Massachusetts

About $6 billion, apparently.   From the Boston Globe:

Massachusetts lawmakers are proposing bigger pensions for state and municipal employees that could cost $6 billion or more, according to some estimates, triggering a chorus of complaints from fiscal watchdogs and local leaders who say the money is not there to pay for it.

The union-friendly, election-year maneuvers by the House and Senate would increase the annual cost-of-living adjustments that retirees receive as part of their pensions.

The individual numbers are seemingly small, a boost of about $120 a year more for every retiree, which advocates say is well-deserved. But multiplied by over 100,000 former teachers and state workers in the state’s pension system as proposed by the House and by 86,000 municipal retirees as envisioned in a Senate amendment, it would add up fast, say critics.

There is a phrase that is used to describe one danger of a representative democracy:  “bread and circuses”.    Lacking true accountability, and without proper checks and balances in place, politicians are at risk of supporting fiscally irresponsible or short-sighted proposals, solely to gain popularity among enough voters to extend their term in office.

I don’t want to begrudge anyone a COLA on their retirement income, but if there is money to burn, shouldn’t it be spent on other purposes, including shoring up pensions that are currently underfunded, investing the money in services and infrastructure that will be needed for the future, et cetera?

Seen in a Boston Globe blog:

The state’s new subsidized health insurance program will cost “significantly” more than the $869 million proposed in the governor’s FY2009 budget just two months ago, the state’s top financial official said today.

The budget gap looms despite steps taken today to hold down state costs—approval of a tough contract with insurers, and increased premiums and copayments for about half of the 176,000 people enrolled.

The monthly premiums and copays are still modest for low income folks in the state plan. However, I wonder how long it will be before my big fear about state health plans—that the state is obliged to regulate or levy taxes to combat health care costs—starts to come true.

I know that folks in Western Massachusetts just love the idea that they may have to start paying tolls on the MassPike again, thanks to some bad investments.

Seen in the Boston Herald:

The Massachusetts Turnpike Authority yesterday began mulling new tolls on portions of Interstate 93, hiking tolls on the western Pike and reinstating charges at exits 1 through 6 to help rescue the agency’s ailing finances and to eliminate inequities.[...]

Turnpike Executive Director Alan LeBovidge said yesterday that finances took another negative turn after State Street Bank pulled out of a deal to help rescue the Pike from a pair of souring derivative transactions.

The Pike is currently losing $336,000 a month because of high interest charges, and faces losses of more than $850,000 a month in July unless it can reach an agreement to refinance its debt. State Street had been in talks with the Turnpike to re-issue $127 million in debt, but the bank decided Friday to pull its line of credit, officials said.

I suspect that a nontrivial portion of the Massachusetts auto insurance buying public might be a little upset at the timing of the limited deregulation of Mass auto pricing. After all, with new rates generally taking effect on 1 April…well, if you had to reup your policy on 15 March, you might wish that reform could have come just a couple of weeks earlier.

Well, Commissioner Burnes is reminding folks that midterm cancellations are allowed. As seen in Insurance Journal:

Massachusetts car owners who want to see if they can get a better deal under the state’s new managed competition system may decide to opt out of their existing insurance plans early.

State regulators say car owners may want to see if they can lower their costs with the new rules. Under the old system the state set a single rate for all insurers. New competitve rates go into effect April 1.

But Insurance Commissioner Nonnie Burnes cautioned buyers that before canceling an existing policy, owners should find out if their insurer charges a fee for early cancellation.

As you’re likely aware, one of the more dwelt-upon differences between Hillary and Obama has been how they would make their universal health care plans universal. Hillary favors requiring everybody to buy in, while Obama takes a more idealistic approach of, “if it’s cheap enough, people will buy it”.

Personally, on a purely philosophical level, I prefer Obama’s stance of letting folks make their own decisions. However, I think Hillary’s right in recognizing that there will be a free rider drag on the health care system unless consumers are required to buy in, or unless society takes the unpalatable step of barring even emergency treatment unless payment is likely.

Anyway…in case you’re interested, some of the challenge faced in making universal health coverage universal is touched upon in this Insurance Journal article, examining recent developments in the Massachusetts experiment:

The governor added that requiring people to get health insurance — which has proved fundamental in helping reduce the number of insured in the state by 300,000 since the law went into effect — will make no sense going forward if premium costs continue to rise.

Fresh proof of that challenge came on Thursday, when state officials postponed a meeting where they were to consider rate increases for those buying subsidized policies. Bids from the four insurers who were to provide the coverage came in far over budget, so the officials were forced to consider alternatives.

“We have a whole lot more work to do to make the overall system costs affordable to people, and obviously, we want to make sure that we’re not penalizing people for not buying some thing they can’t afford,” Patrick said.

That is the principal criticism that Obama, the Illinois senator who currently is the front-runner for the Democratic nomination, makes as he touts his plan and criticizes Clinton by way of Beacon Hill.

…well, almost.

Seen in Insurance Journal:

The new managed competition auto insurance system being implemented in Massachusetts rewards many bad drivers and penalizes many good drivers based on certain supposedly-prohibited social factors, according to the latest charges by critics.

Many good drivers will pay more and many bad drivers will pay less under managed competition because premium discounts being offered indirectly incorporate credit score, homeownership, education level and other social factors that override the pricing impact of driving record, according to a new report.

The report, entitled ‘How You Drive’ Takes A Backseat to ‘Who You Are’: (Mis)Managed Competition in the New Massachusetts Automobile Insurance Market, was released by two consumer groups – the Center for Insurance Research and MASSPIRG.

