical care, unlike ACA-compliant individual market plans, which are required to spend at least 80% of all premium dollars on health care. The rest of the money generally goes to administrative, overhead and marketing costs.
“These plans are a bad deal for consumers and oftentimes leave patients saddled with thousands of dollars in medical debt,” said Energy and Commerce Chair Frank Pallone (D. N.J.), and subcommittee chairwomen Anna Eshoo (D., Calif.) and Diana DeGette (D., Col.) in a statement.
HHS had estimated that, in 2019, as many as 200,000 people previously enrolled in health coverage on the ACA’s exchanges would buy plans exempt from the health law’s requirements. About 8.5 million people signed up for health plans on the ACA exchanges in 2019.
Many of these plans originally were designed decades ago for limited coverage when people were between jobs, for up to 90 days. The administration’s rule change meant the plans could be extended for a total coverage period of three years.
Supporters of the short-term plans say issuers are required to prominently display in the contract and application materials that the plans don’t have to comply with ACA requirements. They say the plans are about a third of the cost of ACA plans.
Short-term health plans are particularly well-suited to provide affordable coverage for people dislocated by the economic shock of the pandemic, according to an April article published by the Galen Institute, a public-policy free-market research organization.
“Short-term plans are available in many states for as little as 3% of the expanded unemployment benefit and are an important option for many people who have a temporary need for health insurance,” according to the article by Casey Mulligan, who was a chief economist at the White House Council of Economic Advisers under President Trump; Brian Blase, who was on the National Economic Council during the Trump administration; and Douglas Badger, who was with the NEC under George W. Bush.
Short-term plans may reduce the number of uninsured Americans by 200,000 people to 3.7 million people, according to a May 2019 report by Chris Pope, a senior fellow at the Manhattan Institute.
“Nearly 98% of people with job-based health insurance before the pandemic still have job-based health insurance. For those who lost coverage and for previously uninsured people, short-term plans provide valuable financial protection and much better doctor access than most ACA plans,” Mr. Blase said in an interview.
But the committee review found it is common industry practice for short-term plans to engage in administrative processes to avoid paying medical claims. Through a process some have described as “post-claims underwriting,” insurers challenge consumers whose claims may actually be covered by the terms of the plan by requiring them to submit extensive medical documentation often dating back many years to prove their condition wasn’t pre-existing.
Corrections & Amplifications
Brian Blase and Douglas Badger were on the National Economic Council. An earlier version of this article incorrectly said they had been on the White House Council of Economic Advisers. (Corrected on June 25)
Write to Stephanie Armour at email@example.com
MEDICAL EXPENSES AND HEALTH INSURANCE PREMIUMS
You’re allowed a distribution to pay for unreimbursed medical expenses that exceed 7.5% of your adjusted gross income, or to pay for health insurance premiums for you, your spouse or children when you are unemployed.
A couple of things to note here: Traditional IRA money can be used to pay for the portion of the medical expenses that tops 7.5% of your adjusted gross income, meaning if you make $100,000 and have $15,000 in unreimbursed medical costs, you can use IRA assets to pay for $7,500 of it. For the health insurance during unemployment exception, you must take the distributions no more than 60 days after you’ve gotten a new job.
Why the Coronavirus Could Threaten the U.S. Economy Even More Than China’s
If people stop traveling and going to the dentist, the gym or even March Madness basketball games, the impact could be enormous, an economist says.
After a string of deaths, some heart-stopping plunges in the stock market and an emergency rate cut by the Federal Reserve, there is reason to be concerned about the ultimate economic impact of the coronavirus in the United States.
The first place to look for answers is China, where the virus has spread most widely. The news has been grim with deaths, rolling quarantines and the economy’s seeming to flat line, though the number of new cases has begun to fall.
Advanced economies like the United States are hardly immune to these effects. To the contrary, a broad outbreak of the disease in them could be even worse for their economies than in China. That is because face-to-face service industries — the kind of businesses that go into a tailspin when fearful people withdraw from one another — tend to dominate economies in high-income countries more than they do in China. If people stay home from school, stop traveling and don’t go to sporting events, the gym or the dentist, the economic consequence would be worse.
In a sense, this is the economic equivalent of the virus’s varied health effects. Just as the disease poses a particular threat to older patients, it could be especially dangerous for more mature economies.
This is not to minimize the indiscriminate and widespread damage that the disease has caused by disrupting the global supply chain. With shortages of everything from auto parts to generic medicines and production delays in things like iPhones and Diet Coke, a great deal of pain is coming from the closing of Chinese factories. That proliferating damage has central banks and financial analysts talking about a global recession in the coming months.
