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Tag: Bailout

  • Health Insurance: Reimbursement to Cause Bailout?

    Health insurance is taking a mighty turn for the worse after this ill-fated attempt at “affordable care” by the Obama administration.

    Things are looking very bleak indeed after Thursday’s Moody’s rating downgrade of the outlook for inurance industry from “stable” to “negative”.

    The downgrade was put in effect because of “ongoing unstable and evolving environment,” as the Obama administration fumbles and flails, imposing “new regulations and announcements that impose operational changes well after product and pricing decisions were finalized,” according to the New York Post.

    This is due to the slow implosion of Obamacare and its ravaging of the health care industry, as well as the recently revealed Section 1342 of the Affordable Care Act, which demands the federal government (read: taxpayers) reimburse losses suffered by the insurance companies that are written into the Act and selling their policies cheaply through Obamacare.

    Section 1342 will reimburse losses accrued through 2016. You know, the date of the next election. This is what Sen. Marco Rubio so accurately described as the law’s “dirty little secret”. This thing didn’t come to light until the outrage last fall over Obama’s “if you like your plan, you can keep your plan” fiasco. It most likely wasn’t intended to come to light at all. Until 2016.

    Secretary of Health and Human Services Kathleen Sebelius then grudgingly revealed that the Obama administration had never once tried to estimate what the guarantee to insurance companies on the Obamacare train could cost us, the taxpayers. How considerate! Basically, unless at least section 1342 is done away with, we could be on the hook for a bailout of Obama’s own giant failure.

    This will keep Obamacare going long enough for the free market to die out, leaving healthcare in the feeble hands of our government with no other option to be had and stranded way beyond the turning point.

    This downgrade is coming on the heels of the latest of many snafus with Obamacare, which has parents and children separated, as parents qualify for plans through the market place, but children are automatically shuffled to medicaid programs. There is no way to get them back, either, according to the AP.

    “The children are getting stuck in this spot where we’ve enrolled the parent, but we can’t bring the children back on the family plan,” Maria Proulx, who is the senior legal counsel for Anthem Blue Cross and Blue Shield of New Hampshire said.

    This was the experience of Russel Clouden of North Port, FL, “Based on your income, they’ll separate your kids from your primary policy and they shift them off to Medicaid or Healthy Kids and there’s no way you can bring them back. I’m kind of in limbo with her because I’m just hoping she doesn’t get injured or sick.”

    Yeah, we’re all kind of in limbo here, hoping this gigantic mess doesn’t bring complete ruin on us and our children. Time will tell.

    Image via wikimedia commons

  • Detroit: “Bailout Would Have Been Better”

    Detroit: “Bailout Would Have Been Better”

    Back in July, Detroit became the largest U.S. city to file for bankruptcy. To help matters, the Obama administration made a pledge this week to send $300 million to Detroit. Considering that Detroit has $18 billion in debt, some residents aren’t exactly thrilled with the pledge and wish the government would have bailed them out instead.

    Make no mistake–the $300 million isn’t a bailout. After the bailout in 2008 and the stimulus plan that followed in 2009, that’s the last thing most people want to hear about. Instead, what some are calling the “Detroit bailout” is federal aid that will go towards improving transportation, tearing down old buildings and paying for more police officers. The Obama administration is not bailing out Detroit, as none of the funds will go towards erasing Detroit’s debt.

    Many residents wish the government would have given Detroit a bailout, though. Bridgette Shephard, a social worker from Detroit commented on the federal aid. “Something is better than nothing. A bailout would have been better, but if we can sustain some of our needs with grants, that would be a start,” Shephard said.

    While $300 million doesn’t sound like a lot in the grand scheme of things, U.S. Housing and Urban Development Secretary Shaun Donovan thinks the federal aid will help Detroit have a comeback. “We all believe this will be one of the great comeback stories in the history of American cities,” Donovan said.

    There have been some discussions in Washington over whether to give Detroit a real bailout, something Kentucky senator Rand Paul is vehemently against. Paul, the son of former Texas congressman and presidential candidate Ron Paul, said that Detroit would receive a bailout “over my dead body because we don’t have any money in Washington.”

    Fortunately for Detroit, the $300 million in federal aid is just the first step in the plan the government has for helping the city. Gene Sperling, the director of the National Economic Council, called the federal aid “unlocking money” and said that more help will be on the way. “We’re in the second inning,” Sperling said. “This is just one step along the way. We don’t expect this to be easy, we expect it to be successful.”

    Should the government bailout Michigan? Respond below. Many Twitter users are against the idea, especially at a time when national debt is as high as it is.

    Image via YouTube

  • Chrysler Buyout by Fiat No Closer, says Marchionne

    Since the automotive industry crisis of 2008-10, the auto industry here in the United States has remained fairly successful and competitive. Chrysler was one company in the United States that was able to revive itself and benefit from the bailout (even though others think Chrysler might have been better off not accepting bailout money). However, Chrysler has now found itself in a precarious position due to specific parameters that came along with accepting government money.

    Instead of choosing to pay members of the United Auto Workers future healthcare payments, Chrysler decided to allow the workers shares in the company instead. In fact, the United Auto Workers, under their volunteer employee’s beneficiary association (VEBA), now own a 41.5% holding of Chrysler. Initially, this may not seem like much of an issue. Sergio Marchionne, chief executive of Chrysler and Fiat, now wants Fiat to buy-out the UAW shares, though, and merge the two companies.

    At first glance, it seems as if the answer is obvious. Fiat would just have to pay for the 41.5% of VEBA shares at their current price and the deal should be done. But, there is a slight catch. When the documents outlining the deal between Chrysler and the UAW were created in 2009, a threshold amount was set to limit the profit the trust could obtain from a sale of its shares. This value was set at $4.25 billion initially, with the amount growing at a 9% compound annual interest rate. After 4 years, this amount has now translated to $5.999 billion.

    So what’s the issue? Using the amount above would give one an estimate of $12 billion as to the worth of Chrysler itself, which is around $3 billion more than USA Bank values the company. Marchionne does not want Fiat to have to pay more than the company is worth, especially considering he owns both companies. If Fiat and VEBA cannot come to an agreement, the trust wants the option to sell a portion of its shares in an IPO. This would hurt Marchionne’s companies in a couple different ways. First, Marchionne will not be able to combine Chrysler and Fiat, a move which would certainly make both companies more competitive due to the increased capital and decreased expenditures. Secondly, if Marchionne wanted to buyout the trust’s shares in the future, the company will be worth more (not to mention that the compound interest will continue to add up), and thus he will have to give the UAW more money.

    I hope that Marchionne and VEBA can come to a deal, if only so that I can see more of those tiny little Italian cars zooming around. Not only are they cute, tiny, and more environmentally conscious, they just add a certain European flair and culture to our banal highways.

    Image via Wikimedia Commons