Moneybox
A blog about business and economics.

June 25 2015 12:19 PM

Obamacare Is Still Alive, Still Pretty Awesome, Even in States That Hate It

"This law is working, and it's going to keep doing it," President Obama said this morning during his press conference celebrating the Supreme Court's decision to spare the Affordable Care Act from partial annihilation. As much as Republicans might protest otherwise, the comment was pretty much a straightforward factual statement, at least if you judge health reform against its primary goal of reducing the uninsured rate.  

One of the amazing bits about Obamacare is just how well it seems to be succeeding in parts of the country that have rejected its core pieces. Remember that the last time the court passed judgment on the ACA, it ruled that states had the right to turn down its Medicaid expansion. Since then, 21 states have abstained from the giant wad of federal cash being offered to them in order to cover more of their low-income population. And yet, the uninsured rate is still down by about one-third in the opt-out states, as shown in this chart from the Urban Institute that Paul Krugman has been linking to. That's not quite as dramatic as the nearly 50 percent drop seen in states that embraced the Medicaid expansion, but it's impressive nonetheless.

As Krugman has noted, some conservatives will try to argue that the improving economy is responsible for expanding health coverage. And I guess you could argue it's purely a coincidence that the uninsured rate started rapidly dropping around late 2013, right when Obamacare's main provisions started going into effect. And maybe, if you do enough mental somersaulting, I could sort of see how it makes sense that our incomplete, slow-moving jobs recovery would bring us a historically low uninsured population. But the much more simple answer is that a law designed to help people get insurance is in fact helping people get insurace—even in states that have tried their best to sabotage it.

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June 25 2015 11:45 AM

Here Is the Huge Health Care Disaster We Just Averted

Obamacare just won a big victory from the Supreme Court. Again. On Thursday, the court ruled 6–3 to uphold the federal subsidies established by the Affordable Care Act. In his opinion, Chief Justice John Roberts explains that “the combination of no tax credits and an ineffective coverage requirement could well push a State’s individual insurance market into a death spiral. It is implausible that Congress meant the Act to operate in this manner.” Wait, you say! What exactly is the death spiral? What is this worst-case scenario that we just averted? Above, Slate explains.

June 25 2015 11:19 AM

“Pure Applesauce” and “Jiggery-Pokery”: Linguistic Highlights From Scalia’s Obamacare Dissent

Justice Antonin Scalia may have been on the losing side in this morning's big health care decision, but as usual, he definitely won the day's contest to see who could pack the most hilarious and anachronistic zingers into a dissent. On Twitter, Matthew Lauer has plucked some of the best one-liners. What was the majority opinion? "Pure applesauce" and "jiggery-pokery." Also, "words no longer have meaning." We expect nothing less from the man who brought us "argle-bargle."

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June 25 2015 10:51 AM

In Two Simple Paragraphs, John Roberts Explains Why He Just Helped Save Obamacare Again

Once again, Supreme Court Chief Justice John Roberts has helped save the Affordable Care Act, this time in a 6–3 decision that upheld the government's right to provide health coverage subsidies to residents of states that rely on the federal insurance exchange. We'll have more in-depth coverage of the ruling through the day, but at the moment, I think the two paragraphs from the end of Roberts' opinion really boil down the essence of the case.

A tiny bit of background: The entire case at hand, King v. Burwell, hinges on a brief passage that says Americans qualify for subsidies if they purchase insurance on an exchange "established by the State." The law's challengers argued that this barred the government from giving tax credits to people who bought their coverage through healthcare.gov because their state chose not to set up their own exchange, which, if true, would have basically decimated insurance markets across the country. The law's authors say that the passage was likely a drafting error and that Obamacare was meant to help people buy insurance, regardless of whether they were using a state exchange or the federal site.

I'll let Roberts take it from here. I'm guessing this passage will go down as a lasting statement about judicial humility.

roberts

Other great articles in Slate:

June 25 2015 6:00 AM

These Maps Show What Was at Stake in the Huge Supreme Court Health Care Decision

Update, June 25, 10:36 a.m.: The Supreme Court Thursday morning upheld the Affordable Care Act subsidies in a huge victory for the Obama administration. Some 6.4 million people will keep their tax credits. Here’s what else was at stake in the decision:

Once again the fate of the Affordable Care Act rests in the hands of the Supreme Court. In King v. Burwell, the court is weighing whether the federal government can legally provide insurance subsidies to people who have purchased their health care through one of the federally run exchanges in 34 states. Whatever the court decides could also theoretically extend to three other exchanges—in Nevada, New Mexico, and Oregon—that are state-based but federally supported. Altogether, roughly $1.7 billion in tax credits and the health insurance of more than 6 million people is at stake. It’s arguably the biggest existential challenge to Obama’s signature health care reform since the Supreme Court upheld the individual mandate in 2012.

