Health Insurers Offer to Accept All Applicants, on Condition

WASHINGTON — The health insurance industry said Wednesday that it would support a health care overhaul requiring insurers to accept all customers, regardless of illness or disability. But in return, the industry said, Congress should require all Americans to have coverage.

The proposals, put forward by the insurers’ two main trade associations, have the potential to reshape and advance the debate over universal health insurance just as President-elect Barack Obama prepares to take office.

In separate actions, the two trade groups, America’s Health Insurance Plans and the Blue Cross and Blue Shield Association, announced their support for guaranteed coverage for people with pre-existing medical conditions, in conjunction with an enforceable mandate for individual coverage.

In the absence of such a mandate, insurers said, many people will wait until they become sick before they buy insurance.

Members of Congress said Wednesday that they wanted to pass legislation next year, as proposed by Mr. Obama, to expand coverage and rein in health care costs.

The new position taken by the insurance industry — the industry that helped sink President Bill Clinton’s plan for universal health coverage in 1994 — could ease the way for passage of such legislation.

But the industry’s position differs from that of Mr. Obama in one significant respect. Insurers want the government to require everyone to have and maintain insurance. By contrast, Mr. Obama would, at least initially, apply the requirement only to children.

In the race for the Democratic presidential nomination, that was a major point of contention between Mr. Obama and Senator Hillary Rodham Clinton of New York. Mrs. Clinton said that everyone should be required to have coverage. Mr. Obama said he wanted to be certain that insurance was affordable and available to all before considering such a broad requirement.

Asked on Wednesday for reaction to the insurance industry’s proposals, Tommy Vietor, a spokesman for the Obama transition team, said, “We are declining comment.” Mr. Vietor cited Mr. Obama’s view that “we have only one president at a time.”

In many cases, people with cancer, diabetes, traumatic brain injuries or other serious afflictions have found that they cannot obtain health insurance at any price.

Research suggests that some insurers turn down 10 percent or more of applicants for individual coverage because of their pre-existing medical conditions.

Donald G. Hamm Jr., president of Assurant Health, explained why the industry thought an individual mandate must be coupled with any ban on such underwriting practices.

“In the individual market, people can choose whether or not to apply for coverage,” Mr. Hamm said in an interview. “If they know they can obtain coverage at any time, many will wait until they get sick to apply for it. That increases the price for everyone.”

Insurers say that is just what happened in several states that prohibited insurers from turning down applicants on the basis of their health status.

The new policy statements are silent on two important issues: how to enforce an individual mandate and how to regulate insurance prices, or premiums.

While insurers would be required to sell insurance to any applicant, nothing would guarantee that consumers could afford it. Rate regulation promises to be a highly contentious issue, since it pits the financial interests of insurers against those of consumers.

At present, insurance premiums are generally regulated by the states and often vary according to a person’s age, sex, medical history and place of residence within a state. In the individual market in most states, a person with a history of serious or chronic illness can be charged much more than a healthy person of the same age and sex.

Mr. Hamm, a member of the board of America’s Health Insurance Plans, said the group might offer recommendations to define “a fair and appropriate rating structure.”

Alissa Fox, a vice president of the Blue Cross and Blue Shield Association, said the individual mandate was an indispensable corollary of any approach forbidding insurers to reject applicants because of health status.

“Insurance works best when everyone is in the pool,” Ms. Fox said. “You need healthy people in the insurance pool to help pay for sicker individuals who are much more motivated to buy coverage.”

Insurers did not say how the government should enforce an individual mandate: whether through fines, tax penalties or other means. Politicians have also been reluctant to specify details of enforcement, which could prove highly unpopular.

