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    Dr. Marcinko is originally from Loyola University MD, Temple University in Philadelphia and the Milton S. Hershey Medical Center in PA; as well as Oglethorpe University and Emory University in Georgia, the Atlanta Hospital & Medical Center; Kellogg-Keller Graduate School of Business and Management in Chicago, and the Aachen City University Hospital, Koln-Germany. He became one of the most innovative global thought leaders in medical business entrepreneurship today by leveraging and adding value with strategies to grow revenues and EBITDA while reducing non-essential expenditures and improving dated operational in-efficiencies.

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    Dr. David E. Marcinko is past Editor-in-Chief of the prestigious “Journal of Health Care Finance”, and a former Certified Financial Planner® who was named “Health Economist of the Year” in 2010. He is a Federal and State court approved expert witness featured in hundreds of peer reviewed medical, business, economics trade journals and publications [AMA, ADA, APMA, AAOS, Physicians Practice, Investment Advisor, Physician’s Money Digest and MD News] etc.

    Later, Dr. Marcinko was a vital and recruited BOD  member of several innovative companies like Physicians Nexus, First Global Financial Advisors and the Physician Services Group Inc; as well as mentor and coach for Deloitte-Touche and other start-up firms in Silicon Valley, CA.

    As a state licensed life, P&C and health insurance agent; and dual SEC registered investment advisor and representative, Marcinko was Founding Dean of the fiduciary and niche focused CERTIFIED MEDICAL PLANNER® chartered professional designation education program; as well as Chief Editor of the three print format HEALTH DICTIONARY SERIES® and online Wiki Project.

    Dr. David E. Marcinko’s professional memberships included: ASHE, AHIMA, ACHE, ACME, ACPE, MGMA, FMMA, FPA and HIMSS. He was a MSFT Beta tester, Google Scholar, “H” Index favorite and one of LinkedIn’s “Top Cited Voices”.

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Cyber Insurance for Dentists?

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Are we de-facto targets?

By D. Kellus Pruitt DDS
pruitt

Have you purchased cyber insurance yet, Doc?

If you are a HIPAA covered entity, you’re going to need it.

Press release: “AIG among insurers seeking more sales as small firms get hacked” (no byline).

“Smaller companies [including dental offices] are learning that, as more data is shared online, they, too, can be targets for the kinds of attacks that larger firms endure. American International Group Inc. and Travelers Cos. are among insurers tailoring cybersecurity products to those customers.”

http://www.delawareonline.com/article/20130322/BUSINESS09/303220034/AIG-among-insurers-seeking-more-sales-small-firms-get-hacked

The Expert Speaks

Bob Parisi, network security and privacy practice leader at the insurance brokerage of Marsh & McLennan tells DelawareOnline that small and mid-size companies are “where we’re going to see some of the most aggressive growth in the next couple of years, because it’s been a part of the market that was ignored.”

The ad describes how a California-based online print shop was targeted by hackers who exposed clients’ names, addresses and credit-card numbers last year. Much like dentists whose EDRs are hacked, after discovering the breach, business owner David Handmaker had to notify affected customers. The Ponemon Institute predicts that 20% or more of the customers notified will instantly become former customers.

“We’re just much, much more aware of the fact that being a small company” makes us more of a target,” Handmaker tells DelawareOnline. He adds that larger businesses have “more resources, and so I think their security practices are maybe a little more evolved.”

Assessment

Small businesses such as print shops and dental practices have become de-facto targets – and according to security experts, easy pickings. I’m not wrong. I’m early.

More

Conclusion

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A Visual Guide to Pissing Off The Financial World

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On the History of AIG

According to Wikipedia, the American International Group, Inc. (NYSE: AIG) or AIG is an American multinational insurance corporation. Its corporate headquarters is located in the American International Building in New York City. The British headquarters office is on Fenchurch Street in London, continental Europe operations are based in La Défense, Paris, and its Asian headquarters office is in Hong Kong.

According to the 2011 Forbes Global 2000 list, AIG was the 29th-largest public company in the world. It was listed on the Dow Jones Industrial Average from April 8, 2004 to September 22nd, 2008.

