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I am a non-professional investor. My blog, Wall Street Weather (http://www.wallstreetweather.net/) examines current and future trends that influence the economy, financial markets, and politics - all from a totally unique and entertaining perspective.
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  • Whole Foods’ John Mackey Out To Alienate Core Customers
    Most consumers and investors would not view Wal-Mart (NYSE:WMT) as being a more compassionate company than Whole Foods Markets (WFMI) when it comes to healthcare reform, yet Wal-Mart is more attuned to the anxieties as well as the spiritual needs of its customers than Whole Foods. Yet “Holy” Foods slapped their customers in the face when CEO John Mackey wrote an op-ed piece in The Wall Street Journal (“The Whole Foods Alternative to ObamaCare”).
     
    Mr. Mackey is not shy about expressing his opinions, but after facing an SEC investigation for posing on a Yahoo message board as “Rahodeb” while seeking to takeover Wild Oats, he has once again stepped over the line in neglecting to separate his personal opinions from the “core values” of the public company he co-founded. 
     
    Whole Foods has built their business around the aura of not being any old supermarket, but a place for better educated more health conscious consumers to shop. These target customers have been sold on the value of paying extra for organic, “fair trade,” and more environmentally friendly products. These customers are more likely than the average supermarket customer to be sympathetic toward those who have either been rejected by private health insurers or cannot afford private health insurance premiums. These target customers are more likely to be repulsed by Mackey’s call for a pure Darwinist health insurance system where only the “fittest” would survive medical underwriting.
     
    While reading my analysis of the hypocrisy of Mackey’s proposals, please consider if or when the company can reconcile with its alienated customers.   These core socialistic customers will surely put the Darwinist to the test. The hard fighting, extremely successful CEO may have picked one fight too many and might even be unprepared to defend his already proven unsuccessful Republican sound bites.
     
    Now let’s dissect Mackey’s “eight reforms” that sound like copies of  the daily editorials from the pages of the Wall Street Journal and Investors Business Daily:
     
    Since Mackey states that “equal access to doctors, medicines, and hospitals” is not “an intrinsic ethical right” since it is not found in the Declaration of Independence and the Constitution, why would Mackey proudly proclaim that he offers health insurance to his employees? (Oops, I forgot that Mackey refers to employees as “team members.” This is no different than comrades.) After all, a true “free market” libertarian would say an employer has no obligation whatsoever to their employees beyond pay for services rendered. And it’s not the nature of a Darwinist to show paternal instincts toward anyone other than their own offspring. 
     
    The real reason why Mackey provides health insurance to his team members is as a competitive advantage to keep them entrapped at Whole Foods. “ObamaCare” would create a free and open healthcare system that would allow team members the freedom and choices to obtain the insurance plan that best suits their personal needs rather than the healthcare choice made by Whole Foods. This is true “personal empowerment.” 
     
    Yet the combination of Whole Foods $1,800 annual HSA contribution and the plans $2,500 deductible only leaves employees with a potential $700 out of pocket expense without considering co-pays. Whole Foods also pays 100% of the premiums for the 89% of company team members who work 30+ hours per week. This tiny “doughnut hole” provides little incentive for Whole Foods employees to be cost conscious about medical expenditures. In fact, major private insurance companies have stated in their earnings calls that employer contributions toward the deductible of high deductible plans have actually discouraged any cost savings. Insurance companies have admitted that this disincentive of employees to reduce their medical expenses is causing them to raise premiums. To break the myth, high deductible plans only work when employees actually forgo medical treatment entirely.
     
    Mackey’s point to “make costs transparent so consumers understand what healthcare treatments cost” will only work if employers stop subsidizing high-deductible HSA plans AND doctors and medical providers are freely transparent in disclosing prices.
     
    I agree with Mackey the tax laws should be equalized so individuals receive the same tax benefit purchasing insurance as employers do, but Mackey does not want to equalize the law so individuals are guaranteed access to health insurance the same as employees are.
     
    Mackey and his free market comrades believe people should be able to cross state lines to purchase policies offered in other states by out of state insurance companies. This already exists now through United Healthcare’s (NYSE:UNH) Golden Rule Insurance Company and United’s plan for AARP members 50+. However, buying an out of state plan usually provides less consumer protections than purchasing a plan from a health insurance company licensed to sell policies in your state.
     
    I agree with Mackey that we need tort reform which could eliminate a lot of the wasteful costs associated with doctors practicing defensive medical care for fear of malpractice suits. Yet for years Republicans have complained about the need for tort reform, yet did nothing even when they controlled Congress and the White House.
     
    The same goes for Mackey complaining about the spiraling federal deficit. I don’t recall any op-ed pieces from Mackey about the costs of the wars in Iraq and Afghanistan that far exceed even the most anti-ObamaCare cost estimates, the tax cuts that were not “paid for,”  the billions in bailouts for Wall Street and the auto industry, etc. that all began during the Bush Administration.
     
    Mackey “wants to repeal government mandates regarding what insurance companies must cover.”  I’m assuming Mackey means you shouldn’t have to purchase a policy with excessive benefits, but healthcare reform should create minimum federal standards to ensure consumers have catastrophic coverage. 
     