The crux of the case is a perilous clause buried in the ACA’s hundreds of pages. According to the law’s exact wording, people become eligible for federal insurance subsidies if they’ve purchased care through “an Exchange established by the State.” Because of those last four words, the plaintiffs in King v. Burwell argue that federal subsidies can only be available on state-based exchanges, and not on the federally facilitated ones in most of the country. The Obama administration has countered that the purpose of the law is to make health care accessible, and that “established by the State” should be read with that in mind. Several of the people who helped pen the legislation have dismissed the clause as a drafting error.

Whether a key component of Obamacare will fall over that technicality is up to the Supreme Court, which could hand down its ruling as early as Thursday. Until then, here’s what you need to know about the scale of the potential fallout if the subsidies are struck down.

In 34 states (shown in blue below), the health insurance marketplaces are federally facilitated. People receiving subsidies make up 87 percent of enrollees in those states.

Nationwide, the average person receives $268 per month in government support for their health care, or roughly 72 percent of their premium. But in some states that average is much higher.

Across the country, some 6.4 million people risk losing their tax credits. On a state-by-state basis, the populations in Texas, Florida, and North Carolina would be hit particularly hard.

In dollars, that translates to a total loss of roughly $1.7 billion, with the most at risk in Texas, Florida, and North Carolina.

Without the subsidies, out-of-pocket premiums would rise an average of 256 percent for those millions of people. And again, in certain states, the average increase would be greater even than that.

There are a lot of things to be worried about should that happen. For starters, most of the people who lost their subsidies would likely find themselves unable to afford health care. That would drive many of them—especially the young and healthy ones—out of the marketplace. The people who chose to stick around would overwhelmingly be the sicker ones, who relied heavily on insurance to cover their medical expenses. (The individual mandate wouldn’t stop this exodus because the vast majority of people receiving subsidies are exempt from paying it based on their income.) So the entire pool of enrollees would shrink, with the balance tipping toward sick individuals with higher costs. To accommodate that, insurers would probably be forced to raise their premiums—driving out more young, healthy, and cost-sensitive people, and triggering what’s commonly known as the “death spiral.”

Anyway, you get the picture. A lot of people could lose their health care. That could force a lot more people who before might have been able to afford their health care to drop it as well. And that beautiful decline in the uninsured rate that Gallup has recorded over the past two years? That would probably be wiped out too.

June 24 2015 12:10 PM

Is Paying Your Rent About to Become Even More of a Nightmare?

Do you rent your home? Do you get that woozy, "Wow, so this is what it's like to give blood" feeling every time you cut a check to your landlord? Well, you've got plenty of company. Harvard's Joint Center for Housing Studies reports today that the number of "cost-burdened" renters, who spend at least 30 percent of their income on housing, reached 20.8 million in the U.S. during 2013, a new peak. Overall, about 49 percent of Americans who rent were in that unfortunate category, down just slightly from 2012. And while a handful of major metro areas fared significantly better—fewer than 40 percent of renters in Des Moines were cost-burdened, so hurray for Iowa—for the most part, renting is pretty rough in and around any large city.

And it's probably getting rougher. “Rental markets tightened again in 2014 as the national vacancy rate fell by nearly a full percentage point to 7.6 percent—its lowest point in two decades,” Harvard's researchers tell us. Meanwhile, rents rose at twice the rate of inflation, and faster than wages. However bad 2013 was when it comes to the country's collective rent burden, it seems likely last year will look worse when the final numbers are in.

Rents are rising for the simple reason that, thanks to the never-ending hangover of the housing bust, a larger share of Americans are renting their living places now than they have in 20 years. And while developers have responded by building apartment buildings like mad—last year, there were the most multifamily housing starts for rent since 1987—it hasn't quite been enough to keep up with demand. (Moreover, new construction is largely catering to wealthier buyers, while the families most burdened by rent tend to be lower-income.) Old, unwanted single-family homes from the boom days of the 1990s and early 2000s are relieving some of the pressure on the market, but not quite enough to keep prices from jumping.