AIG suffered from a liquidity crisis when its credit ratings were downgraded below “AA” levels in September 2008. The United States Federal Reserve Bank on September 16, 2008 created an $85 billion credit facility to enable the company to meet increased collateral obligations consequent to the credit rating downgrade, in exchange for the issuance of a stock warrant to the Federal Reserve Bank for 79.9% of the equity of AIG.

###

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Assessment

The Federal Reserve Bank and the United States Treasury by May 2009 had increased the potential financial support to AIG, with the support of an investment of as much as $70 billion, a $60 billion credit line and $52.5 billion to buy mortgage-based assets owned or guaranteed by AIG, increasing the total amount available to as much as $182.5 billion.

AIG subsequently sold a number of its subsidiaries and other assets to pay down loans received, and continues to seek buyers of its assets.

Many physician investors were affected.

Source: www.CreditLoan.com

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Major Accounting Scandals of Interest to MDs and FAs

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Including Health South, AIG and Others

According to Wikipedia, the company HealthSouth was involved in a corporate accounting scandal in which its Chief Executive Officer, Richard M. Scrushy, was accused of directing company employees to falsely report grossly exaggerated company earnings in order to meet stockholder expectations.

The AIG bonus payments controversy began in March 2009, when it was publicly disclosed that the American International Group (AIG) was to pay approximately $218 million in bonus payments to employees of its financial services division.

 

Source:

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Injured War Contractors Sue Over Health Care

And … Disability Payments

By T. Christian Miller
ProPublica, September 27, 2011, 10:11 am

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Private contractors injured while working for the U.S. government in Iraq and Afghanistan filed a class action lawsuit [1] in federal court on Monday, claiming that corporations and insurance companies had unfairly denied them medical treatment and disability payments.

The Law Suit

The suit, filed in district court in Washington, D.C., claims that private contracting firms and their insurers routinely lied, cheated and threatened injured workers, while ignoring a federal law requiring compensation for such employees. Attorneys for the workers are seeking $2 billion in damages.

The Defense Base Act

The suit is largely based on the Defense Base Act, an obscure law that creates a workers-compensation system for federal contract employees working overseas. Financed by taxpayers, the system was rarely used until the wars in Iraq and Afghanistan, the most privatized conflicts in American history.

Hundreds of thousands of civilians working for federal contractors have been deployed to war zones to deliver mail, cook meals and act as security guards for U.S. soldiers and diplomats. As of June 2011, more than 53,000 civilians have filed claims for injuries in the war zones. Almost 2,500 contract employees have been killed, according to figures [2] kept by the Department of Labor, which oversees the system.

An investigation by ProPublica, the Los Angeles Times and ABC’s 20/20 [3] into the Defense Base Act system found major flaws, including private contractors left without medical care and lax federal oversight. Some Afghan, Iraqi and other foreign workers for U.S. companies were provided with no care at all.

Assessment

The lawsuit, believed to be the first of its kind, charges that major insurance corporations such as AIG and large federal contractors such as Houston-based KBR deliberately flouted the law, thereby defrauding taxpayers and boosting their profits. In interviews and at congressional hearings, AIG and KBR have denied such allegations and said they fully complied with the law. They blamed problems in the delivery of care and benefits on the chaos of the war zones.

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Keep your Investing Options Open – Doctor

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Or – Hedge your Bets

By Dr. David Edward Marcinko MBA CMP™

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[Publisher-in-Chief]

As a physician executive or investor, if you don’t ordinarily deal in options or other financial derivatives, you may need to brush up on puts and calls, straddles, strangles (or combinations), forwards, futures, swaps, spreads, and non-equity options such as stock index options. Options and other financial derivatives can be used by astute physicians, financial advisors and investment managers not only as a tool to better manage the investment risks potentially affecting portfolio returns, but to craft truly value-added investment strategies customized to meet investors’ needs. The three main types of risk of equity securities (individual company, industry, and market) can be mitigated with options.

Individual Company Risk

Individual company risk can be addressed with equity options in that company’s stock. Industry risk can be reduced through the use of narrow-based index options, while market risk can be mitigated with broad-based index options. Sophisticated hedging and risk management strategies can be designed using both equity and stock index options.

Exotic Stock Options?

Some doctors feel that options have been generally thought of as too risky or exotic or requiring too much capital, resulting in a general lack of comfort. A decade ago, these opinions have no doubt been shaped by the collapse of Bearings and the resulting bitter litigation by Proctor & Gamble and Gibson Greetings against Bankers Trust. More recently it has been Enron, Tyco, WorldCom, Lehman Brothers, AIG, BA, Fannie, Freddie and all those involved in the “flash-crash” of 2008-09; etc.