    Mackey wants to “enact Medicare reforms that create greater patient empowerment, choice and responsibility” but fails to describe what that would entail. Mackey, the Republicans, and some Democrats talk about the need to lower the cost of Medicare, yet these are the hypocrites who are getting the seniors to oppose healthcare reform by telling them in TV commercials that they won’t be able to get as many MRIs and CT scans as they want and that if more people get healthcare seniors will have to wait longer to get a doctor’s appointment. Essentially the opposition is screaming to reduce costs but fights every attempt to do so.
     
    And what’s John Mackey’s solution “to help the millions of people who have no insurance and aren’t covered by Medicare, Medicaid or the State Children’s Health Insurance Program”? Mackey wants to “revise tax forms to make it easier for individuals to make a voluntary, tax-deductible donation” so these people can purchase insurance. Most people want to be self-sufficient and would prefer reforms that make healthcare regulations a level playing field than accept charity care. Besides, Mackey conveniently forgets the millions of people who cannot obtain a policy at any price due to the discrimination of medical underwriting. 
     
    Mackey believes that “70% of all healthcare spending is mostly preventable if individuals take responsibility for their health through proper diet, exercise, and other healthy lifestyle choices.” While I wholeheartedly agree with him, there are many other ailments and medical situations that can arise in spite of living a healthy lifestyle. Do you deny care to the baby born with Down syndrome, the teenager with cancer, or a person with motor neurone disease such as scientist Stephen Hawking, who despite Mackey’s assertions about healthcare in England said he wouldn't be here today if it were not for the NHS.”If healthcare in Canada and England was a bleak as Mackey and his free market friends describe, the dead bodies should be littering the streets there.
     
    As Mackey himself admitted on last week’s earnings call, the majority of items that Whole Foods sells are “a bunch of junk.” Which means that John Mackey’s company is contributing to that 70% of healthcare spending he states is “mostly preventable.” 
     
    Disclosure: I made a nice profit selling my WFMI shares August 5.  The profit will more than cover the extra gas and extra cost to purchase the items I used to buy each week at Whole Foods.  
     
    Aug 12 11:49 PM | Link | Comment!
  • Speculators Betting Sugar Will Bring Sweet Returns
    Beyond sweetening drinks, candy, and ice cream, sugar is an ingredient in more food products and restaurant menu items than most people realize. 

    Raw sugar prices have climbed to a three year high as bad weather threatens crop yields in Brazil and India, the world’s largest sugar producers. 

    In “Sugar prices head towards the sky,” the Financial Times reports that traders are betting that “the physical market will be at its tightest between November and April.  They forecast that the price peaks will be seen in the ICE March 2010 raw sugar contract.”

    What’s interesting is that the planetary picture correlates to traders’ bullish sentiment.  Read the rest at WallStreetWeather.net

    Tags: Commodities
    Jul 31 7:25 PM | Link | Comment!
  • The Healthcare “Haves” Don’t Realize Their Risks

    Politicians and the special interests that support them want to scare the public into believing that healthcare reform will bring rationing, yet they refuse to admit that our current system operates under extreme rationing.  By covering certain groups of people through employer-based plans, Medicare for seniors, and Medicaid for the poor, the healthcare industrial complex can lull a large enough population of so-called “haves” into mistakenly believing that as bad as the system is now, they’ll end up with less if major reforms are instituted. 

    Separating the reality from the rhetoric, the people who perceive they have the most to lose by healthcare reform would actually stand to gain by it.  So let’s start with the so-called “haves” – people who have employer-sponsored insurance to understand how vulnerable they really are. 

    Employer-Sponsored Health Insurance:
    For all the speculation about employers dropping coverage if health reform is instituted, employees should understand that an employer is under no obligation whatsoever to provide health insurance to its workers under our current system.  Employers can drop coverage at any time.  In a tough economic climate where there are far more workers than jobs to fill them, employers know they could easily find people who would accept a job without health coverage.   

    One of the favorite buzzwords that Republicans and the so-called “free market” crowd like to use is “choice.”  They proclaim that if the government offered a “public option” to compete against private insurance plans that would limit healthcare choices.  Yet employees do not have a “choice” now.  If you don’t like your employer’s plan, there’s nothing you can do about it. 

    Employer-sponsored health insurance is never portable.  If you lose or leave your job, you lose your insurance.  This is why both sides of the healthcare debate are being misleading when they state that “if you like your current coverage and your doctor, you can keep them.”  If you change employers, most likely your new employer offers a different insurance plan with a different network of doctors and providers. 

    Employer-sponsored insurance is group insurance, meaning that you cannot be rejected for any medical reason.  But when you start a job with a new employer, your new coverage will not cover a pre-existing medical condition for a certain period of time (anywhere from the first six months to one year depending on what state you live in).  For example, a diabetic is responsible for paying for 100% of their treatment costs during the period of exclusion. 