Taken from : http://www.nytimes.com/2008/11/20/us/20health.html?_r=1&ref=business&oref=slogin

Pakistan protests over U.S. missile strikes

ISLAMABAD (Reuters) – Pakistan summoned U.S. ambassador Anne Patterson on Thursday to protest over missile strikes launched by pilotless drone aircraft against militant targets in Pakistan. The protest came a day after a suspected U.S. missile strike on Pakistani soil killed five militants, possibly including an Arab al Qaeda operative. There have been at least 20 strikes in the last three months, reflecting U.S. impatience over militants from Pakistan fueling the Taliban insurgency in Afghanistan and fears that al Qaeda fighters in northwest Pakistan could plan attacks in the West. Pakistan says the attacks violate its sovereignty, undermine efforts to win public support for the fight against militancy, and make it harder to justify the U.S. alliance. Wednesday's attack on Bannu district was unusual in that it took place deeper in Pakistani territory, in an area outside the semi-autonomous tribal lands bordering Afghanistan where most other attacks have focused. Foreign Secretary Salman Bashir lodged "a strong protest" over the "two missiles fired by U.S. drones on a residential compound in Bannu district," a foreign ministry statement said. Bashir "stressed that these attacks must be stopped." An embassy spokeswoman confirmed the ambassador had been summoned and said any message from the Pakistani government would be conveyed to Washington, without elaborating further. Speaking in the National Assembly, Prime Minister Yousaf Raza Gilani called the missile attacks "intolerable" and voiced hope President-elect Barack Obama's government would show more restraint. "These kinds of acts are counter-productive ... it adds to our problems," Gilani said, adding he was sure when "Obama's government is formed, these attacks will be controlled." A diplomatic storm blew up in September after a U.S. commando raid, and there has been no incursion by ground troops since. Addressing NATO's military committee in Brussels on Wednesday Army Chief General Ashfaq Kayani also urged a halt to the use of unmanned "combat aerial vehicles within Pakistani territory." Kayani met NATO Secretary-General Jaap de Hoop Scheffer, and held meetings with Admiral Michael Mullen, U.S. chairman of the joint chiefs of staff, and a French defense chief. Earlier this week, the Foreign Ministry denied Pakistan had a secret agreement with Washington to publicly protest the attacks, while privately acquiescing. Missile-armed drones are primarily used by U.S. forces in the region. The United States seldom confirms drone attacks. Pakistan does not have any combat drones. The Arab killed in the attack in Bannu was identified by a Pakistani intelligence officer as Abdullah Azam al-Saudi. Bannu district in North West Frontier Province lies at the gateway to North Waziristan, a hotbed of Taliban and al Qaeda support. The officer, based in neighboring Dera Ismail Khan district, described al-Saudi as a coordinator between al Qaeda and the Taliban in Pakistan. The officer requested anonymity due to the sensitivity of the subject. There was no other corroboration of al-Saudi's death. Taliban fighters cordoned off the area around the destroyed house, but photographers took pictures of young boys holding pieces of the missile that destroyed it. The Pakistani Taliban, in a statement issued after a meeting of commanders in North Waziristan, threatened revenge attacks outside the tribal lands if missile attacks continued.

"OPERATION LIONHEART"

While the row over missile strikes simmered, NATO's spokesman in Kabul, Brigadier General Richard Blanchette, said coordination with Pakistan has been improving.

Pakistani forces are battling Islamist fighters in other parts of northwest Pakistan, notably Bajaur, a region at the other end of the tribal belt from Waziristan, and Swat valley.

A spokesman for Pakistan's paramilitary forces said on Thursday that 24 al Qaeda-linked militants, including 11 foreigners, had been killed as the military used artillery and jet fighters in support of the ground troops.

The military says more than 1,500 militants have been killed in Bajaur since August while 73 soldiers have also died, though independent casualty estimates are unavailable.

Western forces in Afghanistan have launched "Operation Lionheart" to put pressure on the border with Bajaur, to bottle up insurgents where they can be attacked, Blanchette said.

Taken from : http://news.yahoo.com

Loan Modifications For Banks Could Mask Future Losses

NEW YORK -(Dow Jones)- Banks modifying mortgage terms for homeowners could actually undermine the banking industry's return to health by masking possible losses.

Historical evidence suggests that even when lenders modify mortgage terms for at-risk borrowers - cutting interest rates, principal or extending the loan's life - a hefty portion of those borrowers default within a year or two anyway. Besides, in many cases with subprime loans, so many borrowers had so markedly inflated their income status, that even a vastly modified loan still won't make it affordable for their true earnings.