Assessment

Generally, premiums paid in buying puts or calls are nondeductible capital expenditures and may produce a capital gain or loss depending upon whether the option is sold prior to exercise, the call expires unexercised, or, if the option is exercised, it is added to the basis of the stock (call) or deducted from it (put). Premiums received for writing puts or calls are not included in income upon receipt but are deferred until the option expires, is exercised, or a closing transaction is entered into. Non-equity options (index options) are marked to market at year end (same as for futures) with 60% considered long-term capital gain and 40% considered short-term.

Note: “An Introduction to Options and Other Financial Derivative Strategies,” by Thomas J. Boczar, Trust & Estates, February 1997, pp. 43–68, INTERTEC/K-III Publishing.

The primary objectives in using derivatives are:

1. Risk management and hedging (reducing or eliminating downside risk, monetizing a position, deferring and possibly avoiding capital gains taxes)

2. Leveraging investment capital

3. Enhancing after-tax returns

4. Creating customized risk/return profiles

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Conclusion

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Behind the Financial Reform Push

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Of Worries on Warring Regulators

By Jeff Gerth, ProPublica – April 14, 2010 12:07 pm EDT

Backers of financial regulatory reform are gearing up for the final stretch in a yearlong effort to construct a new, streamlined architecture. But, recent reports and testimony about the financial crisis suggest a crucial ingredient in any new structure is in short supply: cooperation among the watchdogs.

Office of Thrift Supervision

A proposal to eliminate one regulator seen by many as particularly weak—the Office of Thrift Supervision—could alleviate some friction. A soon-to-be-released federal examination of the Washington Mutual collapse found that OTS resisted efforts by a more skeptical regulator, the Federal Deposit Insurance Corporation, to take a closer look at WaMu, according to an account in The New York Times [1].

Reform legislation pending in the Senate [2] (PDF) would also create new agencies, including a financial stability council to assess risk and a consumer protection watchdog. To work as envisioned, the agencies would need new levels of information sharing and decision making. By contrast, history suggests agencies can be stingy with what they know and eager to point blame at sister regulators.

Fall of the House of Lehman

Lehman Brothers, the investment bank that collapsed in September 2008, presents a case in point.

A lengthy examiner’s report [3] for the judge overseeing Lehman’s bankruptcy found that the Federal Reserve Board and the Securities and Exchange Commission kept crucial data from each other even though they had “overlapping” functions. The heads of the Federal Reserve and the SEC reached a formal sharing agreement in July 2008, but the two regulators “did not share all material information that each collected about Lehman’s liquidity.”

SEC Queries

The SEC, asked by the Federal Reserve Bank of New York to provide data on Lehman’s commercial real estate exposure and liquidity, “affirmatively declined to share” the information because it was still in draft form, the bankruptcy report found. The reserve bank never turned down an information request from the SEC, but bank officials “did not perceive any duty to volunteer” information about a $7 billion shortfall in Lehman’s liquidity they uncovered in August 2008.

The reason? The report says it was “because the SEC did not always share information” with them. One official at the Federal Reserve Bank of New York told the examiner “there was not a warm audience” for information sharing between the New York Fed and the SEC.

Lehman fell under the scrutiny of the Fed after it was allowed to tap Fed lending facilities, normally reserved for banks, in the spring of 2008.

Oh … the Irony

Ironically, examiners at the Office of Thrift Supervision, which regulated Lehman’s bank subsidiary, concluded in July 2008 that Lehman had violated its own risk limits by placing an “outsized bet” on commercial real estate. But, the OTS appears as a bit player in the autopsy of Lehman’s collapse; top Federal Reserve officials “considered the SEC to be Lehman’s regulator,” the bankruptcy report found.

One of those officials, Timothy Geithner, was president of the Federal Reserve Bank of New York from 2003 until early 2009, when he became secretary of the Treasury. Shortly after he joined the cabinet, Geithner was asked by a senator about the Fed’s supervisory responsibility [4] in connection with the collapse of institutions like Lehman and the insurance giant AIG.

