Friday, April 30, 2010
Chrysler leading in car industry recovery drama
LOOKING AHEAD by Wally Dobelis
Chrysler leading in car industry recovery drama
Recent weeks’ news was incredible, and I could not stop reading the NYTimes, more exciting than a tabloid. There was the portrait of waiflike, Audrey Hepburn look-alike, internist Dr Mazoltuv Borukhova, sentenced to life without parole for hiring her cousin to kill her dentist husband, who had won temporary custody over their daughter. Then, two days of pictures of President Obama shaking hands with Hugo Chavez and listening to Latin dictators lambaste the US, for which he was shamed by the WSJ and by Patrick Buchanan, normally an understanding observer, in Human Events. The defenders of America may be forgetting that Barack Hussein Obama was doing his job, as he did in Turkey and Europe, the job that he may be the only person capable of doing on this Planet Earth – attempting to bring everybody together for economic recovery and peace.
There is one set of continuation stories this reader has been pursuing step by step, in guessing the eventual outcome, the collapse of the deeply indebted US automotive industry. The Chrysler repayment negotiations involve the Treasury (which has already loaned them $4B, and will loan a further $6B if the outcome of the negotiations is satisfactory), the company owner (Cerberus Capital Management), the bank lenders, UAW, Canadian CAW and a potential rescuer, Fiat of Italy. This day-to-day drama is slowly reaching its deadline, April 30. It is a day beyond my deadline, so we will have to leave the issue guessing at the outcome.
Washington obviously does not want a Chrysler bankruptcy, which would shut off essential Chrysler parts used by all US-, based car manufacturers, and has given $3.5 B to Chrysler and G.M., to support their part makers.
As Chrysler itself, the UAW, to whose health care trust Chrysler owes $10.6B, will accept repayment, half in company stock, without further concessions. UAW president Ron Gettelfinger knows that Chrysler will have to contribute $5B cash over next 10 years, a stretch. Gettelfinger has thousands of retirees, their spouses and other voters in the affected communities to back him in objecting to a bankruptcy solution that would decimate the health trust.
But other creditors, 45 banks and funds led by JPMorganChase and Citigroup, whom Chrysler owes $6.9B, might want bankruptcy, which puts them at the head of the creditors’ line. The Treasury is asking them for a major concession, to accept 15 cents on the dollar. Their counteroffer is to concede 35 cents, in exchange for 40% of the restructured company’s stock. The sides must reach a decision by April 30, or the company goes to bankruptcy court, with liquidation a prospect. The UAW counts on its 26,000 hourly rated workers, 86,000 retirees and living spouses, and a total Chrysler-based membership of 255,000 – a figure that seems a magnitude too large, though the Times also mentions a G.M. membership of 450,000.
Another issue is Chrysler’s potential agreement with Fiat, whereby for 20% interest in the company the Italians will provide small car design and technology but no cash. The idea is to get Chrysler back into the market with small cars offering high gas mileage, valuable in the expectation that fuel costs will go up. More issues involve the fate of the Canadian plants with 8,000 CAW workers, who are not tied to UAW and US elections. The Canadians appear to have agreed to reduce costs.
As of four days before the deadline, the UAW board claims to have improved its offer and will put it to membership vote on Wednesday before the Thursday, April 30 deadline. Unofficially, they will accept 55%of the reconstituted company’s stock for $5M of the debt, and expect a repayment of $8.8B by 2023, at 9% annual interest. To this reader, the debt has inexplicably grown to $13B+, but so be it, let this puzzle unravel later.
The stock situation is more complex, and if it were not for Daimler, the German owner of Chrysler from 1999 to 2007, at the last minute giving up its remaining 19.9% share in Chrysler, plus $600M to the UAW pension trust, to wash their hands of the deal, there would not be enough shares for all players. As is, the UAW’s 55%, plus 20% for Fiat, 10% to be retained by Treasury, leaves only 15% available to repay the banks.
The latest Treasury offer to the banks is to take 22 cents to the dollar, or $1.5B for the $6.9B owed to them, plus stock shares. The threat has been, from the getgo, that the banks, with such a meager offer would opt for bankruptcy court awards giving them more than the Treasury’s cash. Was the government’s reward of $3.5B enough to protect the US car makers from a disruption in parts flow, if bankruptcy were to ensue? Will the UAW risk the uncertainties of the union benefits and healthcare falling to the rehabilitators? With no offer from the 45 lender consortium, and barring a last minute deus ex machina, it appears that a bad conclusion is unavoidable.
