Are Restaurants Really Risky Businesses?

In the past decade, more government-guaranteed loans have gone to full-service restaurants than any other industry – 34,138, to be exact. The limited-service restaurant industry, including drive-in, take-out and fast-food establishments, came in second with 25,288 loans.

The dollar amounts were also impressive. Loans to full-service restaurants topped $8.15 billion, falling just shy of the $8.25 billion that the hotel sector received, according to the National Association of Government-Guaranteed Lenders, a lobbying organization that collects data on loans backed by the Small Business Administration. Limited-service restaurant loans totaled $5.03 billion.

Restaurants are commonly known for being risky ventures, so why do risk-averse banks disburse so many loans to them? After all, restaurants carry a terrific deal of overhead – roughly two-thirds of each dollar earned is allocated to food, beverages and labor, according to the National Restaurant Association. And then there’s the added expense of rent and utilities. Restaurateurs also have to comply with numerous regulations while satisfying picky and demanding customers (see our post, “How to Open a Restaurant”).

The first explanation for the high loan volumes is the sheer number of restaurants. The NRA recently reported that restaurants are the second-largest private industry in the U.S., after health care. There are nearly a million locations across the country, says Hudson Riehle, senior vice president of research and knowledge at the Washington D.C.-based organization.

“The universe is extremely large and it isn’t surprising that restaurants are near or at the top of the list regarding both the dollar amount as well as numbers of loans,” he says.

Could that mean banks are issuing lots of loans to eateries that are then defaulting?

Not necessarily. While full-service and limited-service restaurants top the list for the number and dollar-value of SBA loans, they slipped down the list when it came to loan failures.

Only 4.4% of full-service restaurant loans were charged off — or written off as a loss after the SBA collected personal guarantees and other collateral put up against them. Some 6.3% of limited-service restaurant loans were charged off. By comparison, women’s clothing stores hover at a 12% charge-off rate, nail salons at 14% and shellfishing operations at 36%, according to data from NAGGL.

Of the 1,128 industries that received SBA loans between Oct. 1, 2000 and Sept. 30, 2010, the government’s last fiscal decade, full-service restaurants placed 408th in the charge-off rank, and limited-service restaurants placed 204th.

To be sure, plenty of restaurants shutter every year. But research seems to indicate that the number of closings isn’t stratospheric. Establishments in the leisure and hospitality sector have survival rates that are on par with other industries, according to a 2005 study from the Bureau of Labor Statistics.

Combine that research with the loan-failure figures provided by NAGGL, and there’s a case to be made for restaurants: Maybe they aren’t that risky, after all.


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Insurer Centene: We Can Do Arkansas-Style Medicaid

English: House Bill and Senate Bill subsidies ...

English: House Bill and Senate Bill subsidies for health insurance premiums. (Photo credit: Wikipedia)

By Jay Hancock

April 23rd, 2013, 3:33 PM

is the latest and perhaps best hope for those who want states resistant
to the Affordable Care Act’s Medicaid expansion to reconsider.

Illustration by Darwinek via Wikimedia Commons

Last week the Arkansas legislature approved
a plan to give Medicaid beneficiaries money to buy individual policies
from private insurers on the state’s health insurance exchange — the
subsidized, online markeplaces due to be in business next year. The
governor signed the bill Tuesday — making it law.

The Department of Health and Human Services, which has said it “will consider approving a limited number” of such arrangements, still needs to negotiate details and sign off.

One insurer is already expressing interest.

are very capable of doing an Arkansas-type model,” Centene Corp. CEO
Michael Neidorff said Tuesday. “That’s something that would be a sweet
spot for us.”

Centene sees opportunity in participating in the
health law’s coverage expansions, whether Arkansas-style or not. It
already runs Medicaid managed care plans for those with very low incomes
in several states, although not in Arkansas. Now it wants to offer
plans to individuals with slightly higher incomes through the exchanges.

believe we can achieve increased profitability in 2014 upon the
commencement of the ACA,” Neidorff told stock analysts Tuesday. “The
exchange market represents the largest growth opportunity for Centene
over the next several years, estimated at $52 billion in our existing

Policy analysts expect considerable “churn”
from members moving between the ACA’s expanded Medicaid program and
commercial policies sold on the exchanges as their incomes fluctuate.
Centene wants to be on both sides of the line, selling “a product that
offers people a comfortable transition,” said K. Rone Baldwin, chief of
the company’s insurance group.

Whether managed by Centene or some
other carrier, private, individual insurance in the Arkansas mode could
help Medicaid members keep the same doctor and otherwise minimize
disruptions when they graduate to a non-Medicaid exchange plan, some
have suggested.

The Arkansas model faces large questions. Not least are those about cost.
Commercial insurance of the type Arkansas sees covering Medicaid
members typically pays doctors and hospitals more than traditional
Medicaid or Medicaid managed care plans like Centene runs.

