Friday, March 31, 2006

Woe Unto Them Who Make a Pretense To Devour Widows Houses

Shocks Seen in New Math for Pensions
A proposed new method of reporting pension obligations is likely to show that many companies have a lot more debt than was obvious before.

“The board that writes accounting rules for American business is proposing a new method of reporting pension obligations that is likely to show that many companies have a lot more debt than was obvious before.

In some cases, particularly at old industrial companies like automakers, the newly disclosed obligations are likely to be so large that they will wipe out the net worth of the company.

The panel, the Financial Accounting Standards Board, said the new method, which it plans to issue today for public comment, would address a widespread complaint about the current pension accounting method: that it exposes shareholders and employees to billions of dollars in risks that they cannot easily see or evaluate. The new accounting rule would also apply to retirees' health plans and other benefits.

A member of the accounting board, George Batavick, said, "We took on this project because the current accounting standards just don't provide complete information about these obligations."

The board is moving ahead with the proposed pension changes even as Congress remains bogged down on much broader revisions of the law that governs company pension plans. In fact, Representative John A. Boehner, Republican of Ohio and the new House majority leader, who has been a driving force behind pension changes in Congress, said yesterday that he saw little chance of a finished bill before a deadline for corporate pension contributions in mid-April.

Congress is trying to tighten the rules that govern how much money companies are to set aside in advance to pay for benefits. The accounting board is working with a different set of rules that govern what companies tell investors about their retirement plans.

The new method proposed by the accounting board would require companies to take certain pension values they now report deep in the footnotes of their financial statements and move the information onto their balance sheets — where all their assets and liabilities are reflected. The pension values that now appear on corporate balance sheets are almost universally derided as of little use in understanding the status of a company's retirement plan. ”

A Benefit for Insurers
Critics who say the insurance industry got too big a role in the new Medicare drug program may not know the half of it.

“While the stand-alone Part D drug plans are expected to give insurers a small profit, the margins are likely to be thin — 1 percent to 3 percent before taxes, Humana estimates. That is partly because Humana is offering low premiums and co-payments to attract customers. And the federal subsidy for each customer in a stand-alone Medicare drug plan is only about $75 a month.

But for providing a full Medicare Advantage health policy to a patient, the government pays the insurer $900 to $2,000 a month beyond whatever premium, if any, the patient pays. With that revenue, come bigger profit margins — 3 percent to 5 percent, according to James H. Bloem, Humana's chief financial officer.

For UnitedHealth, the Part D drug business by itself would not be particularly lucrative, adding only 5 to 7 cents to earnings a share, according to Jason Nogueira, an analyst who tracks health care companies for the investment firm T. Rowe Price. That would be no more than 2 cents on the sales dollar for UnitedHealth, which had $45 billion in 2005 revenue and expects profit of $2.90 a share this year.

So the real financial opportunities lie in upgrading Part D enrollees to other Medicare-linked policies. In essence, the high federal subsidies for Medicare Advantage policies are the government's reward to insurers for taking people out of traditional, federally supervised Medicare and into the commercial world of managed care. In fact, Medicare now pays private insurers 15 percent more, on average, to take a patient than it spends in a traditional government program for each patient.

Critics of Medicare's approach, including a number of senior Democrats in Congress, have asked the Congressional Budget Office to examine the issue. The budget office estimated that Medicare could save more than $40 billion over the next 10 years if subsidies to insurers were scaled back to the levels the program now pays directly to doctors and hospitals.

Representative Pete Stark of California, the senior Democrat on the Ways and Means Committee, said in an interview that insurance agents "are out trying to promote seniors into Medicare Advantage plans, and switch them out of plans they are in."

The Medicare law that created the Part D program, Mr. Stark said, "was written by insurance company lobbyists with the help of pharmaceutical company lobbyists."

In a telephone interview, Michael O. Leavitt, the secretary of health and human services, defended the administration's market-based approach to Medicare, saying that market forces were pushing prices lower and that any kinks in Part D would be worked out.

"The market will become simplified because consumers want that," Mr. Leavitt said.

As long as the incentive of federal subsidies stays at current levels, insurers have every reason to pursue them, especially as the industry struggles with slowing growth in its traditional core business of managing employer-sponsored health benefits.

Charles Boorady, a health care securities analyst at Citigroup, said that by expanding Medicare-subsidized offerings, the insurance industry had a potential revenue opportunity of more than $450 billion a year "or enough to almost double the revenue of the managed care industry." ”

1 Then Jesus spoke to the crowds and to His disciples:
2 “The scribes and the Pharisees are seated in the chair of Moses.[1] Perhaps a special chair for teaching in synagogues, or a metaphorical phrase for teaching with Moses’ authority
3 Therefore do whatever they tell you and observe [it]* The bracketed text has been added for clarity. . But don’t do what they do,[2] Lit do according to their works because they don’t practice what they teach.
4 They tie up heavy loads that are hard to carry[3] Other mss omit that are hard to carry and put them on people’s shoulders, but they themselves aren’t willing to lift a finger[4] Lit lift with their finger to move them.
5 They do everything[5] Lit do all their works to be observed by others: They enlarge their phylacteries[6] Small leather boxes containing OT texts, worn by Jews on their arms and foreheads and lengthen their tassels.[7] Other mss add on their robes
6 They love the place of honor at banquets, the front seats in the synagogues,
7 greetings in the marketplaces, and to be called ‘ Rabbi’ by people.

8 “But as for you, do not be called ‘Rabbi,’ because you have one Teacher,[8] Other mss add the Messiah and you are all brothers.
9 Do not call anyone on earth your father, because you have one Father, who is in heaven.
10 And do not be called masters either, because you have one Master,[9] Or Teacher the Messiah.
11 The greatest among you will be your servant.
12 Whoever exalts himself will be humbled, and whoever humbles himself will be exalted.

13 “But woe to you, scribes and Pharisees, hypocrites! You lock up the kingdom of heaven from people. For you don’t go in, and you don’t allow those entering to go in. [
14 “Woe to you, scribes and Pharisees, hypocrites! You devour widows’ houses and make long prayers just for show.[10] Or prayers with false motivation This is why you will receive a harsher punishment.][11]

I guess the market is supposed to solve these problems too, but will it solve our problems or business' problems?
con·cept: Woe Unto Them Who Make a Pretense To Devour Widows Houses