Chrysler leading in car industry recovery drama
LOOKING AHEAD by Wally Dobelis
Recent weeks’ news was incredible, and I could not stop reading the NYTimes, more exciting than a tabloid. There was the portrait of waiflike, Audrey Hepburn look-alike, internist Dr Mazoltuv Borukhova, sentenced to life without parole for hiring her cousin to kill her dentist husband, who had won temporary custody over their daughter. Then, two days of pictures of President Obama shaking hands with Hugo Chavez and listening to Latin dictators lambaste the US, for which he was shamed by the WSJ and by Patrick Buchanan, normally an understanding observer, in Human Events. The defenders of America may be forgetting that Barack Hussein Obama was doing his job, as he did in Turkey and Europe, the job that he may be the only person capable of doing on this Planet Earth – attempting to bring everybody together for economic recovery and peace.
There is one set of continuation stories this reader has been pursuing step by step, in guessing the eventual outcome, the collapse of the deeply indebted US automotive industry. The Chrysler repayment negotiations involve the Treasury (which has already loaned them $4B, and will loan a further $6B if the outcome of the negotiations is satisfactory), the company owner (Cerberus Capital Management), the bank lenders, UAW, Canadian CAW and a potential rescuer, Fiat of Italy. This day-to-day drama is slowly reaching its deadline, April 30. It is a day beyond my deadline, so we will have to leave the issue guessing at the outcome.
Washington obviously does not want a Chrysler bankruptcy, which would shut off essential Chrysler parts used by all US-, based car manufacturers, and has given $3.5 B to Chrysler and G.M., to support their part makers.
As Chrysler itself, the UAW, to whose health care trust Chrysler owes $10.6B, will accept repayment, half in company stock, without further concessions. UAW president Ron Gettelfinger knows that Chrysler will have to contribute $5B cash over next 10 years, a stretch. Gettelfinger has thousands of retirees, their spouses and other voters in the affected communities to back him in objecting to a bankruptcy solution that would decimate the health trust.
But other creditors, 45 banks and funds led by JPMorganChase and Citigroup, whom Chrysler owes $6.9B, might want bankruptcy, which puts them at the head of the creditors’ line. The Treasury is asking them for a major concession, to accept 15 cents on the dollar. Their counteroffer is to concede 35 cents, in exchange for 40% of the restructured company’s stock. The sides must reach a decision by April 30, or the company goes to bankruptcy court, with liquidation a prospect. The UAW counts on its 26,000 hourly rated workers, 86,000 retirees and living spouses, and a total Chrysler-based membership of 255,000 – a figure that seems a magnitude too large, though the Times also mentions a G.M. membership of 450,000.
Another issue is Chrysler’s potential agreement with Fiat, whereby for 20% interest in the company the Italians will provide small car design and technology but no cash. The idea is to get Chrysler back into the market with small cars offering high gas mileage, valuable in the expectation that fuel costs will go up. More issues involve the fate of the Canadian plants with 8,000 CAW workers, who are not tied to UAW and US elections. The Canadians appear to have agreed to reduce costs.
As of four days before the deadline, the UAW board claims to have improved its offer and will put it to membership vote on Wednesday before the Thursday, April 30 deadline. Unofficially, they will accept 55%of the reconstituted company’s stock for $5M of the debt, and expect a repayment of $8.8B by 2023, at 9% annual interest. To this reader, the debt has inexplicably grown to $13B+, but so be it, let this puzzle unravel later.
The stock situation is more complex, and if it were not for Daimler, the German owner of Chrysler from 1999 to 2007, at the last minute giving up its remaining 19.9% share in Chrysler, plus $600M to the UAW pension trust, to wash their hands of the deal, there would not be enough shares for all players. As is, the UAW’s 55%, plus 20% for Fiat, 10% to be retained by Treasury, leaves only 15% available to repay the banks.
The latest Treasury offer to the banks is to take 22 cents to the dollar, or $1.5B for the $6.9B owed to them, plus stock shares. The threat has been, from the getgo, that the banks, with such a meager offer would opt for bankruptcy court awards giving them more than the Treasury’s cash. Was the government’s reward of $3.5B enough to protect the US car makers from a disruption in parts flow, if bankruptcy were to ensue? Will the UAW risk the uncertainties of the union benefits and healthcare falling to the rehabilitators? With no offer from the 45 lender consortium, and barring a last minute deus ex machina, it appears that a bad conclusion is unavoidable.
