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An administration in a seemingly constant state of chaos, escalating threats with North Korea, uncertainty over Iran, the potential unwinding of NAFTA, the dismantling of key components of the Affordable Care Act…and stock markets continue to rise. The MSCI World Index of large and mid-cap stocks from 23 countries hit an all-time high on Friday, as stock indexes in the US, Japan, Hong Kong, Taiwan, Germany, the UK and New Zealand all reached multiyear or record highs last week.
Usually, a jobs report week dominates investor psyche, but this week is different. As traders turn on their computers Sunday night when Asian markets open, they will have to decide whether or not Congressional paralysis will shut down the government as of Monday night at midnight. Most analysts believe that a short shutdown will not derail the economy, unless of course you are not deemed an “excepted” or “emergency” federal worker (note: the word “essential” seems to be very un-PC this time around) and would are put on unpaid leave. If that’s the case, any shutdown will be significant to your life.
If the government were to shut down, here’s what will NOT be immediately affected: Social Security payments, Medicare, air-traffic control, immigration, border security, emergency and disaster assistance, federal law enforcement, IRS processing of electronic returns and payments, mail delivery and active-duty military will keep working, but will NOT get paid until the funds are available.
NOTE: The October 1 roll out of the Affordable Care Act’s Marketplace’s would not be affected by a government shut down. (See Health Care Reform Kickoff: What You Need to Know.)
A government shut down would shutter national parks, federally funded museums (including the Smithsonian), the National Zoo, all federal government websites (including the popular Panda Cam!), research by Health and Human Services, grant applications, new applications for Social Security, IRS walk-in centers, federal loan applications for small businesses, college tuition, or mortgages, Library of Congress buildings, events and web sites and potentially, the government of the District itself.
None of this would deal with the implications of hitting the nation’s borrowing limit - the debt ceiling. We have three weeks to deal with that issue, so don’t fret – here's a cheat sheet “Debt Ceiling, Part Deux,” which will help you brush up on your debt, deficit and debt ceiling facts.
If the government were to shut down, it may delay the Friday release of the September employment report. (Although we think the folks at the Bureau of Labor Statistics are important, Treasury Secretary Jack Lew might not agree.) This report could be pivotal. The big questions is: were the past three punk employment reports, (monthly job creation at just under 150,000, lower than the 180,000 average seen in 2013) a temporary pullback, or the sign of a more worrisome trend?
Economists predict that the September report will be more in line with this year’s 180,000 pace because recent data have shown that the labor market has been improving. (Employment reports from the Institute for Supply Management have gained ground and weekly jobless claims have dropped to the lowest level since June 2007.) The unemployment rate should remain at 7.3 percent.
MARKETS: “October. This is one of the peculiarly dangerous months to speculate in stocks…the others are July, January, September, April, November, May, March, June, December, August and February.” Mark Twain may have be on to something. Five of the 10 worst percentage losses since the Dow’s inception have occurred in October and the month claims the top three worst days ever: 10/19/87 (-22.61%), 10/28/29 (-12.82%) and 10/29/29 (-11.73%). This does not mean that investors should sell everything and run for the hills, but it’s just a reminder that with stock indexes up nearly 20 percent for the year as we enter the spooky month of October, there’s a lot going on that could cause a reversal of fortune for investors.
THE WEEK AHEAD:
Mon 9/30:
9:45 Chicago PMI
10:30 Dallas Fed
Midnight: Government funding deadline
Tues 10/1:
Health Care Marketplaces open (healthcare.gov)
Motor Vehicles Sales
10:00 ISM Manufacturing Index
10:00 Construction Spending
Weds 10/2:
8:15 ADP Private Jobs
Thurs 10/3:
7:30 Challenger Job Cuts
8:30 Weekly Jobless Claims
10:00 Factory Orders
10:00 ISM Non-Manufacturing
Fri 10/4:
8:30 Employment Report
After years of political fighting, a Supreme Court decision and lots of confusion, the 2010 Affordable Care Act (ACA) began implementation on October 1. For those who have health insurance coverage through their employers or through Medicare or Medicaid, you can pretty much drown out the noise. If you are an uninsured U.S. citizen or legal resident, you must be enrolled in qualifying health coverage in 2014 or face a penalty. This is known as the “individual mandate” and it is the cornerstone of the ACA. The government has established a web site called Healthcare.gov to manage all aspects of the ACA.
