Mish's Global Economic Trend Analysis

Video: The Bizarre Reason Your Health Insurance Plan Was Cancelled
Bidding Wars Stop; Millennials Leave Their Parents' Basements, But Not For Homes; Pent Up Demand?
Spain Mandates Public Companies "Stop the Bleeding" No More Layoffs
Strange Bedfellows: To Fight ISIS, US Now Supports Iranian Revolutionary Guard, Other Terror Groups

Video: The Bizarre Reason Your Health Insurance Plan Was Cancelled

Posted: 22 Sep 2014 10:01 PM PDT

There are lots of reasons why your health care plan may have been cancelled but this one is arguably the most bizarre.

Please play the video or the following discussion will not make much sense.

Link if video does not play: Why Your Plan Was Cancelled: Health Insurance and the Affordable Care Act.

I am automatically skeptical of such videos and articles. So I did some digging. It appears the video has it right.

"De Minimis Variation"

PDF page 36 of 40 of Federal Register, Vol. 78, No. 37 / Monday, February 25, 2013 / Rules and Regulations, spells things out nicely.

§ 156.140 Levels of coverage. (a) General requirement for levels of coverage. AV, calculated as described in § 156.135 of this subpart, and within a de minimis variation as defined in paragraph (c) of this section, determines whether a health plan offers a bronze, silver, gold, or platinum level of coverage. (b) The levels of coverage are: (1) A bronze health plan is a health plan that has an AV of 60 percent. (2) A silver health plan is a health plan that has an AV of 70 percent. (3) A gold health plan is a health plan that has an AV of 80 percent. (4) A platinum health plan is a health plan that has as an AV of 90 percent. (c) De minimis variation. The allowable variation in the AV of a health plan that does not result in a material difference in the true dollar value of the health plan is +- 2 percentage points.

Outside of the video, the above obscure government doc was the only place I found an accurate discussion of bronze, silver, gold, and platinum ranges.

Since I did not have the term "de minimis variation" in my search, it took me a while to find that doc.

As Typically Presented

Most sites offer woefully inadequate explanations. For example Medical Mutual accurately defines Actuarial Value (AV) as "the percentage of total spending on Essential Health Benefits (EHBs) that is paid by the health plan," yet, falls woefully short in describing the various metals as follows.

Bronze: 60 percent of Actuarial Value
Silver: 70 percent of Actuarial Value
Gold: 80 percent of Actuarial Value
Platinum: 90 percent of Actuarial Value

That is what we have come to believe, and similar explanations appear on numerous healthcare sites. Ten percent ranges seem reasonable, but they are against the law.

Health Insurance AVs

0-57 Invalid
Bronze AV: 58-62
63-67 Invalid
Silver AV: 68-72
73-77 Invalid
Gold AV: 78-82
83-87 Invalid
Platinum 88-92
93-100 Invalid

Range Analysis

Number of 1-Point Ranges: 100
Acceptable Ranges: 16
Invalid Ranges: 84

Competition Not

If for any reason, health care providers do not want to modify pre-existing plans that are just outside the acceptable ranges, their only option under the law is cancellation.

The legislation guarantees "If you like your plan you may not be able to keep it."

What reason might insurers have to cancel plans?

Thanks to ACA, the providers all have captive audiences. They all understand that no other provider can offer a plan in anything but the 16 of the 100 possible ranges.

If a plan outside one of the allowed ranges makes a smaller percentage profit than something inside one of the ranges, there is a huge incentive for providers to simply dump the plan.

And Obamacare was supposed to increase competition!

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Bidding Wars Stop; Millennials Leave Their Parents' Basements, But Not For Homes; Pent Up Demand?

Posted: 22 Sep 2014 02:25 PM PDT

Bidding Wars Stop

With cash-paying investors on full retreat, existing home sales dropped 1.8% in August, according to the National Association of Realtors.

Lawrence Yun, NAR chief economist says that's a good thing because "first-time buyers have a better chance of purchasing a home now that bidding wars are receding and supply constraints have significantly eased in many parts of the country."

While I agree it's a good thing that bidding wars stopped, the fact of the matter is home prices are once again in la-la land, especially for cash-strapped millennials loaded up with student debt, in low-paying jobs.

Pent Up Demand?

Yun states, "As long as solid job growth continues, wages should eventually pick up to steadily improve purchasing power and help fully release the pent-up demand for buying."

There is arguably a pent-up demand for homes by millennials if wages do catch up, but that assumes millennials have the same value-set and attitudes towards debt as their parents.

In reality, median wages have not gone up much but home prices have. More importantly, attitudes of millennials are not the same as that of their boomer parents.

Millennials Leave Their Parents' Basements, But Not For Homes

Fortune reports Millennials Finally Leave Their Parents' Basements.