“I just want to point out,” Geithner told the Senate Finance Committee, “the Federal Reserve was not given responsibility for overseeing investment banks, insurance companies, hedge funds, non-bank financial systems that were a critical part of making this crisis so intense.”

networking_0

Fed Responsibilities

The Fed is responsible for supervising bank holding companies, such as Citigroup. Those holding companies include investment banks and, as a sister regulator quietly pointed out last week, the Fed shared responsibility with the SEC for overseeing the risky practices of Citigroup’s broker dealer.

John C. Dugan, who oversees nationally chartered banks as comptroller of the currency, told the Financial Crisis Inquiry Commission [5] (PDF) last week that most of the problems that led to a massive bailout for Citigroup took place under the umbrella of the weaker holding company regulated by the Fed—not at Citibank, the banking subsidiary under Dugan’s authority.

Most of the losses, Dugan said at the end of a lengthy report to the commission, were in subprime lending, leveraged loans and the structuring and warehousing of CDOs (collateralized debt obligations) that are supervised, either all or in part, “by the Federal Reserve.”

Geithner has acknowledged [6] that he could have done a better job of supervising Citigroup during his tenure at the New York Fed.

Assessment

If the Senate bill becomes law, Geithner would sit atop the new financial stability council, whose members will include representatives of several different agencies—including the Fed, the SEC and the Office of the Comptroller of the Currency.

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Impact of Performance Fees on Mutual Funds and Physician Portfolios

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More Complex than Realized by Some Doctors

[By Dr. David Edward Marcinko; FACFAS, MBA, CMP™]

[By Professor Hope Rachel Hetico; RN, MHA, CMP™]dave-and-hope4

Physician-investors may find themselves paying advisory fees, brokerage commissions, and other sales charges and expenses. All of these layers of expense can reduce or eliminate the advantage of professional management, if not monitored carefully. Also, fees can have a major impact on investment results. As a percentage of the portfolio, they normally range from low of 15–30 basis points (or .15% to .30%, a basis point is one one-hundredth of one percent) to a high of 300–400 basis points or even higher.

Charges are Universal

All portfolio managers, mutual funds, and investment advisors charge fees in one form or another. Ultimately, they must justify their fees by creating value added, or they would not be in business. Value added includes tangibles, such as greater investment return, as well as intangibles, such as assurance that the investment plan is successfully implemented and monitored, investor convenience, and professional service.

Comparisons Required

Always compare investment performance of funds or managed accounts after fees are deducted; only then can adequate comparisons be made. Also, compare fees within asset classes. Management fees and expenses of investing in bonds or bond funds are much different than the fees of investing in, for example, small companies or emerging market stocks. Whereas 100–200 basis points of fees may be appropriate for an equity portfolio or fund, similar charges may offset the advantages of a managed bond portfolio. With managed bond portfolios, real bond returns have limited long-term potential, because returns are ultimately based on interest rates. For example, if a 3% real (i.e., after inflation) return is expected, 200 basis points in fees may produce a negative after-tax result: 3% real return minus 2% fees minus 10% taxes equals a negative 9% total return.fp-book22

Sales Charges

Mutual funds (and some private portfolio managers) charge sales charges to sell or “distribute” the product. Investors who buy funds through the advice of brokers or “commission based” financial planners will pay a sales load. The many combinations of sales charges fall into three basic categories: front-end, deferred (or back-end), and continuous.

Front-End Fees

Front-end fees are a direct assessment against the initial investment and are limited to a maximum of 8.5%. They usually are stated either as a percentage of the investment or as a percentage of the investment, net of sales charges. For example, a 6% charge on a $10,000 investment is really a $600 charge to invest $9,400 or a real charge of 6.4%. Many low-load funds charge in the range of 1% to 3%. Rather than pay brokers or other purveyors, these fund companies or sponsors use the charges to offset selling or distribution costs. Although rare, some funds charge a load against reinvested dividends.

Deferred Charges

Deferred charges (or back-end loads, or redemption fees) come in many forms. Often, the longer the investor stays with the fund the smaller the charge is upon fund redemption. A typical sliding scale used for deferred charges may be 5-4-3-2-1, where redemption in year 1 is charged 5%, and redemption in year 5 is charged 1%; after year 5, there are no sales charges. Sometimes deferred charges are combined with front-end charges.