Meanwhile, demand for rentals is probably going to keep rising. First, the Federal Reserve would really, really like to raise interest rates in the near future, which will make mortgages less affordable. But more importantly, millennials are getting older. Thus far, most of the growth in renting has been driven by middle-aged and older Americans. But even if young adults continue living with their parents at the same rate as today, there are simply so many twenty- and thirtysomethings that the rate of new household formation is bound to jump in the coming years, which is going to create much more appetite for rentals.

Here are two ways all of this could play out. The optimistic possibility is that developers will see dollar signs thanks to all these young people looking for new homes and race to build new apartments, eventually leading to massive overconstruction that will finally cool off rents (even though most of the new properties will be aimed at relatively well-off customers). The more dour possibility is that all those millennials leaving the nest will simply overwhelm the rate at which companies can break ground on new real estate. In which case, paying rent will only make us feel even woozier.  

June 24 2015 10:54 AM

What Happened to the Teen Summer Job?

The teen summer job was once a rite of passage. Now, it’s a rite that may have passed. According to a new report from Pew Research Center, summer employment among teens has trailed off dramatically over the past few decades. Where in the 1970s, 1980s, and even 1990s a reliable 50-ish percent of teenagers were employed during the peak summer months, nowadays less than a third find summer work.

To be fair, that’s a bit of an oversimplification. As Pew notes, teen employment has historically followed the patterns of the market—climbing during economic booms and falling during and after recessions. Still, the ranks of employed teens have typically hovered between 46 percent and 58 percent during the summer, and over the past few years have slipped well below that. It’s not shocking that teen employment plummeted in the wake of the Great Recession. What is surprising is that since hitting a low point of 29.6 percent in 2010 and 2011, teens have barely recovered, with their summer employment rising to just 31.6 percent last year.

ft_15_0618_summerjobs_420px

Pew Research Center. Data from BLS, not seasonally adjusted.

Looking for an explanation? For starters, we’ve lost entry-level jobs. The most basic tasks that companies once might have hired teens or other young workers to perform are increasingly being automated to cut costs. Teens are also staying in school longer than they used to. By one estimate, states raising their so-called maximal school leaving age accounts for 1 to 2 percentage points of the overall decline in teen employment. Other teens are opting for volunteer work, unpaid internships, and other “pre-college” sorts of programs during the summer over traditional jobs.

There also appears to be an access gap to summer employment. Recently, researchers have found that teens from low-income families were less likely to find summer work than those from wealthy households. White teenagers are also more likely to land summer jobs than black, Hispanic, or Asian ones.

ft_15_0618_summerjobs_race_420px

Pew Research Center. Data from BLS, not seasonally adjusted.

Perhaps most importantly, though, lots of teens just don’t want to work anymore. That could be related in part to teens forgoing jobs for internships and other résumé-padding activities, but it could also just be that fewer of their friends are working, so they’re less inclined to do so as well. As you can see in the chart below from outplacement firm Challenger, Gray & Christmas, the number of teens who want a job has stayed relatively consistent over the past two decades. The number who don’t, on the other hand, has risen alongside those not in the labor force.

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Challenger, Gray & Christmas

So, as with lots of things in the economy—and with teens—the best answer is that it’s complicated. But the teen summer job isn’t what it used to be.

June 23 2015 9:36 AM

When Negotiating a Square Deal, Be Careful With Round Numbers

In the world of head-to-head negotiations, the person who first suggests a dollar figure must do so carefully. The opening episode of Slate's Negotiation Academy (a podcast series I co-hosted) addressed this concept, with behavioral economist Dan Ariely explaining the importance of "anchoring": If I'm selling you a used curio, and we’re haggling over it, and neither of us is exactly sure what the curio’s proper value is, I'm better off naming an extremely high number right off the bat—instead of waiting for you to make a (presumably much lower) initial offer. By acting first and throwing my inflated number out there, I can psychologically "anchor" the bargaining around it. It's a powerful tactic that gives me an advantage as the negotiation proceeds.