Here’s a refresher on what you need to know:
What is qualifying health coverage? Employer-provided insurance; government programs like Medicare, Medicaid, CHIP; COBRA; privately purchased insurance; or coverage you purchase on a state or federal marketplace.
What are “Exchanges” or “Marketplaces”? Starting on October 1, there will be Marketplaces (also known as “exchanges”) for those who do not have insurance and for small businesses with up to 50 employees. The state and federal governments are not providing the coverage; rather they are aggregating the information for consumers through one platform—the Marketplace. It’s like using Travelocity to understand the cost of various airlines flying to your desired destination, rather than visiting each airline’s website to find the same information.
ACA envisioned that most states would establish and run their own online health insurance Marketplaces, with federally run Marketplaces as a backstop. However, only 16 states and the District of Columbia have done so; seven more are partnering with the federal government to operate their Marketplaces. In the other 27 states, people without insurance will use federally managed Marketplaces to shop for coverage.
Individuals can choose among 4 plans: bronze, silver, gold and platinum, which are intended to cover 60 to 90 percent of health costs that a health plan would pay for an average person. Insurers don't have to offer all four plans, but within the health insurance marketplaces, all insurers must offer at least one silver and one gold plan. Costs of each type of plan vary by state.
What are the penalties for NOT having coverage? The greater of:
Are there exemptions from penalties? Yes, for economic hardship (income below 100 percent of poverty level, those who are unable to pay for coverage that is more than 8 percent of household income), religious objections, American Indians, those without coverage for less than 3 months, undocumented immigrants and incarcerated individuals.
Will Uncle Sam help financially? Tax credits for individuals and families making between 100 and 400 percent of the federal poverty level to purchase insurance through the Marketplaces and are ineligible for coverage through an employer or a government plan, like Medicare and Medicaid. Current household income limits for 100 to 400 percent of the poverty line are:
If you are eligible for the credit, you can choose to have all or some of the credit paid in advance directly to your insurance company to lower what you pay out-of-pocket for your monthly premiums during 2014; or you wait to get all of the credit when you file your 2014 tax return in 2015.
Tax credits to buy health coverage will be available to small employers with up to 25 workers and who have average wages of $40,000 or less.
The government will also help low income people with out-of-pocket (unreimbursed) expenses. If income is between 100 percent and 250 percent of the federal poverty line ($23,550 to $58,875 for a family of four), you can qualify, BUT only if you enroll in a silver plan.
How will ACA change health benefits and coverage?
Will there be changes to Medicare? Higher-income Medicare beneficiaries (those who earn more than $85,000 per person or $170,000 per couple) will pay slightly more for their prescription drug coverage, or Medicare Part D. This is expected to affect about 5 percent of beneficiaries.
Most Medicare recipients will see their drug costs go down as the ACA begins to close the "donut hole," which is a coverage gap that forces Medicare beneficiaries to pay 100 percent of their prescription drug costs up to a certain amount. This gap is expected to be fully closed by 2020, but those who fall into the gap this year will get a 47.5 percent discount on certain brand-name drugs and a 21 percent discount on generic drugs until they reach the out-of-pocket limit.
Will there be changes to Medicaid? ACA will mean an expansion of Medicaid to anyone under 65, with income eligibility levels of 133 percent of poverty level.
When do employers have to do something? On July 2, 2013, the Obama Administration announced that it would delay implementation of the “Employer Mandate” until 2015. As of 2015, employers of 50 or more full-time workers that do not offer coverage will pay a fee of $2,000 per worker for each full time employee over the first 30 employees. Small businesses with fewer than 50 employees can start shopping for coverage on October 1st through the Small Business Health Options program, or SHOP Marketplace.
How much ACA cost? The net cost is now estimated to be $1.375 trillion over the 10-year period from 2014 to 2023, according to a July 30 CBO estimate.
Who is paying for ACA?
When will there be a reduction in health care costs overall? President Obama recently proclaimed, that in “the three years since ‘Obamacare’ passed, we’ve seen the slowest growth in health care costs on record.”
According to the Kaiser Family Foundation and CMS data, national health spending grew by 3.9 percent from 2009 through 2011, and near 4 percent in 2012; it’s projected to grow at a similar rate through 2013. Those are the lowest rates since the government started keeping track in 1960. BUT, independent experts believe the slowdown is largely due to the economy and a contraction of spending during the recession. Most agree that any cost savings provisions included in ACA have not yet been realized.