Recent weeks’ news was incredible, and I could not stop reading the NYTimes, more exciting than a tabloid. There was the portrait of waiflike, Audrey Hepburn look-alike, internist Dr Mazoltuv Borukhova, sentenced to life without parole for hiring her cousin to kill her dentist husband, who had won temporary custody over their daughter. Then, two days of pictures of President Obama shaking hands with Hugo Chavez and listening to Latin dictators lambaste the US, for which he was shamed by the WSJ and by Patrick Buchanan, normally an understanding observer, in Human Events. The defenders of America may be forgetting that Barack Hussein Obama was doing his job, as he did in Turkey and Europe, the job that he may be the only person capable of doing on this Planet Earth – attempting to bring everybody together for economic recovery and peace.
There is one set of continuation stories this reader has been pursuing step by step, in guessing the eventual outcome, the collapse of the deeply indebted US automotive industry. The Chrysler repayment negotiations involve the Treasury (which has already loaned them $4B, and will loan a further $6B if the outcome of the negotiations is satisfactory), the company owner (Cerberus Capital Management), the bank lenders, UAW, Canadian CAW and a potential rescuer, Fiat of Italy. This day-to-day drama is slowly reaching its deadline, April 30. It is a day beyond my deadline, so we will have to leave the issue guessing at the outcome.
Washington obviously does not want a Chrysler bankruptcy, which would shut off essential Chrysler parts used by all US-, based car manufacturers, and has given $3.5 B to Chrysler and G.M., to support their part makers.
As Chrysler itself, the UAW, to whose health care trust Chrysler owes $10.6B, will accept repayment, half in company stock, without further concessions. UAW president Ron Gettelfinger knows that Chrysler will have to contribute $5B cash over next 10 years, a stretch. Gettelfinger has thousands of retirees, their spouses and other voters in the affected communities to back him in objecting to a bankruptcy solution that would decimate the health trust.
But other creditors, 45 banks and funds led by JPMorganChase and Citigroup, whom Chrysler owes $6.9B, might want bankruptcy, which puts them at the head of the creditors’ line. The Treasury is asking them for a major concession, to accept 15 cents on the dollar. Their counteroffer is to concede 35 cents, in exchange for 40% of the restructured company’s stock. The sides must reach a decision by April 30, or the company goes to bankruptcy court, with liquidation a prospect. The UAW counts on its 26,000 hourly rated workers, 86,000 retirees and living spouses, and a total Chrysler-based membership of 255,000 – a figure that seems a magnitude too large, though the Times also mentions a G.M. membership of 450,000.
Another issue is Chrysler’s potential agreement with Fiat, whereby for 20% interest in the company the Italians will provide small car design and technology but no cash. The idea is to get Chrysler back into the market with small cars offering high gas mileage, valuable in the expectation that fuel costs will go up. More issues involve the fate of the Canadian plants with 8,000 CAW workers, who are not tied to UAW and US elections. The Canadians appear to have agreed to reduce costs.
As of four days before the deadline, the UAW board claims to have improved its offer and will put it to membership vote on Wednesday before the Thursday, April 30 deadline. Unofficially, they will accept 55%of the reconstituted company’s stock for $5M of the debt, and expect a repayment of $8.8B by 2023, at 9% annual interest. To this reader, the debt has inexplicably grown to $13B+, but so be it, let this puzzle unravel later.
The stock situation is more complex, and if it were not for Daimler, the German owner of Chrysler from 1999 to 2007, at the last minute giving up its remaining 19.9% share in Chrysler, plus $600M to the UAW pension trust, to wash their hands of the deal, there would not be enough shares for all players. As is, the UAW’s 55%, plus 20% for Fiat, 10% to be retained by Treasury, leaves only 15% available to repay the banks.
The latest Treasury offer to the banks is to take 22 cents to the dollar, or $1.5B for the $6.9B owed to them, plus stock shares. The threat has been, from the getgo, that the banks, with such a meager offer would opt for bankruptcy court awards giving them more than the Treasury’s cash. Was the government’s reward of $3.5B enough to protect the US car makers from a disruption in parts flow, if bankruptcy were to ensue? Will the UAW risk the uncertainties of the union benefits and healthcare falling to the rehabilitators? With no offer from the 45 lender consortium, and barring a last minute deus ex machina, it appears that a bad conclusion is unavoidable.