Jed Kolko, chief economist at Trulia, put together this graph, which shows that Millennials are finally moving out of their parents' houses, after years of living at home:

But that's where the good news ends. Over the past two years, Millennials have been moving away from home, but they don't actually have enough money, or desire, to form their own households. The homeownership rate among Millennials continues to fall:

The falling homeownership rate and falling "headship rate"—which is the share of Millennials who are the head of a household regardless of whether they own real estate—suggest that this generation is still doubling up with friends or other relatives even if they aren't living with Mom and Dad.

The one bright spot in the Census data for the youngest workers: between 2012 and 2013, median income for those aged 15 to 24 shot up by 10% from $31,000 per year to roughly $34,000 per year. But this is the first time since 2006 that this age group has seen any increase in income at all, meanwhile the cost of shelter has risen 16% since that time. Income for the older half of the Millennial generation rose just 1.1% between 2012 and 2013.

This poor performance could mean that the housing industry is building too many homes, according to Kolka. This is quite the surprise given that single-family housing construction is still well below pre-crisis and even pre-bubble norms.

Census Data

I commend Fortune for linking to the actual data. Few mainstream media articles do.

For those who wish to take a closer look: Income and Poverty in the United States: 2013, Issued September 2014. Here are a couple of charts and stats that caught my eye.

Real Median Income

Full-Time Employment

Real Medium Income Notes

Real median household income for those 15-24 shot up by 10.5% but only from $31,049 to $34,311. That's not enough to support buying a nice house in most areas. Moreover, the 15-24 demographic has 6.3 million households and typically that age group does not buy houses anyway.
Real median household income for those 25-34 (about 20 million households) was only up 1.1% to $52,702. Home prices rose more, making homes less affordable.
Real median household income for those 35-44 (about 21 million households) was only op 0.7%, but to a better looking to $64,973.
Those aged 45-54 and 55-64 actually saw incomes declines of 0.3% and 3.3% respectively on household populations over 23 million each.

Attitudes, Wages, Home Prices

That data is from 2013, but it's very safe to conclude nothing much changed in 2014. None of the income data is supportive of more household formation. Wages have not kept up with home prices in the key demographic groups. Things are far worse if you factor in attitudes.

Attitudes - Fed's Biggest, Most Futile Fight

I have been talking about attitudes for years. For example, please consider Please consider Teenagers Scared Over Plight of their Parents; Attitudes - Bernanke's Biggest, Most Futile Fight

That 2010 post contains an email from "Nancy Drew" about her daughters, aged 15 and 17 with their friends scared half-to-death about their parents' financial woes.

Such memories last a long time.

I wrote then and I repeat now ... "Those fretting over base money supply and foolishly screaming hyperinflation (or even inflation), simply do not understand the dynamics of debt deflation, nor do they understand how small the increase in base money is compared to debt that will be written off, nor do they understand the role of changing social attitudes towards spending."

Clash of Generations

On May 30, 2014 I wrote Clash of Generations - Boomers vs. Millennials: Attitude Change Will Disrupt Wall Street and Corporate America

If you haven't read that, please do. And if you have, I suggest it's well worth another look.

Pent Up Demand to Sell

Yun thinks another housing boom is just around the corner. He talks of a pent-up demand to buy.

I suggest there's a pent-up demand to sell for three reasons:

Aging boomers seeking to downsize
All-cash equity buyers looking to take profits
Some of those who were underwater and hoping to get out will do so if and when they get a chance

Will millennials be able to plug all of that pent-up selling pressure? I think not.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Spain Mandates Public Companies "Stop the Bleeding" No More Layoffs

Posted: 22 Sep 2014 11:28 AM PDT

In a concern over votes, regional government spending is on the rise. In addition, Spain Mandates "Stop the Bleeding" No More Layoffs in Public Companies.

"Stop the Bleeding" via translation ...

Nine months after the local elections, the government has begun to show signs of needing a push to overcome the electoral polls. The unemployment remains, along with public debt, macroeconomic data that further tarnishes their results. For this reason, some sources claim that the Government has called on companies possessing some control to hire staff or fail to fire.

Although the discourse of government is to "rationalize public spending" and "reduce the number of officials," the fact is that regional governments are the largest employer in the country. Together, they have more than 2.5 million workers, and despite successive cut plans, thirteen regions have increased their spending on staff.

According to sources, some companies linked to State or investments through the State Society for Industrial Holdings (Sepi), have begun to put the brakes on the dismissal of staff working at the express request of the Government.

Government Tentacles

Here's the essence: Public companies where the Spanish government has tentacles have been ordered "don't fire".

By the way, companies that can't fire, won't hire. Of course that does not apply to the government itself.

Austerity? Where is it?