I note that they don’t seem to take exception to other, long-accepted rating variables that are correlated to those factors. It seems to me, for example, that one’s income impacts the type of vehicle (or number of vehicles) one drives.

Or, what about the impact of one’s income on one’s ability to afford decent lawyers in the event of a traffic ticket? Heck, let’s not forget what the “driving while black” phenomenon could influence one’s driving record.

Let’s charge everyone the same rate! The middle aged driver driving a modest pickup in a rural area ought to pay the same premium as the teenager driving a sports car in an urban area.

After all, that’s the only way one can completely eliminate correlation between rating classifications and certain demographic attributes.

Folks, let’s have a little bit of sense here. Correlations are impossible to prevent unless there is one rate for all. Instead, in a fair environment, actuaries, underwriters, and product designers seek to pick and weight attributes in a manner that is least correlated to other, socially-frowned-upon and probably-not-predictive-anyway attributes.

And keep in mind, the finer we can slice-and-dice the pool of potential customers, the lower rates we can offer to more folks, partly as a result of the increased accuracy, and partly because of the increased competitive pressures arising from the healthy market.

Seen at the Boston Globe:

Undersecretary of Transportation Jeffrey Mullan said during a budget hearing in Revere that a toll plan was something the administration was considering as a way to close a $19 billion transportation funding shortfall. I-93 is one of the state’s main north-south arteries, running through Boston and to the New Hampshire border, and travelers currently pay no tolls for using it.

Other administration aides have denied tolls are being considered, and at mid-afternoon, Doug Rubin, Gov. Deval Patrick’s chief of staff, said the statement “was not consistent with the administration’s position.”

Rubin added: “Gov. Patrick firmly believes that we must look for reforms and efficiencies throughout our transportation system before we ask toll payers to pay more. He has been clear that adding tolls throughout I-93 is not an option the administration is prepared to consider at this point. He has directed the secretary of transportation to continue to review the system and find ways to achieve savings and efficiencies first before the administration seriously considers any revenue enhancement options.”

It’s nice to see that even in Taxachusetts, it’s known that seeking efficiency within the government is preferable to tax hikes. However, perhaps the Patrick administration would have done better to mention any thoughts of tolling I-93 (or any other interstate in the state) in the context of combating pollution, CO₂ emissions, and congestion…before highlighting the revenue-generation aspects.

I think someone forgot to sensitivity-test a few of the assumptions made when pricing out Massachusetts attempt at imposing universal health care:

The subsidized insurance program at the heart of the state’s healthcare initiative is expected to roughly double in size and expense over the next three years - an unexpected level of growth that could cost state taxpayers hundreds of millions of dollars or force the state to scale back its ambitions.

State projections obtained by the Globe show the program reaching 342,000 people and $1.35 billion in annual expenses by June 2011. Those figures would far outstrip the original plans for the Commonwealth Care program, largely because state officials underestimated the number of uninsured residents.

I don’t know about you, but assessing what happens if things don’t go as planned is a regular part of my analysis when putting together project plans.

Insurance Journal has an article posted discussing Commissioner Burnes’ approving rate filings by Commerce and Safety over Attorney General Coakley’s protests.

Quoting IJ:

Burnes dismissed the AG’s entire analysis, ruling in favor of the insurers on each provision. Burnes suggested that while the AG’s approach might have worked under the previous fix-and-establish system, it was irrelevant under the new managed competition system and that the AG “fails to recognize” that the rules have changed.

Burnes said that while the attorney general wants to challenge individual provisions of rates, as was done under the previous system, a competitive system requires a broader view.[...]

“It is not my task to look at aggregate industrywide data for the purpose of developing an underwriting profits provision that reasonably reflects the average financial needs of a mythical ‘Every Company,’ but is specific to none.”[...]

“It is neither my role, nor the role of the Attorney General, to decide what expenses a company should incur in a competitive insurance market provided no such expenses violate the law. Companies that unwisely spend money will enjoy less success in the market, and this experience alone will alter future conduct,” Burnes wrote.

As someone who’s been grilled a few too many times in difficult rate filings, that’s good reading.

For details on what actually was approved, check out the article.

Um…say what? From Insurance Journal:

The Massachusetts House has approved a bill banning drivers from talking or texting on cell phones while behind the wheel, despite opposition from a lawmaker from a city where authorities say a man sending a message struck and killed a 13-year-old boy in a hit-and-run accident last month.[...]

The most vocal opposition came from Taunton Rep. James Fagan, a Democrat who argued that it’s a giveaway to insurance companies that will impose surcharges on violators. He said a violation would cost him $140 per year in surcharges for six years.

You’re arguing against making it illegal to drive while distracted, on the basis that it gives insurers the ability to surcharge more?

I could launch into a long discussion about how any increased premium revenue would in theory be offset by slightly decreased premiums on law abiding citizens, by pointing out that MVR’s are expensive enough that there’s a good chance violations won’t be surcharged at renewal in many jurisdictions, or even by pointing out that MVR’s are notoriously incomplete and it’s doubtful that folks would be ticketed just for texting without some other chargeable incident occurring (be it reckless driving, or an accident).

However…I’ll settle for observing that someone’s priorities are misplaced.

If there’s a flaw with a no-texting-while-driving law, it’s that there may be other laws that already govern, or that society would be better served with a generic no-driving-while-distracted law. Fear of insurance surcharges is a lousy excuse to oppose legal recognition of an idiotic behavior.