Now comes news of some further tactical wisdom regarding initial prices. A paper released Monday by the National Bureau of Economic Research argues that significantly different negotiation outcomes will result if that initial number I put forth is a rounded-off figure (such as $500) as opposed to a more precise amount (such as $498.92). The study found that, in an online bargaining situation that mimicked a traditional, back-and-forth negotiation, setting my initial price as a round number was likely to net lower counteroffers (5 to 8 percent lower, on average). But those counteroffers came more quickly (6 to 11 days sooner), and the probability of an actual sale was increased (it was 3 to 5 percent more likely that an agreement would be reached).

This is not the first time that round numbers have come under scrutiny. In a 2013 interview with NPR host Robert Siegel, Columbia Business School professor Malia Mason—using data obtained in part from Zillow real estate listings—suggested that the use of round numbers in a negotiation is generally a sucker’s play:

SIEGEL: And first, give us an example. What do you mean, don't pick a round number?
MASON: So if you're negotiating for, let's say, a car, you're buying a used car from someone, don't suggest that you'll pay $5,000 for the car. Say something like, "I'll pay you $5,125 for the car," or $4,885 for the car.
SIEGEL: Why should that be a more successful tactic of negotiating?
MASON: It signals that you have more knowledge about the value of the good being negotiated.
SIEGEL: Somebody says 5,000 to me and I think, ah, they don't know much. But if they say, $5,123.50, I think, boy, they must have looked up some table of the values of used cars, or something.
MASON: Correct.

But in their NBER paper, researchers Matthew Backus, Tom Blake, and Steven Tadelis note that posting a round number has uses, too. There seems to be something about a round number that indicates a seller’s willingness to bargain. The authors of the study term it a “cheap-talk signal.” Buyers pick up on it. So the resultant agreed-upon price might be lower, but the offers come quicker and a sale is more likely.

Feel free to apply this wisdom to your next negotiation session. Are you a seller who absolutely needs the sale to go through, needs it done quickly, and can afford to sacrifice a little on the price? Then go ahead and round off.

No word in the study on how this technique interacts with anchoring high, but it does seem possible to name a number that’s both lofty and round. Just ask Dr. Evil.

June 23 2015 1:15 AM

Barbara Ann Berwick Beat Uber in a Labor Dispute. Now You Can Pay Her to Tell You How.

In many ways, Barbara Ann Berwick is the ideal Uber driver. She’s enterprising, a true “small business entrepreneur,” as Uber likes to describe its workers. For years she ran a money-management firm, and before that operated a phone-sex business. By the time she signed up to drive for Uber in July 2014, Berwick was already well-versed in the worlds of self-employment and small business. So it’s fitting that in September of that year she put her knowledge and entrepreneurial knack to good use, filing a claim with the California Labor Commissioner over her status as an independent contractor on Uber’s platform.

Last week, it came out that the commission had ruled in Berwick’s favor—deeming the 65-year-old an employee of Uber and ordering the ride-hailing company to pay her roughly $4,000 in owed expenses. Uber has already appealed the decision, which if cemented as precedent could have grave implications for its independent contractor–based business model, and the legal fight is sure to be protracted. But for Berwick, it’s looking like another business opportunity.

“Rideshareschool.com,” she tells me Monday evening. That would be the not-yet-live website Berwick plans to launch advertising a series of classes on how Uber drivers can file complaints like hers and be deemed employees by the California Labor Commissioner. “It’ll take two to three hours and I’ll go over all of the particulars and stuff,” she explains. “Exactly what you want to do to get compensated as an employee, how to claim your expenses and stuff. That would be for anyone that’s interested.” Interested and willing to show up with $50 in hand, that is. “I’ll take a check but I prefer cash,” Berwick says. “They should bring paper and pencil to take notes. Only the first 10 people who present with payment will be admitted.”

Reached Monday night, an Uber spokeswoman declined to comment on Berwick’s class plans, instead pointing to a study the company conducted earlier this year that found most drivers prefer their flexible status as contractors.

While Berwick says the media has been hounding her ever since her decision was released, fellow Uber drivers haven’t done the same. That might sound surprising—presumably plenty of drivers would like to be deemed Uber employees and have their expenses reimbursed—but Berwick thinks it’s mostly because they don’t know how to reach her. “I’ve heard from a few but not many,” Berwick says. “The situation is people don’t necessarily know how to get ahold of me.” She asks how I found her number. It was on Yelp.