    The nation’s largest employers self-insure and hire a health insurance company to act as the plan’s administrator.  Medium-sized businesses purchase insurance from a health insurance company.  And health insurers are allowed to medically underwrite all groups except those companies of 50 employees or less in most states.  The “free marketers” try to convince young people to be opposed to healthcare reform by saying they would pay more if everyone in America had to have health insurance.  Yet if you’re young and most of your coworkers are middle aged, adverse selection by the health insurers insures your policy’s benefits will be lower and your premiums higher than if you worked for a company where most of the employees are in their twenties. 

    Even if an employee believes they are following the rules of their employer’s plan, they could face some unexpected expenses.  For example, you could have surgery performed by an in-network plan surgeon at an in-network hospital or outpatient facility.  But if an out-of-network anesthesiologist or other non-network provider participates in the procedure, your employer’s policy may not cover their costs associated with the procedure.  You will be responsible for paying the difference (“balance billing”).  Saying you didn’t know will not excuse you from paying the bill. 

    Many people who know they would not pass medical underwriting or have a chronic condition stay in a job they despise just to keep health coverage for themselves or a family member.  Or they won’t change jobs because they cannot afford to pay for care during the pre-existing condition exclusionary period.  So how much “freedom” and “choice” does an employee actually have if they live in fear of losing their employer-based coverage? 

    Individuals:
    So what if you don’t have employer-sponsored insurance, you’re not old enough for Medicare, and not poor enough for Medicaid?  You could try to obtain an individual policy.  Try is the operative word as individual health insurance policies are medically underwritten.  Far more applicants will be rejected than accepted. 

    Most people are under the illusion that only people with a “pre-existing condition” get rejected for individual health insurance.  They mistakenly believe that a pre-existing condition refers to a person who is obese, has diabetes, cancer, AIDS, had a heart attack, etc.  While this is correct, the public should understand that insurance companies define a pre-existing condition to be anything that they believe could be an underwriting risk.  High cholesterol, blood pressure, allergies, skin rashes, irregular menstrual cycles, past drug or alcohol use, treatment for depression,  participating in extreme sports – all these things and more are grounds for rejection.  Family medical history and any other potentials are treated with the same level of caution by insurers as is they were actual diseases. 

    Once you’re rejected, your medical history is usually sent to the industry’s Medical Information Bureau (MIB) so it can be shared with other insurance companies so they know you’re a bad risk.   

    If you do get a policy, you should be aware the insurance company will do everything possible to reject any sizable claim or try to rescind your policy altogether.  Insurers will make every effort to get your doctor to acknowledge that your condition probably existed before your insurance policy became effective.   

    Additionally, individuals should carefully read their “Certificate of Coverage” to understand what their policy’s annual out-of-pocket maximum is as well as the policy’s benefit limits and exclusions.   Often individual procedure limits such as outpatient surgeries might be substantially less than your overall policy’s annual and lifetime limits.   

    Uninsured:
    The politicians and the free marketers believe a hospital’s emergency room is the solution to those who can’t obtain insurance.  The hospital will stabilize your condition, but then you’re on your own.  If you have any financial assets whatsoever, the hospital will seize them to pay for your treatment.  If you do not, the insured population will subsidize your care. 

    Insurers of last result such as state run high risk pools, are not consistently available in all states.  Rejected insurance applicants often face waiting lists or high risk pools that are closed to new applicants, and the Blue Cross & Blue Shields who used to be insurers of last resort no longer provide that function in most states. 

    Medicare:
    For all the talk that the nation should not want “government-run healthcare,” I have yet to hear a senior citizen who would willingly give up their government plan.   

    Seniors on original Medicare pay 20% of the Medicare rate to Medicare providers for treatment.  Most seniors on original Medicare purchase a “Medigap” supplemental policy to help defray the 20% seniors are responsible for.   

    Medicare Advantage Plans were created during the Bush Administration.  Private insurers are reimbursed more for these plans, yet seniors are more financially at risk than in traditional Medicare.  Seniors in a Medicare Advantage Plan who fail to ensure that all of the providers who treat them are in-network providers, could be faced with a bill if one of the providers involved in their care was out-of- network.  Likewise if a senior on a Medicare Advantage HMO does not obtain a written referral from their primary care physician prior to each specialist visit and medical test/treatment. 

    Seniors who sign up for Medicare Advantage and then want to switch back to the government’s original Medicare program can only do so during open enrollment season each year (November 15 to December 31; coverage takes effect Jan 1). What’s worse is that seniors who switch back to traditional Medicare from a Medicare Advantage plan might not be able to obtain a Medigap policy as these supplemental plans are allowed to medically underwrite.  The cheapest premiums are for seniors who take a Medigap policy at the time they become eligible for Medicare.  Once you’ve developed a pre-existing condition, it’s too late for Medigap coverage. 

    Medicare Part D (prescription drug plan) was created during the Bush Administration.  In keeping in line with their “free market mantra,” only private insurers offer Part D coverage.  Healthcare reform would mitigate the “doughnut hole” in Part D. 

    Conclusion:
    Now that you know what the risks are under our current system, it’s time for everyone to acknowledge that rationing is running rampant and getting worse every year.  Isn’t it better to develop a new healthcare system that prohibits the rationing I’ve described while only permitting rationing based upon effectiveness of care? 

    No disclosures.

    Jul 27 3:16 PM | Link | Comment!
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