Nor is it to discount the possibility that the United States will be spared the worst effects. Scientific and public health efforts might limit the spread of the virus or quickly find a treatment or vaccine. The warmer weather of summer might slow the spread of the coronavirus as it usually does with the seasonal flu. Many things could prevent an outbreak as large as the one in China.
But it is to say that an equivalent outbreak in the United States might easily have a worse economic impact.
As a baseline, several factors work against the United States. China’s authoritarian government can quarantine entire cities or order people off the streets in a way that would be hard to imagine in America, presumably giving China an advantage in slowing the spread of the disease. In addition, a large share of American workers lack paid sick days and millions lack health care coverage, so people may be less likely to stay home or to get proper medical care. And 41 percent of China’s population lives outside urban areas, more than twice the share in the United States. Diseases generally spread faster in urban areas.
Beyond those issues, however, is a fundamental difference in economic structure: When people pull back from interacting with others because of their fear of disease, the things they stop doing will frequently affect much bigger industries in the United States.
Consider travel. The average American takes three flights a year; the average Chinese person less than half a flight. And the epidemiological disaster of the Diamond Princess has persuaded many people to hold off on cruises. That cruise ship stigma alone potentially affects about 3.5 percent of the United States, which has about 11.5 million passengers each year, compared with only 0.17 percent of China, which has about 2.3 million passengers.
People may stop attending American sporting events. There have even been calls for the N.C.A.A. to play its March Madness college basketball tournament without an audience. But sports is a huge business in the United States. People spend upward of 10 times as much on sporting events as they do in China.
And if 60 million Americans stop spending $19 billion a year on gyms, that would be a much a bigger deal than if the 6.6 million gym members in China stopped spending the $6 billion they devote to gyms now.
That’s just a start. Who wants to go to the dentist or the hospital during an outbreak if a visit isn’t necessary? Yet health spending is 17 percent of the U.S. economy — more than triple the proportion spent in China.
Of course, not every service sector is so much larger than in China. Retail and restaurants, for example, have comparable shares of gross domestic product in both countries.
But over all, the United States is substantially more reliant on services than China is. And, on the flip side, agriculture, a sector not noted for day-to-day social interaction and so potentially less harmed by social withdrawal, is a 10 times larger share of China’s economy than it is in the United States.
So for all the talk about the global “supply shock” set off by the coronavirus outbreak and its impact on supply chains, we may have more to fear from an old-fashioned “demand shock” that emerges when everyone simply stays home. A major coronavirus epidemic in the United States might be like a big snowstorm that shuts down most economic activity and social interaction only until the snow is cleared away. But the coronavirus could be a “Snowmaggedon-style storm” that hits the whole country and lasts for months.
So go wash your hands for the full 20 seconds. And show some more sympathy for the folks quarantined in China and elsewhere. Because if it spreads rapidly in the United States, it could be a heck of a lot worse.
A point-by-point exploration of their arguments would exceed the space allotted for this column by several thousand inches. But I think one can sum up the libertarian approach to Warren with a single question: How big a problem do you think billionaires, and the mega-successful corporations they helm, pose to the average American? Actually, come to think of it, I think that’s about how you’d sum up the question of Warren from any angle.
Which is why this debate ultimately matters to a lot more people than just some cranky libertarians: It speaks directly to a whole lot of young people who see that the economy doesn’t work for them the way it did for their parents and grandparents, and therefore conclude that somewhere along the way, the people it is working for — the barons of finance, the giants of Silicon Valley — must have rigged the system in their favor.
To be fair, they’re not entirely wrong. As Adam Smith once wrote, “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” Bankers and tech executives very much included. So I find myself nodding in agreement with Wilkinson — and, by extension, with the progressive base of the Democratic Party — when he says: “Warren’s general diagnosis of the problem — it’s a rigged system of anticompetitive rent-seeking enabled by insufficiently democratic and representative political institutions — is broadly similar to my own.”
Yet they’re not entirely right, either. Are big corporations, or billionaires, or banks, or tech giants, or health insurers and pharmaceutical firms — to name some of Warren’s favorite targets — really the reason that young people are struggling
Sure, Warren may be eager to sic her Consumer Financial Protection Bureau on your mortgage lender if you fall afoul of some obscure clause, but that’s not the problem for most Americans. They’re much more likely to struggle with finding affordable housing in prosperous cities. In fairness, Warren does have a plan to ease the zoning regulations that cause the shortage — but for some reason she rarely talks about it on the campaign trail, possibly because it’s constitutionally dubious, but more likely because it would alienate her affluent suburban base.