But the plan is being praised as a “conservative alternative” to Obamacare classic and is reportedly being eyed by Pennsylvania, Ohio and other states resisting the Medicaid expansion.

executives spoke to investment analysts on a conference call about the
company’s quarterly profits. Like other insurers, they were coy about
saying where they plan to offer exchange plans and on what terms.

do expect to be on the exchanges in a subset of the places where we
have health plans today, and we’re entering into contracts with
hospitals,” said Baldwin. How well will Centene be paying those
hospitals to care for its exchange members? “It’s certainly not exactly
at [lower] Medicaid rates but I wouldn’t say it’s exactly at [higher]
commercial rates either,” he added.

The company earned $23 million for the quarter on revenue of $2.5 billion.

Health Care In The States Officials Unveil More Details Of Colo. Exchange Funding


Health-Insurance-rates (Photo credit: Wikipedia)

By Eric Whitney, Colorado Public Radio

March 22nd, 2013, 2:35 PM

A week after approving a tax on health insurance policies, Colorado officials are offering more details of their plans to fund the state’s health insurance exchange after federal backing runs out in 2014.

Last week the state’s exchange board approved, with broad support,  a 1.4 percent fee on all policies sold in the exchange. This week the board asked state lawmakers for the right to charge health plans up to $1.80 per member per month for up to three years to fund start-up costs.

That bill also asks for up to $5 million in state tax credits for insurers that contribute a like amount to the exchange. That’s one of the mechanisms currently used to fund Colorado’s high risk insurance plan, which will be shut down when the Affordable Care Act’s ban on denying coverage to people with preexisting conditions takes effect in 2014.

The goal is create multiple revenue streams and keep prices as low as possible for consumers. The board can create some of those streams, including some fees, on its own. Others require legislation.

The board thinks it will cost $22 million to $24 million per year to run the exchange. State law says the exchange can’t use any state tax revenue.

The state’s health insurance plans say they’re OK with the new fees and proposed tax credit.

“The idea of having a wide and broad funding structure for the exchange is important to carriers,” said Mark Reece, associate director of the Colorado Association of Health Plans. “This bill adequately meets that … assessment structure we’ve been looking for.”

Reece conditioned his organization’s support on additional details that remain to be worked out with the bill’s Democratic co-sponsor, Beth McCann.

Business groups, including the local chapter of the National Federation of Independent Businesses and Colorado Competitive Council, also voiced support for the bill, and for the exchange as a means of increasing coverage and competition in the state’s insurance markets.

Two consumer groups also testified in favor of the temporary per member per month assessment and tax credits for insurers supporting the exchange. No one testified against the bill.

No lawmakers expressed opposition to the bill upon its introduction, but no vote was taken. The committee hearing the bill laid it over to give its sponsor more time to work out details with interested parties.

This story is part of a collaboration that includes Colorado Public Radio, NPR and Kaiser Health News.

Voluntary Insurance Benefits

Share of federal excise taxes paid by US house...

Share of federal excise taxes paid by US households reporting different income levels, 1979-2007 (Photo credit: Wikipedia)


Voluntary Insurance Benefits What are Voluntary Benefits? Voluntary benefits are insurance products that employees may choose to purchase through their companies at rates that are lower than they could get on their own. A few examples of voluntary benefits are dental, vision, life, disability, supplemental health and cancer insurance. Many employers offer voluntary benefits because they allow companies to provide a more robust benefits package at no cost to them. How do voluntary benefits work for employees? For an example of how voluntary benefits work we’ll need our good friends Gary and Greta. Tonight, they’re going to a restaurant for dinner. Gary and Greta’s entrées include soup and salad with the price of their meals. In this case, their meal is like their company’s health plan – they get what they want along with a few added extras. Hopefully, their food tastes better than their health plan. Anyway, tonight Gary and Greta want more than the basic entrée, soup and salad. They’d also like to order some appetizers, a bottle of wine and dessert. These extras are kind of like voluntary benefits – Gary and Greta get more than the basic offering, but only pay for what they order. Like appetizers, desserts and wines, voluntary benefits come in many varieties that help protect your financial and physical well-being. For example, for a little extra money that’s simply deducted from his paycheck each month, Gary can purchase disability insurance that will help offset loss of income if he is unable to work due to sickness or injury. He can choose supplemental insurance to cover copays, deductibles or other costs of care not covered by his regular health insurance. And benefits are paid directly to the employee, so Gary can use the money however he needs to. Most consumers don’t plan for loss of income, or for expenses like childcare and travel that are necessitated by illness or injuries but not covered by medical insurance. Yet studies show that unexpected illness and injuries account for more than 350,000 bankruptcies every year. By enrolling in these voluntary benefits, Gary is rewarded with greater peace of mind. As an added bonus, the premiums Gary pays for voluntary benefits are paid using pre-tax dollars. Voluntary benefits may also include options like vision and dental insurance, which can protect more than your eyes and teeth. Annual eye exams, for example, can help detect health problems like diabetes and high blood pressure. And did you know that gum disease is a serious risk factor for heart disease? Keeping your teeth and gums in good shape helps protect your overall health. Now, what are the advantages for employers who offer voluntary benefits? Offering voluntary benefits to employees provides a great incentive for people to stay with your company. Your employees can receive more benefits – and you don’t pay any extra. You’re also helping your employees protect their health, their savings and everything they’ve worked so hard to achieve. As an added bonus, offering voluntary benefits provides the opportunity to lower your payroll taxes with each enrolled employee. Summary of Voluntary Benefits Voluntary benefits allow employees to purchase additional insurance products through their company at rates that are lower than if they bought them on their own. Premiums are paid from pre-tax dollars and deducted from the employee’s paycheck, making payment simple and convenient. Voluntary benefits are also a way for employers to offer an added incentive to employees without having to pay extra. Everybody wins when voluntary benefits are a part of a company’s employee benefits package. What are Voluntary Benefits? Watch Healthcare Video: What are Voluntary Benefits.


