January 8, 2019
From NYC to Boise, Babies are Pricey
If a new baby is in the works for the new year, prepare yourself now.
Despite the pure joy of having a child, the fact of the matter is that the basics – daycare plus a second bedroom, extra health insurance, food and personal items – are expensive even in Little Rock, Arkansas, which is at the bottom of Magnify Money’s new ranking of the cost of adding a family member in 100 U.S. major cities. Monthly expenses for an infant exceed $700 a month in Little Rock, or nearly $8,500 a year.
The big budget buster everywhere is day care, which is a financial shock for most new parents. The bills can easily reach or exceed $1,000 a month, and day care represents 70 percent to 80 percent of the money spent on a baby, whether the parents live in New York City, Birmingham, Alabama, or Boise, Idaho.
Magnify Money’s estimates do not even include the college savings parents should start socking away immediately. They do include the federal tax credits for children.
Click here to get a rough idea of what your new baby will cost where you live. …Learn More
December 6, 2018
ACA Premiums Drop in Many States
Premiums for the benchmark silver health insurance plans under the Affordable Care Act will go down 1 percent to 2 percent, on average, in 2019.
This sounds like good news to people scurrying to enroll by the Dec. 15 deadline. But a more accurate characterization is that this slight decline is a break from what had generally been a relentless pace of premium hikes in 2016 through 2018.
Cynthia Cox, director of health reform and private insurance for the Henry J. Kaiser Family Foundation, said insurance companies in many states had previously “raised premiums more than they had to” amid the uncertainty in the program’s early years. These hikes boosted their profits, but they’ve “put the brakes on premium increases,” which they are required to justify to state regulators.
On close inspection, however, the picture is far more complex. Each state regulates its insurers, and individual state markets have gone in many different directions in the five years since the Affordable Care Act (ACA) went into effect, a Kaiser study shows. The unique developments in each state market reflect a combination of state and federal regulatory changes, insurers’ constant repricing to market conditions, and insurers’ entrances into, and exits from, the state insurance exchanges.
Here are a few examples, based on insurance companies’ rate filings with state regulators:
- Tennessee residents will see the biggest decline in 2019 premiums, a drop of 26 percent for the benchmark silver plan, which is the second lowest-cost silver plan. Tennessee insurers initially had set some of the lowest premiums in the country. In a 2018 adjustment, Cox said they overcorrected them to the point that the policies became “particularly overpriced.” Next year, insurers will drop the premiums as they continue their efforts to find the proper pricing for the state’s insurance market. Somewhat similar stories have played out in New Mexico, New Hampshire, and Pennsylvania.
- North Dakota premiums are going in the opposite situation. Two years ago, Cox said, insurers there were “losing money quickly,” so they raised their 2018 rates by 8 percent. This increase apparently wasn’t enough, and the benchmark silver premium will rise by another 21 percent next year.
- Alaska’s premiums got so high that the state stepped in. In 2017, the federal Centers for Medicare & Medicaid Services granted Alaska’s request for a waiver that allowed it to reinsure its health insurance companies to reduce their risk in hopes they would drop their prices. The reform worked. Between 2017 and 2019, Alaska’s benchmark premium has fallen 25 percent.
- New Jersey’s benchmark price will drop nearly 15 percent as a result of a new state law. Last summer, the state instituted a mandate requiring uninsured residents to purchase coverage to replace the federal mandate, which was eliminated. …
November 13, 2018
Millennial Cities and Those Left Behind
Sumat Lam, a recent college graduate, was skeptical when his Silicon Valley employer transferred him to Austin, Texas. What he found was a high-tech mecca that defies the stereotypes of 10-gallon hats and Southern drawls.
Google, Apple and Amazon have established outposts in the “Silicon Hills” of Texas’ Hill Country. The young workers moving there are “bringing in their culture and influences from Boston and New York,” Lam told VOA News.
Taylor Hardy lives in Dayton, Ohio, but she might as well be living on a different planet.
This young nursing assistant can barely eke out a living. Her plight is shared by too many others in this former industrial hub that has been in a downward spiral that accelerated after plant closings by National Cash Register and General Motors during the last recession. The loss of high-quality blue-collar jobs contributes to Dayton’s 35 percent poverty rate – nearly three times the national rate.
Hardy, a single mother, and the boyfriend who lives with her, earn a total of $27,000 a year – she has $5 in her bank account. “I work all these hours, and I miss all the time with my kids to make … nothing,” she said in the PBS Frontline documentary “Left Behind America.”
The contrasting fortunes in these two cities – Austin versus Dayton – are playing out around the country. Young professionals are streaming into Millennial boomtowns from San Francisco to Boston, where growth seems almost unstoppable. But outside these hot spots are struggling Midwestern and Northeastern cities that have become deserts, devoid of opportunity for their young adult residents.
“Historically, many young American adults have left their hometowns to chase better opportunities,” said Kali McFadden, senior analyst at Magnify Money. “But not all millennials have the same work opportunities,” she said about her firm’s new city ranking of the employment available to young workers. …Learn More
November 1, 2018
US Inequality is Feeding on Itself
The fact that the richest Americans are grabbing such a big slice of the pie isn’t exactly breaking news.
What is news is that Wall Street is getting nervous about it. Moody’s Investors Service, a private watchdog for the federal government’s fiscal soundness, has concluded that inequality has reached the point that it threatens a system already being strained by increases in the federal debt. But Moody’s also noted that inequality is contributing to slower economic growth, which further aggravates inequality.