Friday, April 23, 2010
Preservationists have problems in NYC; the Block Beautiful reviewed
LOOKING AHEAD by Wally Dobelis
The neighborhood tragedy that the closing of the 161 years old St. Vincent’s Hospital represents finds little response in the media. Are we so inured by hospital closings that we don’t care? Is there a hope of a last minute white knight? Is a multi billionaire going to jump in and rescue the $700M debt (now grown to $1B)? As to the preservationists who sued to stop the proposed $300M sale of the adjoining O’Toole and other properties to Rudin that might have stopped the hospital’s bankruptcy, are they really winning, or do they realize that the liquidators will demolish the entire old neighborhood? As of the moment, the hospital will go down, 3,500 pink slips have been issued and Beth Israel and its Phillips Ambulatory unit, Bellevue and Roosevelt Hospitals are bracing to accept the overload of the poor patients, whose free care was at the root of St. Vincent’s bankruptcy that started in 2005 at $1.1B, was liquidated when the debt was reduced to $700M and resumed when it was found to be back at $1B. Gov Paterson tried to connect St. Vincent’s to such potential rescuers as Continuum Partnership (Beth Israel, Roosevelt, and St. Luke’s) and Mount Sinai Medical Center, to no avail.
Speaking of preservationists, they are not succeeding very well. The former Church of Holy Communion, lately the Limelight, in the Ladies’ Mile Historic district, was sold to a developer. When the trees on the property were cut in one fell swoop, protesters at the Landmarks Preservation Commission found out that the new owner had properly filed a request, based on a report from their arborist, who found that all the trees were diseased and should be removed. This information was not disseminated, and when the preservationists found out, it was too late for the trees.
Another tentative failure, the attempt to landmark the old Tammany Hall headquarters on East 17th Street, corner Union Square. It is owned by Liberty Theatres, who have been given a signed standstill agreement by the Landmarks Preservation Commission, meaning that landmarking will not be pursued, provided the theatre people will not alter the façade and other distinctive features. When the preservationists tried to check further, as interested parties who have been pursuing the designation since 1985, they had to follow the FOIL route to find that there are some 12 standstill agreements issued since 1999, applicable to properties throughout the city.
Which brings us to the Frederick J. Sterner (1862-1939) renovation on Block Beautiful, 139 East 19th Street, his first purchase and residence on Block Beautiful. Finding neglect on the block, he bought and rebuilt a number of the brownstones, beautifying the neighborhood in his imaginative fairyland style, with light pastel tinted stucco, Mediterranean Arts & Crafts tile work, removing high stoops, adding flower boxes, leaded glass and ornaments. The present owners of No 139 want to increase the building’s height by another story or two, installing new rooftop bulkheads. The preservationists protest, finding the change inappropriate and affecting the character of the street. So it’s back to the drawing board.
If you’d like to be guided though the 19th Street Sterner history, take a walk on this short block, Irving Place to 3rd Avenue. I will offer lite advice, from facts as well as personal memories and legend. There’s more info, since the Block Beautiful was given a Historic District designation in 1966 within the framework of the larger Gramercy Park Historic District.
Starting at top SW corner, Irving and 19th, past the big apartment building, No. 124 has a Dutch stepwise gable, looking like a storybook creation. The area allegedly was used to hold carriage houses for the Gramercy Park gentry.
No 128 was the home of Lincoln Kirstein (1907-96), founder of the NYC Ballet, and I have some memory associated with Public Theatre. Feel free to refresh me.
No 132, an apartment building, was once the residence of Ida Tarbell the muckraker journalist (this is disputed, her alternate address given is No.120.. maybe both are correct), painter Cecelia Beaux , stockbroker and collector Chester Dale, and possibly it may have had Theda Bara, Lillian and Dorothy Gish, Ethel Barrymore and Helen Hayes staying there, or is that more legend?
Next, a strip of beige and colored houses, with window boxes, until we come to No.146, where painter George Bellows of the Armory Eight lived and painted, 1910-25. The roof studio is visible from the street.
Crossing to the north side, on the NE corner of Irving and 19th, the large red brick ivy-covered beauty (No. 80 Irving Place), was an early birth control clinic. Now owned by a Wall Street broker, it is equipped with an automatic garage and arcane electronics inside.