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White House Details The Reach Of Automatic Spending Cuts

Topics: Health Costs, Hospitals, Medicare, Medicaid, Politics

Sep 15, 2012

In a report issued Friday, the Obama administration outlined the budget accounts which would be touched by sequestration’s automatic spending reductions. Although Medicare benefits are exempt, a 2 percent cut would be imposed on Medicare provider payments.

Kaiser Health News: Automatic Budget Cuts Will Reduce Medicare Payments To Providers By $11 Billion
Medicare providers would see reductions of about $11 billion beginning in January as part of series of automatic spending cuts set to begin next year unless Congress acts to halt them, according to estimates released Friday by the White House Office of Management and Budget. The numbers came in a report that details how federal agencies would implement roughly $110 billion in mandatory, across-the-board budget cuts agreed to by Congress and President Barack Obama last August as a way to end a bitterly partisan dispute over raising the debt ceiling. Lawmakers in both chambers, as well as Obama, want to avoid the automatic cuts that would trim federal spending by $2.1 trillion over the next 10 years, called sequestration (Carey, 9/14).

Kaiser Health News also has a copy of the full report.

USA Today: White House Warns Of Massive Defense, Domestic Cuts
The cuts are threatened under terms of last year’s deficit reduction law, which trimmed $1.1 trillion from federal spending over 10 years and mandated another $1.2 trillion — without saying how to do it. A bipartisan committee tasked with that challenge failed. Now Congress has four months remaining to avoid the automatic cuts. If it fails — and as of now, Obama and Republicans are at loggerheads, with the election less than eight weeks away — defense spending would be cut by 9.4%, non-defense spending by 8.2%, most entitlement programs by 7.6% and Medicare providers by 2% (Wolf, 9/14).

Politico: White House: Sequester ‘Deeply Destructive’ To Defense
The report confirms in painstaking detail which budget accounts are subject to cuts — down to the congressional visitors center — and which are exempt. And it is likely to add new urgency to efforts to stop the cuts from taking effect. “No amount of planning can mitigate the effect of these cuts. Sequestration is a blunt and indiscriminate instrument. It is not the responsible way for our nation to achieve deficit reduction,” the Office of Management and Budget wrote. “The report leaves no question that the sequestration would be deeply destructive to national security, domestic investments and core government functions” (Wright and Allen, 9/14).

The Washington Post: White House: Dire Cuts For Military, Domestic Programs As U.S. Steps Toward Fiscal Cliff
The report tracks the level of cuts for 1,200 separate budget line items, taking account of rules Congress agreed to last summer that shield certain priorities, including food stamps and Medicaid benefits. Salaries for military personnel are also exempt, as are Medicare benefits, though Medicare providers would take a 2 percent hit (Helderman, 9/14).

The Wall Street Journal: Federal Budget Cuts Detailed
The White House ticked through the federal budget line by line in the report, showing how a roughly 9% reduction in spending on military and other programs would affect government operations. There would also be a 2% cut in payments to Medicare providers, equal to $11 billion a year, the report says. … The White House and Democrats want any deal to include more tax revenue, while many Republicans want to block the cuts to military programs and make more reductions on social programs like food stamps (Paletta, 9/14).

The New York Times: White House Details Potential Effects If Automatic Budget Cuts Go Through
Lawmakers still hope that Congress and the White House can come up with a way to avoid the cuts, but nothing will happen before the November elections, whose outcome will have some effect on what any future agreement would look like. For now, the two parties remain at odds, with each seeking to blame the other for the automatic cuts about to come. Under the terms of those cuts, most military programs face a 9.4 percent reduction, while most domestic programs would be sliced by 8.2 percent. Medicare would be trimmed by 2 percent, while other social programs — excluding Social Security — would be sliced by as much as 10 percent (Weisman, 9/14).

