Southern states face highest insurance premium hikes

By Misty Williams

The Atlanta Journal-Constitution

Georgia and other Southern states have faced some of the nation's biggest spikes in health insurance premiums in recent years, far outpacing family income growth, a recent study shows.

From 2003 to 2009, insurance premiums for Georgia families jumped 48 percent on average from $8,641 to $12,792, compared with a 41 percent hike nationally, according to a report by The Commonwealth Fund, a nonprofit that focuses on health care policy.

Meanwhile, incomes have failed to keep up with premium increases, the study shows.

Nationwide, premiums made up more than one-fifth of median household incomes for people under the age of 65 in 10 states, many of them in the South and south central U.S., where incomes tend to be lower, according to data from the Medical Expenditure Panel Survey. In Georgia, the average premium accounted for 18.9 percent of median household income in 2009.

“The effect this has had, especially during these difficult economic times, is to force families to trade off wages for benefits or make other difficult choices to balance their family budgets,” Karen Davis, The Commonwealth Fund president, said in an e-mail.

Rising health care costs are also a major problem for entrepreneurs and small business owners, who are finding it increasingly unaffordable, said Ken Thorpe, a health policy professor at Emory University.

“You’re seeing fewer of them offer coverage over time,” he said.

Insurance costs are explicitly linked to what employers are able to pay their workers, said Tim Sweeney, a health care policy analyst with the Georgia Budget and Policy Institute.

“They have to decide where to put their money,” Sweeney said. "Employees want that health coverage.”

Overall increases in insurance costs are also closely tied to the widespread growth of chronic illnesses, such as diabetes and obesity, Thorpe said. Chronic illnesses in adults tend to be more prevalent in the South, compared with Colorado, California or other Western states, where there are often healthier food choices and people are generally more active, he said.

Unless something is done about the growth in chronic illnesses, it’s going to be difficult to get insurance costs down, Thorpe said. “That’s a real challenge moving forward,” he added.

Post office loses 8.5 Billion Dollars

Losses double for U.S. Postal Service

By Aaron Smith, staff writerNovember 12, 2010: 12:46 PM ET

NEW YORK (CNNMoney.com) -- The U.S. Postal Service more than doubled its losses in fiscal year 2010, despite cutting billions of dollars in expenses and trimming its staff.

The Postal Service said its net loss totaled $8.5 billion in the fiscal year that ended Sept. 30. That compares to a loss of $3.8 billion the prior year.

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The Postal Service blamed the deeper losses on the recession and on the continuing growth of e-mail. A change in the interest rates affecting the Postal Service's workers' compensation liability also played a role, the organization said.

Chief Financial Officer Joe Corbett said the losses were worsening despite cuts that generated cost savings of $9 billion over the past two years. Those savings came primarily from the elimination of 105,000 full-time positions -- "more than any other organization, anywhere," Corbett said.

As more communications go electronic, mail volume keeps dropping. The Postal Service delivered 170.6 billion pieces in its 2010 fiscal year, compared to 176.7 billion pieces the prior year. That decline cost the service around $1 billion in lost revenue.

"We will continue our relentless efforts to innovate and improve efficiency," Corbett said. "However, the need for changes to legislation, regulations and labor contracts has never been more obvious."

0:00 /3:07Postal service delivers debt

Postal Service spokeswoman Joanne Veto said her organization has asked Congress to allow it to scale back to five-day delivery, cutting Saturdays, and to discontinue its "unique" requirement to pre-fund its retirement fund -- something no other federal agency is required to do.

Congress has taken no action on these requests, she said.

Auditor Ernst & Young is expected to issue an audit opinion saying that "questions remain" about the Postal Service's ability to make its $5.5 billion pre-funding payment for retiree health benefits, due at the end of fiscal year 2011.

Despite that, Veto said the Postal Service is "fully funded for existing retirement benefits."

Veto also said that mail volume is expected to pick up in fiscal year 2011, although first-class mail -- the service's most lucrative product -- is forecast to continue its decline.

Allstate sues Countrywide

NEW YORK (AP) -- Allstate Corp. has filed a federal lawsuit against Countrywide Financial Corp. over $700 million in toxic mortgage-backed securities that the insurer bought beginning in 2005, only to see their value decline rapidly.

The suit, filed Monday in Manhattan federal court, targets Countrywide, its co-founder and longtime CEO Angelo Mozilo and other executives, as well as Bank of America Corp., which bought the mortgage giant in 2008.

Allstate maintains that beginning in 2003, Countrywide abandoned its underwriting standards and misrepresented crucial information about the underlying mortgage loans that made up the securities it sold. The company, then the nation's largest home loan originator, presented securities backed by the mortgages as safe investments to Allstate and others by concealing material facts, the suit alleges.

The Northbrook, Ill.-based home and auto insurer bought the mortgage-backed securities in question from Countrywide between March 2005 and June 2007. Allstate says its claims are based on analysis of the loans underlying the mortgage-backed securities, internal Countrywide documents that have been made public through a Securities and Exchange Commission lawsuit, and complaints filed against Countrywide by regulators, states' attorneys general and other investors.

Charlotte, N.C.-based Bank of America, the nation's largest bank, said in an e-mail, "We are still reviewing the complaint, but this unfortunately appears to be a situation where a sophisticated investor is looking for someone to blame for a downturn in the economy and losses on an investment it made."

Mozilo's attorney did not immediately respond to a request for comment.

Allstate did not specify damages in the suit but said it seeks, at minimum, to reverse the securities purchases and recover its losses. The insurer posted a loss of $1.68 billion for 2008, largely due to investment losses. It turned a profit in 2009 and has maintained positive income in 2010, but third-quarter results missed analyst expectations.

In October, Mozilo agreed to a $67.5 million settlement with the SEC to avoid trial on civil fraud and insider trading charges that alleged he profited from doling out risky mortgages while misleading investors about the risks. Under terms of the settlement, Mozilo and two other Countrywide executives did not admit wrongdoing.

Countrywide was writing one in six of the nation's mortgages in 2006, more than $490 billion, according to court records from the SEC case. The Calabasas, Calif.-based company spiraled into disaster as it became clear many of its borrowers wouldn't be able to repay mortgages that had required no proof of income or down payment, and contained adjustable rates that quickly made monthly payments unaffordable. The SEC said in its filing that Countrywide executives knew as early as September 2004 it could suffer huge credit losses.

In 2008, Bank of America reached an $8.4 billion settlement with 12 states in 2008 over Countrywide's lending practices. The company also agreed in August to pay $600 million to end a class-action case from former Countrywide shareholders.

In its most recent quarterly report filed with the SEC, Bank of America said it, Countrywide and its Merrill Lynch unit have been named as defendants in suits related to the sales of more than $375 billion in mortgage-backed securities.

Allstate shares fell 9 cents to close Tuesday at $32. Bank of America finished up 7 cents at $13.34.