With government spending going up in 13 of 17 autonomous regions in Spain and with a slowdown in Europe at large, it's quite easy to predict another budget deficit target miss by Spain.

IMF Forecasts 19% Unemployment in 2019, Asks Spain to Increase VAT

Here's one I missed from July: IMF Improves Forecast for Spain, but Expects Unemployment Rate of 19% in 2019.

Also via translation ...

According to projections by the institution in the medium term, growth will remain at around 1.5 or 2% and unemployment will drop significantly but at 18.7%

The IMF however has improved its growth forecasts, but also stressed the need to raise VAT and cut contributions to Social Security.

The governing body of Christine Lagarde, the Spanish economy expected to grow 1.2% in 2014 and 1.6% in 2015 compared with 0.9% and 1% previously. Also forecast a steady pace of expansion will allow GDP growth of 1.7% in 2016 and 1.8% in 2017, while in 2018 would lead to 1.9% and 2% a year later.

Unemployment

Spain's unemployment rate is 24.5% according to Eurostat.

The scary thing is the IMF is typically overoptimistic on everything. If Spain actually raises the VAT as the IMF wants, it 99% certain Spain will not hit even the IMF's lowered growth targets.

Here's the question of the day: If the IMF is overoptimistic on its 2019 assessment of employment and growth, how long can Spain put up with this?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Strange Bedfellows: To Fight ISIS, US Now Supports Iranian Revolutionary Guard, Other Terror Groups

Posted: 22 Sep 2014 12:04 AM PDT

Strange Bedfellows

US Mideast relationships get stranger every day. The US has come to the defense or has given aid to three rather unlikely groups in the past few weeks.

Iranian Revolutionary Guard
Kurdish Workers Party (PKK), which directly supports the YPG, on Washington's list of proscribed terror groups
"Moderates" fighting to overthrow Syrian president Assad. Those moderates just signed a non-agression pact with ISIS

70,000 Kurds Seek Refuge in Turkey

The Guardian reports Kurds Flee into Turkey to Escape Isis Offensive

More than 70,000 Kurds fled from northern Syria into Turkey at the weekend and tens of thousands more are trying to cross the border as the terror group Islamic State (Isis) intensified its assault on a crucial Kurdish safe haven near the border.

Previous attacks have targeted Yazidis, Christians, Kurds and Shia Turkomans in Iraq, and Alawites, Shias and Christians in Syria, forcing most to flee. Those captured have been given the stark choice between converting to the jihadists' hardline view of Sunni Islam or being killed.

The refugee agency UNHCR said it was preparing for up to several hundred thousand more refugees to cross into Turkey in the coming days and called on Ankara to provide space for the Kurds to shelter. The global aid body said its staff were helping provide refugees with immediate needs.

The Kurdish YPG militia now defending Kobani crossed into Iraq in mid-August to help rescue up to 50,000 Yazidis who were besieged by Isis on Mount Sinjar. That escape was aided by US airstrikes, which scattered the jihadis from the northern base of the mountain.

YPG forces say they are being outgunned by Isis, which is using heavy weapons supplied by the US to the Iraqi military, who surrendered them when they abandoned northern Iraq in June.

The Isis rampage through Iraq has already led to some unlikely alliances being formed, with US jets flying air cover over the Shia Turkoman town of Amerli earlier this month in support of Shia militias led by the Iranian Revolutionary Guard. An elite leader of the guards, General Qassem Suleimani, was on the ground in Amerli as the US jets attacked Isis positions.

Potentially complicating US support for the Syrian Kurds is the fact that the Kurdish Workers Party (PKK), which directly supports the YPG, is on Washington's list of proscribed terror groups.

Obama's "Moderate Rebels" Sign Deal With ISIS

Inquiring minds may also wish to consider Obama's "Moderate Rebels" Sign Deal With ISIS.

The supposed "moderate" rebels fighting Syrian dictator Bashar al-Assad — self-styled jihadists whom the Obama administration and Congress plan to supply with even more support under the guise of battling the Islamic State (ISIS) — recently signed a non-aggression pact with ISIS (also known as ISIL), according to reports from human-rights groups and French news agency Agence France-Presse (AFP). Lawmakers on Capitol Hill pointed to the news as yet another reason why supplying U.S. arms and support to Islamic forces to battle Islamic forces was a dangerous idea. The foreign-policy establishment, however, plans to proceed with arming and training jihadists anyway.

Following a vote earlier this week in the House to approve Obama's plan to arm jihadists in Syria, the Senate just gave the administration a green light for the half-baked plot as well. Despite bipartisan opposition to the plan, senators voted overwhelmingly (78-22) to approve a broader $1 trillion appropriations bill that included authority to back what the establishment refers to as "moderate" forces in Syria. Those same allegedly "moderate" jihadists, according to the AFP and the Syrian Observatory for Human Rights, inked a deal with ISIS outside Damascus last week. The agreement was reportedly brokered by the al-Qaeda affiliate in Syria known as Jabhat al-Nusra.