Next, No. 129, a mysterious fairy palace that originally served as a stable and studio, was once owned by the late photographer Hal Reiff. I have occasionally sat in the paved courtyard, amid Greek statues, with an adult beverage, cherishing my chance to share in the old New York opulence.
Tall No. 131 where F. Scott and Zelda Fitzgerald visited critic Ernest Boyd, still has an original high stoop, and No. 135, Igor Cassini’s decorative glass and Medieval/Oriental architectural treasure, was supposedly originally imported as a wedding gift for a Woolworth heiress.
No. 139, Sterner’s stucco, tile and wrought iron abode is now part of the preservationists’ juggle.
No. 141 has Mediterranean style arts and crafts tile work, jockey figurines and leaded glass windows, for sale at $8M. Inside, it is a millionaire’s toy, including kitchen. Previous owners include sportscaster Ted Husing and designer Abbijane Schifrin.
No 143 has an original Anglo-Italian stoop, and at 145 are zebra tiles, and No. 147 was studio of painter Robert Winthrop Chanler. At No. 151 critic Carl Van Vechten (1880-1964) of the Harlem Renaissance fame threw wild parties. Ethel Barrymore claimed that she came to a party there as a young girl, and left next morning as an old woman.
Wally Dobelis thanks NYTimes, Christopher Gray, Andrew Scott Dolkart (regret, I have not seen his new book) and Internet sources. Send comments, corrections and more legends to Wally@ix.netcom.com. Spare nothing.
The neighborhood tragedy that the closing of the 161 years old St. Vincent’s Hospital represents finds little response in the media. Are we so inured by hospital closings that we don’t care? Is there a hope of a last minute white knight? Is a multi billionaire going to jump in and rescue the $700M debt (now grown to $1B)? As to the preservationists who sued to stop the proposed $300M sale of the adjoining O’Toole and other properties to Rudin that might have stopped the hospital’s bankruptcy, are they really winning, or do they realize that the liquidators will demolish the entire old neighborhood? As of the moment, the hospital will go down, 3,500 pink slips have been issued and Beth Israel and its Phillips Ambulatory unit, Bellevue and Roosevelt Hospitals are bracing to accept the overload of the poor patients, whose free care was at the root of St. Vincent’s bankruptcy that started in 2005 at $1.1B, was liquidated when the debt was reduced to $700M and resumed when it was found to be back at $1B. Gov Paterson tried to connect St. Vincent’s to such potential rescuers as Continuum Partnership (Beth Israel, Roosevelt, and St. Luke’s) and Mount Sinai Medical Center, to no avail.
Speaking of preservationists, they are not succeeding very well. The former Church of Holy Communion, lately the Limelight, in the Ladies’ Mile Historic district, was sold to a developer. When the trees on the property were cut in one fell swoop, protesters at the Landmarks Preservation Commission found out that the new owner had properly filed a request, based on a report from their arborist, who found that all the trees were diseased and should be removed. This information was not disseminated, and when the preservationists found out, it was too late for the trees.
Another tentative failure, the attempt to landmark the old Tammany Hall headquarters on East 17th Street, corner Union Square. It is owned by Liberty Theatres, who have been given a signed standstill agreement by the Landmarks Preservation Commission, meaning that landmarking will not be pursued, provided the theatre people will not alter the façade and other distinctive features. When the preservationists tried to check further, as interested parties who have been pursuing the designation since 1985, they had to follow the FOIL route to find that there are some 12 standstill agreements issued since 1999, applicable to properties throughout the city.
Which brings us to the Frederick J. Sterner (1862-1939) renovation on Block Beautiful, 139 East 19th Street, his first purchase and residence on Block Beautiful. Finding neglect on the block, he bought and rebuilt a number of the brownstones, beautifying the neighborhood in his imaginative fairyland style, with light pastel tinted stucco, Mediterranean Arts & Crafts tile work, removing high stoops, adding flower boxes, leaded glass and ornaments. The present owners of No 139 want to increase the building’s height by another story or two, installing new rooftop bulkheads. The preservationists protest, finding the change inappropriate and affecting the character of the street. So it’s back to the drawing board.
If you’d like to be guided though the 19th Street Sterner history, take a walk on this short block, Irving Place to 3rd Avenue. I will offer lite advice, from facts as well as personal memories and legend. There’s more info, since the Block Beautiful was given a Historic District designation in 1966 within the framework of the larger Gramercy Park Historic District.