At my request, Berwick outlines again her arguments for why Uber should be considered an employer, and herself an employee rather than an independent contractor. She breezes through the company’s “control mechanisms” for its drivers—last-minute cancellations without pay, the five-star rating system, rider feedback, and weekly emails—as though she is delivering a well-practiced spiel. “Four mechanisms don’t just constitute pervasive control,” Berwick says, citing a key phrase California uses to define an employer-employee relationship, “in my opinion, they constitute abject control.”

Berwick isn’t a lawyer, but she knows her way around a legal dispute. She readily admits that she’s been a litigant many times, though always as a plaintiff. “Oh God, I don’t know,” Berwick says, when I ask how many times. (A search for “Barbara Ann Berwick” in San Francisco Superior Court’s online database yields 17 different results from 1987 to 2009.) She says all this experience was helpful in navigating the claim against Uber, like when it came time for her second hearing and, she alleges, Uber produced a perjurious witness.

“He said the passengers pay the drivers, which is not true,” Berwick tells me. “I pulled out a bank statement and I put it on the table and said, ‘Do you know what this is?’ And he said, ‘a bank statement.’ And I said, ‘Very good!’ And I said, ‘If you take a look at these payments here, who’s making the payments?’ And he said, ‘Rasier.’ ” Rasier, she explains, is a subsidiary of Uber. “I turned to the hearing officer and I said, ‘He swore on the penalty of perjury that he would tell the truth, the whole truth and nothing but the truth, but he didn’t do it, he lied, and would you like to prosecute this man for perjury?’ ” Berwick continues. “And the officer said no, because they only do that for criminal proceedings.” (Uber’s spokeswoman declined to comment on this particular anecdote.)

Attendees of Berwick’s classes will doubtless be regaled with similarly entertaining stories, though what actual lessons will be imparted and over how many sessions is less clear. “I have no idea. This is brand new,” Berwick says when I ask for more details. Her own claim—and $4,000 payout—are pending on Uber’s appeal. While Berwick represented herself in front of the Labor Commissioner, she’s since gotten an attorney. In the meantime, she plans to begin instructing the classes at 2 p.m. next Monday, and add sessions on other days as needed. The first one will be held at 167 Anzavista Ave. in San Francisco, the same address associated with Berwick Enterprises, the company she founded.

Hoping to sit in? When rideshareschool.com goes live, would-be attendees will be able to register there, Berwick says. Until then, she says, you can give her a call—yes, at the number on Yelp.

June 22 2015 4:45 PM

Lucky Charms’ Pink Hearts, Orange Stars, and Purple Horseshoes Are About to Lose Their Artificial Coloring

Colorful, sickly sweet Lucky Charms have been a hit with kids ever since their introduction in the 1960s. They’ve been derided for their unhealthiness and high artificial content for just as long.

Those marshmallows could now get a lot less objectionable. General Mills—the company that makes Lucky Charms, as well as cereals like Trix, Reese’s Puffs, Cocoa Puffs, and Wheaties—announced today that it will eliminate artificial colors and flavors from all its cereals, replacing them with fruit and vegetable juices, natural dyes, and spice blends. Three-fifths of the company’s cereals already meet this standard, and the company says it will strip artificial colors and flavors from the rest by the end of 2017.

General Mills’ announcement comes at a time when major food companies are updating their products to reflect changing consumer attitudes. Nestlé announced in February that it would remove artificial flavors and colors from several of its candy bars and chocolates, and Panera, Taco Bell, and Pizza Hut have unveiled similar initiatives. Chipotle made the notable decision to drop genetically modified organisms from its menu last month. Two factors seem to incentivize these changes: heaps of media attention, and hopefully an attendant boost in sales. The latter certainly applies to General Mills, which has seen its cereal sales lag in the past few years as more people turn toward other breakfast options, such as yogurt.

But even if cutting artificial cereals is an economically motivated move, it has huge implications elsewhere. General Mills makes up about 30 percent of U.S. cereal sales—a market that includes a lot more young children than most. General Mills is the first cereal-maker to reject artificial ingredients, and doing so could pressure other companies—especially Kellogg, the company’s biggest rival—to do so, as well. After 2017, it's not crazy to imagine an entire generation of children growing up with a whole lot less artificial flavoring in one of their staple breakfast foods. 

And that would be huge. Artificial food coloring has been linked to cancer, allergic reactions, and hyperactivity and other behavioral problems in children. Whatever its motivations, General Mills’ move to drop artificial colors and flavors from its cereals promises to make the day’s most important meal at least a little bit healthier. 

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