Redemption Fees

Certain quoted redemption fees may not apply after a period, such as one year. Funds often use such fees to discourage the trading of funds. Frequently, these charges are paid to the fund itself rather than to the fund management company; or broker. Long-term physician investors actually benefit from this fee structure; short-term shareholders who redeem shares bear the additional liquidation costs to satisfy redemption requests.

Continuous Charges

Continuous sales charges, known as 12b-1 fees for the SEC rule governing such charges, represent ongoing charges to pay distribution costs, including those of brokers who sell and maintain accounts, in which case they are known as “trail commissions.” The fund company may be reimbursed for distribution costs as well. In the prospectus, funds quote 12b-1 charges in the form of a maximum charge. This does not mean that the full charge is incurred, however. For example, a fund with a .75% 12b-1 approved plan may actually incur much lower expenses than .75%. Compared to front-end charges, a .75% per year sales charge of this type could be more costly to investment performance, given enough time.

Sales Loads

Portfolio managers can charge sales loads as well, usually in the form of a traditional WRAP fee arrangement (the investor pays a broker an all-inclusive fee that covers portfolio manager fees and transactions costs). No-load funds can be purchased through brokers or discount brokerage firms. The broker charges a commission for such purchases or sales.

Management Advisory Fees

Private account managers and mutual funds charge a fee for managing the portfolio. These fees typically range between 25 and 150 basis points. Bond funds tend to charge in the range of 25 to 100 basis points, and equity funds charge 75 to 150 basis points. Fees charged by private account managers usually are higher because of the direct attention given to a single doctor client. These managers do not pass along additional administrative costs, however, because they pay them out of the management fee. These management fees come in many forms. Tiered fees can charge smaller accounts a higher fee than larger accounts. Mutual funds often charge “group fees”: a fund family may tier its fee structure to encompass all funds offered by the fund family or by a group of similar funds (such as all international equity funds). Performance fees, although subject to SEC regulations, may be charged as well. A performance fee may be charged if the manager exceeds a certain return or outperforms a particular index or benchmark portfolio.

Administrative Expenses and Expense Ratios

Most private managers are compensated with higher management fees, as mentioned above. Therefore, many private accounts usually do not incur separate administrative expenses. Some management firms charge custodial fees or similar account maintenance fees. Mutual funds incur a number of administrative expenses, including shareholder servicing, prospectuses, reporting, legal and auditing costs, and registration and custodial costs. Mutual funds report these expenses and management fees as an expense ratio—the ratio of expenses to the average net assets of the fund. Expense ratios also include distribution costs or 12b-1 charges.insurance-book10 

Brokerage Commissions

Almost all buyers and sellers of securities incur brokerage commissions. Private “wealth managers” usually provide commission schedules to prospective physician-investors or current clients. Some private managers charge higher management fees and a discounted commission schedule, while others charge lower fees and higher commissions. These combinations of management and commission fees make comparison of prospective managers’ cost structures a difficult task. Most portfolio managers obtain research from brokerage firms, which can affect the commission relationship between broker and manager. Reduced commission schedules exchanged for information are known as “soft dollar costs.” Mutual funds may negotiate similar reduced commission schedules. In this regard, more-competitive brokerage firms can charge lower fees to investors. Commissions are not part of the expense ratio, because they are a part of the security cost basis. Firms with higher portfolio turnover are more likely to have higher commission costs than those with low turnover. Asset class impacts such costs as well. For example, small-cap stocks may be more expensive than large-cap stocks, or foreign bonds may be more expensive than domestic bonds.

Total Cost Approach

To arrive at a relevant comparison of fees among funds and managers, and to see what the total effect of fees on investment performance is, analyze the various charges on a net present value basis. Begin with a given investment amount (e.g., $10,000) and factor in fees over time to arrive at the present value of those fees. Present the comparisons in an easy-to-use table.

Sources of Fee Information

Consult the mutual fund prospectus for fee information. The prospectus has a fund expenses section that summarizes sales charges, expense ratios, and management fees; it does not cover commissions, however. Expense ratios usually are reported for the past 10 years. Commission or brokerage fees are more difficult to find. The statement of additional information and often the annual report disclose the annual amounts paid for commissions. When the total commission paid is divided by average asset values a sense of commission costs can be determined. Private wealth managers disclose fee structures in the ADV I filed with the SEC. Managers must disclose these fees to potential and current clients by providing either ADV Part II or equivalent form to the investor.

