How Small Businesses Are Coping With Health Insurance

Occasionally in the coming weeks and months, The Agenda will introduce you to small-business owners who are wrestling with how to provide health insurance to their employees. Over time, we hope to delve into all aspects of a crucial decision — not just managing the costs but sorting out benefit packages, weighing alternatives, and dealing with insurers and brokers. Along the way, we hope to get a better understanding of how the 2010 health-care legislation will, or won’t, affect small businesses.

Today we meet Ann Gish, who designs high-end bed linens from offices in Manhattan. As we proceed with this series, we’d like to hear from you. What questions would you like us to ask of the business owners we profile? Do you have an interesting health insurance story to tell? Please drop us a line.

THE OWNER Ann Gish, 63.

THE COMPANY Ann Gish Inc. designs and distributes luxury bed and table linens and pillows, which are sold at Bergdorf Goodman, NeimanMarcus.com and boutiques nationwide. In 2011, the company opened its own store in Manhattan. Excluding Ms. Gish and her husband, Ann Gish Inc. employs 10 people in the United States.

WHAT THE COMPANY PAYS The company bears the entire premium cost for its workforce, $472 a month per employee. It provides individual coverage only, but Ms. Gish said that most of her employees are either unmarried or have spouses who get insurance through their jobs. One sales manager, however, has a self-employed husband with a pre-existing condition and a child. Ms. Gish pays the employee’s premiums, and the employee pays the insurance for the rest of her family — an additional $1,300 a month. “She used her agent, we used our agent, and this was the best we could do,” Ms. Gish said. “If she could find a better deal, we’d give her the $500.” Ms. Gish said she is giving serious thought to reducing the share of employee premiums that her company pays: “I want to see what happens business-wise over the next year, and I want to see what happens when the health care reform kicks in.”

THE PLAN Ann Gish offers preferred provider organization coverage, a form of managed care that favors doctors and hospitals that are in-network. One aspect of the plan that galls Ms. Gish is that doctors must seek permission from the insurer before prescribing some treatments. However, Ms. Gish said, the plan is “non-gated,” meaning that employees don’t need permission from their primary doctor to see a specialist.

THE INSURER Currently, it’s Aetna; before that, it was Oxford. “We’ve changed either every year or every two years,” Ms. Gish said, “because they take away the policy that you have, and they give you a new one that’s more money and generally fewer benefits.” In recent years, premiums have bounced around, Ms. Gish said: $422 in 2009, $479 in 2010, back down to $443 last year, and now back up again. Meanwhile, she said, this year employees face slightly higher co-payments and much steeper deductibles.

http://boss.blogs.nytimes.com/2012/02/22/how-small-businesses-are-coping-with-health-insurance/?ref=business

Making the Volcker Rule Better for Markets and the Economy: View

The Volcker rule, a central element of the U.S. financial reform effort, is facing heavy criticism as regulators prepare a final version. We encourage them to stick as close as possible to the rule’s original intent: severing the links between high-stakes securities trading and the banking services crucial to the broader economy.

Inspired by former Federal Reserve Chairman Paul Volcker, the rule forbids proprietary trading, or the use of a bank’s own funds to make speculative bets. This has two main aims: prevent losses on such trades from reducing banks’ ability to lend, and cut traders off from the taxpayer subsidies implicit in federal deposit insurance, emergency central-bank credit and government bailouts.

In recent days, big banks, investment managers and even the governments of Germany, Japanand the U.K. have lamented what they see as the rule’s adverse effects. Their primary complaint relates to an exemption -- inserted in the legislation by the finance industry’s lobbyists -- that allows banks to engage in the business known as market making. This useful activity, which helps customers buy or sell financial instruments, is dominated by a handful of U.S. banks. It can be difficult to distinguish from proprietary trading because both tend to involve buying and selling for the bank’s own account. Market makers do so in anticipation of clients’ needs. Prop traders do so solely to make bets with shareholders’ and creditors’ money.

Impaired Liquidity

The rule’s critics worry that aggressive efforts to eliminate proprietary trading will complicate market making, leading banks to charge more for the service or pull out of the business entirely. This in turn could prompt investors to demand a higher return to compensate for the extra difficulty in making trades, thus increasing borrowing costs for governments and companies. One study, commissioned by a financial-industry trade group, estimates that the decreased liquidity -- that is, the impaired ability to trade quickly and inexpensively -- could add as much as $43 billion a year in borrowing costs for U.S. corporations, while knocking as much as $315 billion off the value of existing corporate bonds.

There are many reasons to question the validity of such analyses. First, they assume that if the rule puts a chill on market making, the structure of the market would remain the same. Unlikely. If big banks such as JPMorgan Chase & Co. and Citigroup Inc. pulled out or charged more, smaller dealers that are not banks, such as Jefferies Group Inc. and Cantor Fitzgerald LP, would probably step in to fill at least part of the void.

The altered environment might also spur new and more efficient ways to match buyers and sellers, much as high oil prices encourage the development of alternative energy. Corporations and governments might seek to address the lack of standardization in bond issues, a characteristic that makes them much less liquid than stocks.

Second, the Volcker rule’s critics talk as if liquidity is an unmitigated good. Questionable. Economists from Keynes to Larry Summers -- and more recently, Adair Turner, the chairman of the U.K. Financial Services Authority -- have suggested that higher transaction costs could be beneficial because they favor long-term investment over short-term speculative trading.

Beyond that, market makers must always stand ready to take a client’s trade, no matter what. Consider the financial turmoil of 2008, when securities firms were trying to get rid of mortgage-backed investments that were rapidly becoming worthless. Is it really desirable that federally insured institutions be among the buyers in such a situation?

Ignoring Benefits

http://www.bloomberg.com/news/2012-02-15/making-the-volcker-rule-better-for-markets-and-the-economy-view.html