The non-aggression pact between ISIS and elements of Obama's "moderate" opposition states that "the two parties will respect a truce until a final solution is found and they promise not to attack each other because they consider the principal enemy to be the Nussayri regime," AFP and other media outlets quoted it as saying. The term "Nussayri" is a slur used to describe the Islamic Shia denomination Alawite to which Assad and many Syrians belong. A spokesman for the Obama-backed Sunni "Free Syrian Army" (FSA) rebels had previously vowed on television to exterminate all Shia Muslims, not just Alawites.

In an almost surreal interview with Fox News host Sean Hannity this week, leading congressional warmonger Sen. John McCain (R-Ariz.) demanded even more support for what he calls "moderate" rebels. Sounding confused, McCain lashed out at Sen. Rand Paul (R-Ky.), angrily noting that the senator from Kentucky did not personally know the jihadists fighting in Syria. "Has Rand Paul ever been to Syria? Has he ever met with ISIS? Has he ever met with any of these people? No, no, no," McCain fumed on national television, presumably meaning the FSA rather than ISIS.

Ironically, McCain himself faced an embarrassing scandal after it was revealed that Syrian "rebels" he met and posed with for photographs were actually involved in kidnapping pilgrims. The Arizona senator's spokesman later claimed McCain did not really know whom he was meeting. Calling the incident "regrettable," the spokesman was forced to explain that his boss does not "in any way condone the kidnapping of Lebanese Shia pilgrims." He does, however, condone providing even more weapons to his "moderate" rebels, as he made clear again in the recent Fox interview.

Hannity Interviews McCain

Listen to this confused, embarrassingly tortured response by McCain to Hannity's questions. The best word to describe McCain's performance is "pathetic".

McCain Meets Rebels Accused of Kidnapping

Flashback May 31, 2013: Oops! Sen. McCain Met Syrian Rebels Accused of Kidnapping.

Sen. John McCain (R-Ariz., shown) and his goal of openly intervening in the Syrian conflict on behalf of the foreign-backed rebels — many of whom openly fight under the banner of al-Qaeda — suffered a major setback this week after a public relations stunt backfired in spectacular fashion. Media reports that surfaced Thursday claimed some of the opposition fighters he met and posed for pictures with during a recent trip to Syria were actually extremists. In fact, the radicals are accused of kidnapping Lebanese pilgrims from a village in Aleppo province.

The news, first reported by Al Jadeed and The Daily Star newspaper in Lebanon, sparked widespread ridicule and criticism of the senator as his office scrambled to deal with the embarrassing negative publicity. It also further confirmed long-held suspicions among lawmakers and analysts that, contrary to claims made by Sen. McCain and others pushing for another open U.S. war in the Middle East, rebel forces might be just as bad as the Assad regime — maybe worse.

Rand Paul vs. McCain

McCain fumes Rand Paul did not go to Syria. McCain did, and had his picture taken with extremist kidnappers.

Which makes more sense?

Strangest of All Bedfellows

Arguably the strangest set of bedfellows in this mess is Hillary Clinton and Senator McCain. Both argue we should have armed the "moderates".

Questions of the Day

Do the al-Qaeda "moderates" wear signs that say "I am a moderate"?
If McCain cannot tell the difference without such a sign, how can Obama or Hillary?

"You Have to Begin Somewhere"

Nonetheless, Former Pentagon chief Leon Panetta says Obama should have armed moderate Syrian rebels earlier.

"I think the President's concern, and I understand it, was that he had a fear that if we started providing weapons, we wouldn't know where those weapons would wind up," said Panetta, defence secretary when the US pulled out of Iraq in 2011.

"My view was: you have to begin somewhere," added Panetta, also a former CIA director.

Warmonger Logic

We cannot tell the moderates from the extremists but "you have to begin somewhere".
And by overthrowing Assad, with extreme al-Qaeda rebels aligned with "moderate" Al-Qaeda rebels, things would be better now, not just in Syria but also Iraq!

My Take

We "began somewhere" quite a bit ago, having removed Hussein and spending trillions of dollars to do it.
ISIS formed in the vacuum.
Getting moderates to overthrow Assad in Syria would not have done a damn thing to stabilize Iraq.

Judging from recent US geopolitical stupidity in the Mideast, in Ukraine, and historically everywhere else, there's a high probability things would be even worse now had we done what McCain and Hillary wanted.

Just remember ... To make matters worse, you have to begin somewhere.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Mish's Global Economic Trend Analysis

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