Reporting Services

Reporting services, such as Morningstar and Lipper, provide similar information from their own research of mutual funds. These services can be extremely beneficial, because fee information is summarized and often accounted for in the reports’ investment return calculations. This helps the investor and planner make good comparisons of funds. Information services that cover private managers provide information, primarily about management fees.

Assessment

To the extent that online trading, deep discount brokerages, lack of SEC and FINRA oversight, and the recent financial, insurance and banking meltdown has affected the above, it is left up to your discretion and personal situation. Generally, all fess are, and should be, negotiable.

Disclaimer: Both contributors are former licensed insurance agents and financial advisors.

Conclusion

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***

On Financial Sector Failings

Understanding the Debacle

[By Staff Reporters]56371606

Did you know that Michael Lewis and David Einhorn recently gave a nice review of the financial system catastrophe, and its devastating flaws, causes and effects, in the January 3rd 2009 New York Times?

Exposing the Flaws

In review of How to Repair a Broken Financial World, they said:

1. Wall Street CEOs won’t self-incriminate or blow the whistle on their own companies [Think: thin-blue line]. And, they receive bonuses and are on peer-compensation committees. Perhaps they might even be fired if they self-accuse of irresponsibility.

2. The credit-rating agencies, which are supposed to carefully measure the amount of risk that companies take, dropped the ball.

For example Fannie, Freddie, GE and AIG all had triple-A ratings; remember Enron? But, they disguised the risk, rather than expose it. Why? Because they would have to re-rate tens of thousands of credits tied to them, as well as increase their own cost-of-capital; integrity and reputations be damned! And, did the big financial firms contribute to those very same credit-rating agencies [pay-2-play]?

3. Was Chris Cox and the Securities and Exchange Commission [SEC] competent enough, or motivated enough, to do its job and investigate the Madoff scheme even after being warned about it?

Assessment

Can you cite some other, even more pernicious, flaws? For example; how did the mortgage industry’s engorgement of commission-driven sales, and the consumer sentiment to “own a home – at all costs” factor into the fault-line?   

Link: http://www.nytimes.com/2009/01/04/opinion/04lewiseinhornb.html?_r=1

Conclusion

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Healthcare, Medicine and AIG

Hospitals, Doctors and Insurance Companies Affected

Staff Reporters

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The federal government recently announced a $100 billion rescue of American International Group [AIG], the largest insurer in the nation. Those involved in the business of insurance should know that it was the financial services operations and other non-insurance operations of AIG, and not its insurance companies, that forced the federal government to bail them out. Medical professionals should be aware, as well.

How it Happened

According to experts, the reason for AIG’s problems is two-fold. It is partly based in its dealings with credit default swaps, complicated financial instruments that investors use to protect themselves from bond defaults—which also caused the collapse of Lehman Brothers.

Insurers try to keep premiums low and profits high by investing. And while all insurers invest premiums in different forms of assets, AIG invested much of its enormous income in securities that were backed by sub-prime mortgages. As the mortgage-crisis came to a head, the value of those securities fell, creating financial problems for AIG. Insurers, like AIG, who attempted to profit from high risk investments found those investments to be so risky that they failed completely. When the investments failed, the insurer’s operating assets were reduced and it needed a major infusion of working capital. The federal loans, although enormous, are fully backed by saleable assets.

I Have AIG Insurance – Should I be Worried?

Generally no; because of the corporate structure of AIG. The holding company can be experiencing financial problems while the individual insurance company subsidiaries that agreed to insure you remain secure. They have more than adequate reserves to pay the claims anticipated. Each AIG branded insurer is a separate corporate entity that, by law, must maintain funds in secure reserves to pay claims presented.

And yet; First Professionals Insurance Company [FPIC] of Florida, recently told the SEC that it held securities with an amortized cost of $4.1 million in Lehman Brothers, $2.1M in American International Group, $2.5M in Morgan Stanley, $2.1M in Washington Mutual and $300,000 in Fannie Mae. 

Will AIG Claims be Paid?