Banks and politicians have been pushing the use of mortgage modifications as a way of keeping at-risk borrowers out of foreclosure. They hope that will stanch the steep nationwide slide in housing values. Loan modifications can also provide some accounting and earnings relief for banks, since lenders can re-list many modified delinquent loans as current loans, so long as the borrower resumes regular payments once the loan is modified.

Many industry officials say loan modifications will help a large number of borrowers avoid foreclosure, since banks are working to identify at-risk borrowers before they default. They are focusing intensely on borrowers of adjustable rates mortgages whose rates are soon scheduled to reset higher. Just two weeks ago, for example, JPMorgan Chase & Co. (JPM) disclosed that it prevented 250,000 home foreclosures since it started to actively modify mortgages in early 2007.

But loan modifications have shown a glaring historical weakness: According a 2007 Fitch Ratings report, 35% to 40% of borrowers default on their modified loans within 12-24 months. Research from Moody's Investors Service and other firms have found similar, albeit bleaker, statistics. Both the Fitch and Moody's reports collected information from mortgages that lenders sold to third-party investors via mortgage-backed securities, and those pools of mortgages include both prime and subprime loans.

Dr. Joseph Mason, a banking professor at Louisiana State University's business school, aggregated that data in a report last year that critiqued the practice of modifying loans. He puts the benchmark success rate for modified loans at 50% .

Mason says, furthermore, that there isn't yet evidence to suggest that banks will see lower re-default rates among mortgages sitting on their balance sheets, as compared to loans sitting in mortgage-backed securities.

"Unless we get into skewed outcomes," where bank-held loans outperform securitized loans, "or vice versa," he says, "then we wouldn't expect to see any difference."

But federal banking regulators, including the Federal Deposit Insurance Corp., and even Federal Reserve Chairman Benjamin Bernanke, have nonetheless been pushing banks to offer modifications to mortgage borrowers.

"The FDIC believes modifications should be systematic and sustainable," a spokeswoman for the FDIC said.

What's more, the FDIC is itself working to modify mortgages written by IndyMac Bancorp Inc. (IDMCQ), the California bank company that the FDIC seized in July - at the time, the largest bank failure in the nation's history.

"The modified (IndyMac) loans will be underwritten to an affordable debt-to- income ratio" of 38%, said FDIC Chairman Sheila Bair, in an August statement. That means the FDIC will modify IndyMac borrowers' loans in a way that a loan's monthly payments are equal to 38% of a borrower's monthly income.

But Mason cites research suggesting that borrowers substantially inflated their incomes in about 70% of loans, meaning it may be highly difficult to modify many loans in a way that reflects the borrowers' true incomes - as opposed to the incomes borrowers submitted on the original loan applications, often with the help of mortgage brokers or loan officers.

"If modifications are given to borrowers that are not well suited for homeownership in the long term," Mason writes in his report, "the loan modification only serves to delay the inevitable."

And yet, banks struggling with rising delinquencies may be able to use modifications as a way to re-list delinquent loans as current, and thereby disclose stronger balance sheets.

Some banks have undertaken conservative policies to ensure that modified loans are not re-classified as current loans, only to lapse back into default within months, and produce yet another spike in so-called "nonperforming" loans, or loans in default.

Both Wells Fargo & Co. (WFC) and Wachovia Corp. (WB) - which Wells Fargo is set to purchase by year's end - wait until borrowers have made six consecutive payments on a modified loan before they classify such a loan as current.

There is no specific requirement for how many payments borrowers must make before banks can re-classify a modified loan as current. While Wells Fargo and Wachovia have adopted decidedly conservative standards, banks are apparently free to adopt less stringent policies, and more quickly re-classify modified loans as current. Such practices could later produce a spike in reports of bad loan.

Lana Chan, an analyst at BMO Capital Markets, therefore says that loan modifications could "potentially be delaying the inevitable."

Taken from : http://money.cnn.com/news/newsfeeds/articles/djf500/200811181400DOWJONESDJONLINE000588_FORTUNE5.htm