Starting at top SW corner, Irving and 19th, past the big apartment building, No. 124 has a Dutch stepwise gable, looking like a storybook creation. The area allegedly was used to hold carriage houses for the Gramercy Park gentry.
No 128 was the home of Lincoln Kirstein (1907-96), founder of the NYC Ballet, and I have some memory associated with Public Theatre. Feel free to refresh me.
No 132, an apartment building, was once the residence of Ida Tarbell the muckraker journalist (this is disputed, her alternate address given is No.120.. maybe both are correct), painter Cecelia Beaux , stockbroker and collector Chester Dale, and possibly it may have had Theda Bara, Lillian and Dorothy Gish, Ethel Barrymore and Helen Hayes staying there, or is that more legend?
Next, a strip of beige and colored houses, with window boxes, until we come to No.146, where painter George Bellows of the Armory Eight lived and painted, 1910-25. The roof studio is visible from the street.
Crossing to the north side, on the NE corner of Irving and 19th, the large red brick ivy-covered beauty (No. 80 Irving Place), was an early birth control clinic. Now owned by a Wall Street broker, it is equipped with an automatic garage and arcane electronics inside.
Next, No. 129, a mysterious fairy palace that originally served as a stable and studio, was once owned by the late photographer Hal Reiff. I have occasionally sat in the paved courtyard, amid Greek statues, with an adult beverage, cherishing my chance to share in the old New York opulence.
Tall No. 131 where F. Scott and Zelda Fitzgerald visited critic Ernest Boyd, still has an original high stoop, and No. 135, Igor Cassini’s decorative glass and Medieval/Oriental architectural treasure, was supposedly originally imported as a wedding gift for a Woolworth heiress.
No. 139, Sterner’s stucco, tile and wrought iron abode is now part of the preservationists’ juggle.
No. 141 has Mediterranean style arts and crafts tile work, jockey figurines and leaded glass windows, for sale at $8M. Inside, it is a millionaire’s toy, including kitchen. Previous owners include sportscaster Ted Husing and designer Abbijane Schifrin.
No 143 has an original Anglo-Italian stoop, and at 145 are zebra tiles, and No. 147 was studio of painter Robert Winthrop Chanler. At No. 151 critic Carl Van Vechten (1880-1964) of the Harlem Renaissance fame threw wild parties. Ethel Barrymore claimed that she came to a party there as a young girl, and left next morning as an old woman.
Wally Dobelis thanks NYTimes, Christopher Gray, Andrew Scott Dolkart (regret, I have not seen his new book) and Internet sources. Send comments, corrections and more legends to Wally@ix.netcom.com. Spare nothing.
Thursday, April 15, 2010
nals helping us look at Healthcare Reform Bill (HRB)
LOOKING AHEAD by Wally Dobelis
Professionals helping us look at Healthcare Reform Bill (HRB)
The one word that I craved to see during the healthcare reform discussions was “actuary,” the mathematical scientist of insurance ,who predicts mortality (or morbidity, in case of healthcare), and structures premium rates, to make sure that the method used by the insurer in sharing of risks among many, the basic principle of insurance, is mathematically sound. Alas, no luck.
Insurance as a keystone of social benefit dates back to Adam and Eve, who after being chased out of their highly regulated Paradise into a free-will, everyone-for-himself world, had to defend themselves from animals and fellow men, and chose to pay protection money (e.g. food, skins, their daughters and sons) to the strongest among themselves, who could lead the group (e.g. extended family, tribe, village, country) in defense, or in attack. Fire coverage originated as a Roman fire company protection racket. Some ancient Persians originated gave annual tributes to the leader, buying an actual payback in emergencies (e.g. disasters, weddings).
Insurance as we know it came about in London, the commercial center, when ship-owners started to get together at Lloyd’s Coffee House in 1688, in advance of dangerous trading trips, to put money into a common fund, proportional to the dangers of each ship’s route, so as to to pay off the owners of ships lost to pirates and other hazards. It evolved from real home fire insurance, developed after the great London fire of 1666, and the great innovator Benjamin Franklin in Philadelphia adapted the novel idea, and formed our first insurance society. Exclusion of fragile, statistically unpredictable high cost risks – e.g. not insuring wooden houses - came with it, eventually evolving into graduated rates, the principle for which today’s health insurers are getting demonized.