Probably, yes. If the insurer has maintained adequate reserves, as required by state laws, there will be sufficient funds to pay all claims reasonably presented. If the individual insurer should fail, it will be taken over by the state where it is domiciled. If the insurer is faced with a catastrophe that it cannot cover and if your insurance is with an AIG company that is admitted to do business in your state, the state’s Insurance Guarantee Fund will pay your claim up to a limit that is usually no more than $500,000.  Of course, there is no absolute certainty in any situation relating to insurance, but the AIG companies are well-funded and very capable of handling all predictable claims.

On the one hand, if the insurer is put into receivership, the state regulator will use the insurer’s own assets to make payments before seeking funds from the insurance guarantee fund which is financed by assessments on all insurance companies that do business in the state. If, on the other hand, the AIG insurer is not admitted to do business in the state but does business through the surplus lines market, you are not protected by a guarantee fund and must be certain the insurer has the assets sufficient to cover any potential losses.

How Do I Determine That My Insurer Has Adequate Assets?

Contact your state department of insurance to determine if the insurer is admitted to do business and is protected by the Guarantee Fund. Also, check your policy; the insurer must tell you in writing if it is not admitted. Contact your state department of insurance to obtain financial documents filed by the insurer.

Assessment

The credit-crunch is on everywhere, and hospitals filing bankruptcy this quarter include: a two-hospital system in Honolulu; one in Pontiac, MI; Trinity Hospital in Erin, Tennessee; Century City Doctors Hospital in Beverly Hills, Lincoln Park Hospital in Chicago, and four hospital system Hospital Partners of America, in Charlotte [See www.HealthcareFinancials.com; November 2008 issue].

Assessment

Finally, conventional wisdom suggests a ratings reveiw of any policy provided the insurer by Bests. It should be at least “A” rated. Review financial ratings of the insurer issued by Standard & Poors. Of course, these have become suspect of late, too! So, search the Internet with a query including the name of the insurer and the words “financial problem.” Be sure to ask your insurance agent or broker.

Conclusion

Your thoughts and comments re appreciated.

Disclosure: Dr. David Edward Marcinko is the editor of Healthcare Organizations: [Financial Management Strategies] www.HealthcareFinancials.com

Speaker:If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com  or Bio: www.stpub.com/pubs/authors/MARCINKO.htm

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What’s’ AIG, WM and LEH Got to Do with It?

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Medical Malpractice Liability … and More

[By Staff Reporters]

With sincere apologies to Tina Turner – and perhaps more than most doctors realize – AIG, LEH and WM may indeed have something to do with “it” – when it comes to medical malpractice insurance. That is, of course, if the “it” – is your liability carrier. Why?

According to David J. Reynolds of the Dow Jones Newswires on 9/25/08, the FPIC Insurance Group www.FPIC.com recently disclosed its investment holdings in some of the financial companies hit hardest by the financial meltdown on Wall Street and in our current economic turmoil.  

The Company

FPIC Insurance Group, Inc., through its subsidiary companies, is a leading provider of medical professional liability [MPL] insurance for physicians, dentists and other healthcare providers. Its largest subsidiary, First Professionals Insurance Company [FPIC], Inc., is the largest writer of MPL insurance in Florida and has served the market for more than 30 years. Licensed in 28 states, their insurance subsidiaries currently write business in 14 states.

SEC Filings

The medical liability insurance company reported, in its filing with the Securities and Exchange Commission [SEC], that it holds securities with an amortized cost of $4.1 million in Lehman Brothers (LEH), $2.1 million in American International Group (AIG), $2.5 million in Morgan Stanley (MS), $2.1 million in Washington Mutual (WM) and $300,000 in Fannie Mae (FNM).

SEC Report

http://phx.corporate-ir.net/phoenix.zhtml?c=93296&p=irol-newsArticle&ID=1202483&highlight=

advisors

Total Assets

As of June 30, the Jacksonville, Fla., company said it had a total of $755.7 million in cash and investments.  

2007 Annual Report

http://library.corporate-ir.net/library/93/932/93296/items/287671/2007AR.pdf

Assessment

So, if you think FPIC or possibly your own medical liability carrier has not been affected by the recent stock market slump – think again. AIG, WM and LEH may just have “something to do with it”, after all!

For more analysis and story commentary, please visit:

Link: http://www.djnewsplus.com/al?rnd=AJZr27%2BhR5N7y%2BByhI1ECg%3D%3D

Conclusion

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