Archive for March, 2010

FACT CHECK: Premiums would rise under Obama plan (AP)

Wednesday, March 17th, 2010 | Finance News

WASHINGTON – Buyers, beware: President Barack Obama says his health care overhaul will lower premiums by double digits, but check the fine print.

Premiums are likely to keep going up even if the health care bill passes, experts say. If cost controls work as advertised, annual increases would level off with time. But don't look for a rollback. Instead, the main reason premiums would be more affordable is that new government tax credits would help cover the cost for millions of people.

Listening to Obama pitch his plan, you might not realize that's how it works.

Visiting a Cleveland suburb this week, the president described how individuals and small businesses will be able to buy coverage in a new kind of health insurance marketplace, gaining the same strength in numbers that federal employees have.

"You'll be able to buy in, or a small business will be able to buy into this pool," Obama said. "And that will lower rates, it's estimated, by up to 14 to 20 percent over what you're currently getting. That's money out of pocket."

And that's not all.

Obama asked his audience for a show of hands from people with employer-provided coverage, what most Americans have.

"Your employer, it's estimated, would see premiums fall by as much as 3,000 percent," said the president, "which means they could give you a raise."

A White House press spokesman later said the president misspoke; he had meant to say annual premiums would drop by $3,000.

It could be a long wait.

"There's no question premiums are still going to keep going up," said Larry Levitt of the Kaiser Family Foundation, a research clearinghouse on the health care system. "There are pieces of reform that will hopefully keep them from going up as fast. But it would be miraculous if premiums actually went down relative to where they are today."

The statistics Obama based his claims on come from two sources. In both cases, the caveats got left out.

A report for the Business Roundtable, an association of big company CEOs, was the source for the claim that employers could save $3,000 per worker on health care costs, the White House said.

Issued in November, the report looked generally at proposals that Democrats were considering to curb health care costs, concluding they had the potential to significantly reduce future increases.

But the analysis didn't consider specific legislation, much less the final language being tweaked this week. It's unclear to what degree the bill that the House is expected to vote on within days would reduce costs for employers.

An analysis by the Congressional Budget Office of earlier Senate legislation suggested savings could be fairly modest.

It found that large employers would see premium savings of at most 3 percent compared with what their costs would have been without the legislation. That would be more like a few hundred dollars instead of several thousand.

The claim that people buying coverage individually would save 14 percent to 20 percent comes from the same budget office report, prepared in November for Sen. Evan Bayh, D-Ind. But the presidential sound bite fails to convey the full picture.

The budget office concluded that premiums for people buying their own coverage would go up by an average of 10 percent to 13 percent, compared with the levels they'd reach without the legislation. That's mainly because policies in the individual insurance market would provide more comprehensive benefits than they do today.

For most households, those added costs would be more than offset by the tax credits provided under the bill, and they would pay significantly less than they have to now.

The premium reduction of 14 percent to 20 percent that Obama cites would apply only to a portion of the people buying coverage on their own — those who decide they want to keep the skimpier kinds of policies available today.

Their costs would go down because more young people would be joining the risk pool and because insurance company overhead costs would be lower in the more efficient system Obama wants to create.

The president usually alludes to that distinction in his health care stump speech, saying the savings would accrue to those people who continue to buy "comparable" coverage to what they have today.

But many of his listeners may not pick up on it.

"People are likely to not buy the same low-value policies they are buying now," said health economist Len Nichols of George Mason University. "If they did buy the same value plans ... the premium would be lower than it is now. This makes the White House statement true. But is it possibly misleading for some people? Sure."

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Honda to recall 410,000 vehicles for brake problem (AP)

Tuesday, March 16th, 2010 | Finance News

DETROIT – Honda Motor Co. will recall more than 410,000 Odyssey minivans and Element small trucks because of braking system problems that could make it tougher to stop the vehicle if not repaired.

The recall includes 344,000 Odysseys and 68,000 Elements from the 2007 and 2008 model years.

Honda said in a statement that over time, brake pedals can feel "soft" and must be pressed closer to the floor to stop the vehicles. Left unrepaired, the problem could cause loss of braking power and possibly a crash, Honda spokesman Chris Martin said.

"It's definitely not operating the way it should, and it's safety systems, so it brings it to the recall status," he said.

The National Highway Traffic Safety Administration has reported three crashes due to the problem with minor injuries and no deaths, Martin said. Honda notified NHTSA of the recall on Monday, he said.

Honda has traced the problem to the device that powers the electronic stability control system, which selectively brakes each of the wheels to keep the vehicles upright during an emergency situation.

When the device, called a "vehicle stability assist modulator," tests itself when the vehicles are started, it allows a small amount of air into the hydraulic brake lines. Over time, an air bubble in the lines can cause a loss of braking power and require that the pedal be pushed farther toward the floor than normal to stop the vehicles, Martin said.

"Although not all vehicles being recalled are affected by this issue, we are recalling all possible units to assure all customers that their vehicles will perform correctly," Honda said in a statement.

Under the recall, which Honda said it volunteered to do, Honda said that owners should wait to get a letter from the company before scheduling a repair because the parts are not yet available. Letters should go out toward the end of April.

Drivers who fear that they've lost braking power should have their dealer check the brakes sooner, Martin said. The dealer can "bleed" air bubbles out of the hydraulic lines, which should fix the problem until the parts arrive for the final repair, he said.

Honda technicians will put plastic caps and sealant over two small holes in the device to stop the air from getting in, Martin said.