The mathematician Elizur Wright of Massachusetts in the 1850s formulated the rules that made for sound and fair life insurance administration - uniform premiums throughout lifetime to accumulate early reserves sufficient to pay for deaths later in life, nonforfeiture values (e.g. payout of cash values for early terminations), reinstatement, loan provisions, all meant to make the socially beneficial life insurance a fair practice, protecting the insureds . Under the terms of the US Constitution, insurance administration was reserved for the states, although the interstate commerce clause was invoked in the 1970s to attempt federalizing it, unsuccessfully.
Since Elizur, the actuarial science has become an academic subject, and mathematicians must take post-grad courses and pass exams for years to become actuaries. Now that the healthcare reform bill is passed, I finally got to talk to an old friend, retired FSA (Fellow of the Society of Actuaries), who, talking to this non-anointed non-mathematician, broadly dismissed the HCRB as an unfair choice, deigned to have the working people pay for the non-workers. When pressed, he reluctantly specified selected objections, e.g. documented immigrants’ aged relatives admitted to the US who become welfare recipients in short order, Obama’s unwillingness to adapt tort reform, and the inadequacy of the incomplete premium base to pay for instant claims, when millions of new participants with existing costly impairments enter the system while the healthy young stay away.
So, what does the HR Bill actually provide? First, coverage for 32M uninsured Americans by 2019. The expansion begins in 2014, with 95% of eligibles insured, vs. 83% today. and the mandate for everyone to get coverage also begins in 2014 (low-level income people exempted; also note that 7M undocumented immigrants remain uncovered, and cannot buy insurance even in the newly created purchasing pools called exchanges). From 2014 on insurers may not deny coverage or charge more to people with existing health problems (some insurers are already raising premiums across the board to anticipate high claims). Starting 2010, lifetime payment limits and denial of coverage to sick children will cease. The Fed/state Medicaid is expanded to 133% of federal poverty level incomes, just under $40K/yr for a family of four, and new eligibles are to be paid by Fed funds until 2016. Childless adults will be covered starting in 2014. As to prescription drugs, for seniors who have reached $2,830 expense, the “doughnut hole” will be closed, a gain of $250.
The cost of HRB, per Congressional Budget Office, will be $940B over 10 years, and the budget will be cut by $138B. Gains will come from a tax on high-cost “Cadillac” plans, with thresholds at $10,200 for individuals and $27,500 (we have lots of them in high-cost NY). The reconciliation package of March 25 scaled back this excise tax to 40% and postponed it to 2018, and imposed a Medicare tax of 3.8% on capital gains and investment income, affecting on couples making $250K plus.
Looking for impact statements from other insurance friends, I found equal discretion and wait and see attitudes, except for suggesting that “This is the end of health insurance companies. If you raise premiums in anticipation of new enrollees with pre-existing conditions, you lose existing policyholders; if you don’t raise, you spend the company into bankruptcy. Requiring that 85% of premium income be spent on claims only works with large employers, who do self-administration, the small ones cost more to administer, and individual policyholders are even more costly.” One advisor, quoting the social contract, would accept disabled children and adults as new enrollees, but not people with tobacco, alcohol, drug and overeating-induced disabilities. Note that HRB does not require employers to offer coverage, but they will be fined if the government subsidizes their employee coverage.
As for cost savings via HRB, by simplifying medical protocols and eliminating unnecessary referrals, and by curbing drug therapy for social failings such as “loneliness” and ordinary life problems, which are listed under depression therapy codes in the bloated DSM (Diagnostic and Statistical Manual of Mental Disorders), why no mention in the bill’s summary? Further, there’s the hope that HRB can curb the overabuse of hospital emergency rooms – but note that for the 7M not covered undocumented immigrants the ER is the viable health resource. In that context, let’s hope that drug chains and huge retailers will continue building health clinics, and let’sroot for the medical profession to produce physicians and PAs willing to practice there, for our and the undocumenteds’ social benefit.
Ultimately, is HRB the forerunner of single source healthcare, the Medicare for all Americans? Let us nor forget that it was invented by Otto von Bismarck the Prussian “Iron Chancellor,” in the 1870s, to curb the growth of Socialism in the newly unified and industrialized Germany, and it spread all throughout civilized Europe.
Wally Dobelis thanks newspaper and internet sources and medical and insurance friends.