Similarly, Warren is eager to forgive student loans — a $1.6 trillion transfer to some of the most affluent members of society — but not to attack degree creep, which has walled off most of the best jobs for those who hold a bachelor of arts while enriching a lot of colleges. She targets insurers and drugmakers, but not the hospitals and medical workers who drive most of our health-care costs.
Too many of her proposals are like this; they focus on corporate villains or billionaires while ignoring the much broader class of people that Richard Reeves of the Brookings Institution dubbed the “Dream Hoarders” — the well-educated upper-middle-class people who are desperate to pass their privilege onto their kids, and are unhappy about the steadily mounting cost of doing so. They’re Warren’s base.
Unfortunately, the Dream Hoarders — and I include myself in their number — are a much bigger problem for the rest of America than the billionaires whose wealth Warren promises to expropriate. Those billionaires got that way by building companies that disrupted cozy local monopolies, and they fund coding camps for high-school dropouts; Dream Hoarders
- protect their professional licensing regimes and
- insist on ever more extensive and expensive educations in the people they hire. Dream Hoarders also
- pull every lever to keep their own housing prices high — and poorer kids out of their schools — while
- using their wealth to carefully guide their children over the hurdles they’ve erected.
Which may be why the best predictor of a neighborhood with a low degree of income mobility is not the gap between the top 1 percent and everyone else — the gap that Warren focuses on with all her talk of taxing billionaires — but
If you really want to unrig the system, you need to focus less on a handful of billionaires than on the iron grip that the Dream Hoarders have on America’s most powerful institutions — including, to all appearances, Elizabeth Warren’s campaign.
Democrats shouldn’t put themselves in a fiscal straitjacket.On Thursday, the best House speaker of modern times reclaimed her gavel, replacing one of the worst. It has taken the news media a very long time to appreciate the greatness of Nancy Pelosi, who saved Social Security from privatization, then was instrumental in gaining health insurance for 20 million Americans. And the media are still having a hard time facing up to the phoniness of their darling Paul Ryan, who, by the way, left office with a 12 percent favorable rating.
There’s every reason to expect that Pelosi will once again be highly effective. But some progressive Democrats object to one of her initial moves — and on the economics, and probably the politics, the critics are right.
.. The issue in question is “paygo,” a rule requiring that increases in spending be matched by offsetting tax increases or cuts elsewhere.
You can argue that as a practical matter, the rule won’t matter much if at all. On one side, paygo is the law, whether Democrats put it in their internal rules or not. On the other side, the law can fairly easily be waived, as happened after the G.O.P.’s huge 2017 tax cut was enacted.
But adopting the rule was a signal of Democratic priorities — a statement that the party is deeply concerned about budget deficits and willing to cramp its other goals to address that concern. Is that a signal the party should really be sending?
.. Furthermore, there are things the government should be spending money on even when jobs are plentiful — things like fixing our deteriorating infrastructure and helping children get education, health care and adequate nutrition. Such spending has big long-run payoffs, even in purely monetary terms.
Meanwhile, the federal government can borrow money very cheaply — the interest rate on inflation-protected 10-year bonds is only about 1 percent. These low borrowing costs, in turn, reflect what seems to be a persistent savings glut — that is, the private sector wants to save more than it’s willing to invest, even with very low interest rates.
Or consider what happened after Democrats enacted the Affordable Care Act, going to great lengths to pay for the additional benefits with tax increases and spending cuts. A majority of voters still believed that it increased the deficit. Reality doesn’t seem to matter.
.. Anyway, the truth is that while voters may claim to care about the deficit, hardly any of them really do. For example, does anyone still believe that the Tea Party uprising was a protest against deficits? From the beginning, it was basically about race — about the government spending money to help Those People. And that’s true of a lot of what pretends to be fiscal conservatism.
.. In fact, even the deficit scolds who played such a big role in Beltway discourse during the Obama years seem oddly selective in their concerns about red ink. After all those proclamations that fiscal doom was coming any day now unless we cut spending on Social Security and Medicare, it’s remarkable how muted their response has been to a huge, budget-busting tax cut. It’s almost as if their real goal was shrinking social programs, not limiting national debt.
.. So am I saying that Democrats should completely ignore budget deficits? No; if and when they’re ready to move on things like some form of Medicare for All, the sums will be so large that asking how they’ll be paid for will be crucial.