The high level of U.S. inequality today “sets us apart” from Canada, Australia, and several European countries, Moody’s said in an October report, “Widening Income Inequality Will Weigh on U.S. Credit Profile.”
Moody’s central concern is how inequality will affect the federal budget. When the economy slows in periods of high inequality, there are more lower-income households requiring support from costly programs like Medicaid. Federal tax revenues also decline during any downturn, leaving less money to pay for these means-tested programs and for social insurance programs like Social Security and Medicare.
The firm’s second concern is that inequality is a drag on the economy. When the middle-class is squeezed, for example, they have less money to buy consumer goods. And when the economy slows down, inequality can increase, as it did in the years after the 2008-2009 recession.
This has played out in a widening wealth gap, Moody’s said. The typical lower and middle-income worker’s net worth – assets minus liabilities – has shrunk since the recession, while net worth rose sharply for the people at the top.
One big reason for widening inequality is the stock market. Even though the market declined sharply this month, the post-recession bull market has beefed up investment portfolios – but only for the 50 percent of Americans who own company shares or stock mutual funds.
A second contribution to a widening wealth gap, post-recession, has been housing. A home is often the most valuable asset people own, so the steep drop in house prices and the spike in foreclosures were big setbacks for people who aspired to build wealth through homeownership. …Learn More
October 2, 2018
Subprime Crisis Lingers for Minorities
As Americans were riveted to the spectacle of teetering Wall Street behemoths in 2008, another ruinous tragedy was beginning to unfold: a national foreclosure crisis.
Black and Hispanic homebuyers were hit hardest by the foreclosures that resulted from unbridled sales of predatory subprime mortgages, which exceeded $500 billion annually at the market’s peak.
In the decade since the financial crisis, the stock market has rebounded smartly, but the damage to minority communities remains. At the height of the foreclosure crisis, entire neighborhoods were littered with bank foreclosure sales and realtors’ signs advertising sales of the properties.
About 30 percent of black and Hispanic borrowers’ homes in total have gone into foreclosure in the years since the housing market crash, compared with 11 percent of whites’ homes.
“For [minority] families, financially destructive foreclosure events delayed and potentially derailed the dream of homeownership,” the Federal Reserve Bank of St. Louis concluded in a report on the continuing impact of the financial crisis.
But the damage goes deeper than that. Because home equity is often the most valuable asset that people own, the foreclosure crisis “severely damaged the balance sheets of minority families,” the Fed said. …Learn More
September 27, 2018
Medicaid Expansion Reduces Unpaid Debt
One in five Americans is burdened by unpaid medical bills that have been sent to a collection agency. Medical debt is the most common type of debt in collections.
This burden falls hardest on lower-paid people, who have little money to spare between paychecks. These are the same people the 2014 Medicaid expansion under the Affordable Care Act (ACA) was designed to help. Some 6.5 million additional low-income workers were getting insurance coverage just two years after Medicaid’s expansion, which increased the program’s income ceiling for eligibility in the states that chose to adopt the expansion.
The evidence mounts that this major policy has improved the precarious finances of vulnerable households.
A new study of the regions of the country with the largest percentage of low-income residents found that putting more people on Medicaid has reduced the number of unpaid bills of all kinds that go to collection agencies and cut by $1,000 the amounts that individuals had in collections.
The impact in states that did not expand Medicaid is apparent in Urban Institute data. Five of the 10 states with the highest share of residents owing money for medical bills – North Carolina, South Carolina, Oklahoma, Tennessee and Texas – decided against expanding their Medicaid-covered populations under the ACA option. About one in four of their residents have medical debt in collections.
That’s in contrast to Minnesota, which has one of the most generous Medicaid programs in the country and the lowest rate of medical debt collection of any state (3 percent of residents), said Urban Institute economist Signe-Mary McKernan.
“Past due medical debt is a big problem,” she said. “When [people] have high-quality health care, it makes a difference not only in their physical health but in their financial health.” …
August 30, 2018
Why US Workers Have Lost Leverage
A 1970 contract negotiation between GE and its unionized workforce is unimaginable today.
A strike then slowed production for months at 135 factories around the country. With inflation running at 6 percent annually, the company offered pay raises of 3 percent to 5 percent a year for three years. The union rejected the offer, and a federal mediator was brought in. GE eventually agreed to a minimum 25 percent pay raise over 40 months.
“They said we couldn’t, but we damn sure did it,” one staffer said about his union’s victory.
Former Wall Street Journal editor Rick Wartzman tells this story in his book about the rise and fall of American workers through the labor relations that have played out at corporate stalwarts like GE, General Motors, and Walmart.
Critics use examples like GE to argue that unions had it too good – and they have a point. But that’s old news. What’s relevant today is that the pendulum has swung in the opposite direction, and blue-collar and middle-class Americans seem barely able to keep their heads above water even in a long-running economic boom.
New York University economist Edward Wolff in a January report estimated that workers lost much ground in the 2008 recession and never recovered. The typical family’s net worth, adjusted for inflation, is no higher than it was in 1983 and far below the pre-recession peak. Granted, workers’ wages have gone up recently, though barely faster than inflation, but they had been flat for 15 years. Workers are also funding more of their retirement and health insurance.
Wartzman’s theme in “The End of Loyalty: the Rise and Fall of Good Jobs in America” is that the system no longer works for regular people, because companies have weakened or broken the social contract they once had with their workers.
The loss of employer loyalty is one way to look at the state of labor today. The loss of workers’ leverage against global corporations is another. …Learn More