The automaker is still preparing a list of affected vehicles. After April 19, owners can determine if their vehicles are being recalled by going to http://www.recalls.honda.com or by calling (800) 999-1009, and selecting option number four.

The safety recall is Honda's second in the past two months. In February it recalled 952,118 vehicles globally due to air bag problems.

It comes on the heels of Toyota Motor Corp.'s spate of safety recalls that include more than 8 million vehicles worldwide for braking and sudden acceleration problems.

One of the Toyota recalls is a braking software problem that causes the pedal of the Prius gas-electric hybrid to momentarily drop toward the floor.

Ford Motor Co. had a similar software problem with its Ford Fusion and Mercury Milan hybrids. The company told owners of 17,600 cars to bring them in for a software update because a glitch can give drivers the impression that the brakes have failed when they haven't.

The automaker called the repairs a "customer satisfaction program" and said it was not a full-fledged recall.

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Stocks rise after Fed pledges to keep rates low (AP)

Tuesday, March 16th, 2010 | Finance News

NEW YORK – The Federal Reserve's mildly upbeat take on the economy and its plans to hold interest rates low gave stocks a lift.

The Dow Jones industrial average rose almost 44 points Tuesday for its sixth straight gain. Broader indexes also posted bigger advances. Prices for Treasurys rose as the Fed said again that it expects to keep interest rates low for "an extended period."

The Fed also said in a statement following its meeting on monetary policy that businesses are spending "significantly" more on equipment and software. The central bank said that employment is stabilizing. That's a brighter assessment of the job market than at its last meeting in late January. Still, the Fed noted that employers remain reluctant to hire.

"That's a major statement. That's saying that that's one major risk that's going to remain for a while," said Guy LeBas, chief fixed income strategist of Janney Montgomery Scott in Philadelphia, referring to cautious employers.

Many investors appear relieved that the Fed will hold rates low to help the economy recover. As the economy improves, the Fed will need to start raising rates to stop prices from rising too fast. For now, though, the Fed repeated its belief that inflation is likely to remain subdued.

The Fed's statement hurt the dollar, which draws support from higher rates. The central bank's assessment of the economy also lessened investors' need to find safe places like the dollar to invest in.

The dollar's slide, in turn, raised commodity prices and the stocks of energy and materials companies.

The Fed also said it still plans to stop buying mortgage-backed securities from Fannie Mae and Freddie Mac at the end of the month. Policymakers also noted that construction of homes has been little changed and remains weak.

"We are passing through a historic phase where the Fed's emergency responses to the Great Recession are now behind us and we're incrementally getting back to business as usual," said Robert Dye, senior economist at PNC Financial Services Group in Pittsburgh.

Stocks rose in morning trading after the Standard & Poor's credit rating agency signed off on Greece's plan to slash its budget deficit. That eased concerns that the country will default on debt, and that its problems might hurt the economies of other European nations. The 16 countries that share the euro agreed to help Greece with loans if necessary.

The Dow rose 43.83, or 0.4 percent, to 10,685.98. It's up 1.3 percent in the past six days and stands at its highest level since Jan. 19.

The Standard & Poor's 500 index rose 8.95, or 0.8 percent, to 1,159.46, its highest close since October 2008.

The Nasdaq composite index rose 15.80, or 0.7 percent, to 2,378.01. The Nasdaq is at its highest level since August 2008.

The stock market has been recording steady gains for more than a month. Investors are looking for signs that the recovery is strong enough to justify the recent climb as well as the steep rebound in stocks in the past 12 months.

Dan Dolan, director of Wealth Management Strategies at Select Sector SPDRs in Garden City, N.Y., said the small moves higher are a sign that investors aren't getting overconfident.

"On the margin these little slow movements are constructive. There is still a lot of doubt in the market, which probably is a good thing."

The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.66 percent from 3.70 percent late Monday.

The dollar fell against other major currencies, while gold prices rose.

Crude oil rose $1.90 to $81.70 per barrel on the New York Mercantile Exchange as the dollar fell. A weaker dollar makes commodities less expensive to foreign buyers.

The Fed's decision on mortgage buying came as investors saw new evidence that housing remains weak. The Commerce Department said Tuesday that construction of homes fell 5.9 percent last month to a seasonally adjusted annual rate of 575,000 units. That was slightly better than the rate of 570,000 units economists polled by Thomson Reuters predicted.

January activity was revised higher to a pace of 622,000 units, the best showing in 14 months. But applications for new permits fell 1.6 percent. They are considered a good indicator of future activity.

General Electric Co. gave a boost to the Dow after the company said it would increase its dividend in 2011. The conglomerate cut its payout two years ago as the recession pounded the company's financial arm. GE shares rose 78 cents, or 4.5 percent, to $18.07.

Among energy and materials stocks, Peabody Energy Corp. rose $1.65, or 3.5 percent, to $48.81, while United States Steel Corp. rose $1.80, or 3 percent, to $62.49.

More than two stocks rose for every one that fell on the New York Stock Exchange, where consolidated volume rose to 4.5 billion shares from 4.2 billion Monday.

The Russell 2000 index of smaller companies rose 5.17, or 0.8 percent, to 679.58.

Stocks rose in Europe after concern about Greece's financial woes ebbed. Britain's FTSE 100 rose 0.8 percent, Germany's DAX index rose 1.4 percent, and France's CAC-40 rose 1.5 percent. In Asia, Japan's Nikkei stock average fell 0.3 percent.

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