The Los Angeles Times: White House Warns Of ‘Deeply Destructive’ Budget Cuts
Still, the report puts a finer point on what is coming if Congress doesn’t act. Medicare payments to providers would be cut by 2%, or $11 billion, next year. More than $540 million would be cut from food stamps. Financial aid for college would be cut by $140 million. The National Institutes of Health would take a $2.5-billion cut. The report says embassy security, construction and maintenance would be cut by $129 million. Social security, military personnel, Veteran’s Administration and Medicaid are exempt from cuts (Hennessey, 9/14).

The Hill: White House Details Automatic Budget Cuts, Calls Them ‘Blunt, Indiscriminate’
The assessments made in the sequestration analysis are strictly “preliminary” and based on fiscal year 2012 spending levels, the White House said. “The Administration continues to urge Congress to avoid … sequestration through the enactment of bipartisan balanced deficit reduction legislation,” the report states (Muñoz, 9/14).

The Washington Times: White House Details ‘Destructive’ Spending Cuts
With excruciating detail, the White House on Friday laid out exactly where it will have to cut $109 billion from federal spending in January, including $11.1 billion from Medicare and $54.7 billion from defense spending. … These are among the findings in a new 394-page report by the White House that was delivered Friday to Congress, detailing line by line what will happen next year if Washington fails to act to head off about $100 billion in military and domestic spending cuts scheduled to begin Jan. 2. Also facing slashes are the National Institutes of Health, which would see a $2.5 billion cut, and the Centers for Disease Control and Prevention, which would have to trim $464 million, according to the 394-page report (Dinan, 9/14).

Reuters: Automatic U.S. Spending Cuts Destructive: Administration
In submitting the details of the automatic spending cuts, the White House used the occasion to attack Republicans in Congress for offering only “unbalanced solutions” that it said were not “realistic, fair or responsible ways” to avoid the $109 billion meat-axe approach. This was in response to months of Republican claims that they had approved an alternative in the House of Representatives that the Democratic Senate has ignored (Felsenthal and Shalal-Esa, 9/14).

Marketwatch: Budget Sequester Would Be Devastating: White House
Automatic spending cuts set to begin in January would have a “devastating” effect on both defense and domestic programs, the White House’s Office of Management and Budget said in a report on Friday (Schroeder, 9/14).

Bloomberg: Obama Warns Congress of ‘Devastating’ Cuts in Report
An Obama administration report cataloguing the impact of $1.2 trillion in looming spending cuts illustrates the stakes as lawmakers debate what to do about the U.S. deficit less than two months before the election. The White House budget office said the cuts, known as sequestration and set to start in January, would undermine economic investment and cause “severe harm”to initiatives including food-safety inspections, air-traffic control and support for schools (Faler and Runningen, 9/15).

National Journal: White House Unveils Sequestration Plan
Two programs established in the 2010 Affordable Care Act would be protected from cuts — funding for an insurance pool for “high-risk” patients who were denied coverage due to a preexisting condition and a that aims to get consumer insurance exchanges off the ground (O’Donnell, Sorcher and McCarthy, 9/14).

UPI: OMB: Cuts Would Be ‘Deeply Destructive’
The across-the-board cuts are mandated by the Sequestration Transparency Act, part of a deal worked out to end last year’s U.S. debt-ceiling crisis. A congressional Joint Select Committee on Deficit Reduction, known as the supercommittee, was required to identify about $1.2 trillion in cuts to reduce the federal deficit. If it failed, then Congress could increase the debt ceiling but $1.2 trillion — but that would trigger the sequestrations at the center of Friday’s report by the White House Office of Management and Budget (9/14).

National Journal: Sequester Benefits Neither Party, Congressional Insiders Say
Congress is not expected to make any serious maneuvers to offset looming cuts to the defense sector before the fall elections, making the issue a political football heading into November. So which party has the political advantage? Neither, according to the muddled results from National Journal’s latest Congressional Insiders poll (Goldmacher and Bell, 9/14).

This is part of Kaiser Health News’ Daily Report – a summary of health policy coverage from more than 300 news organizations. The full summary of the day’s news can be found here and you can sign up for e-mail subscriptions to the Daily Report here. In addition, our staff of reporters and correspondents file original stories each day, which you can find on our home page.

English: Medicare and Medicaid as % GDP Explan...

English: Medicare and Medicaid as % GDP Explanation: Eventually, Medicare and Medicaid spending absorbs all federal tax revenue, which has averaged around 19% of GDP for the past 30 years. Category:Health economics (Photo credit: Wikipedia)

HHS Details Consumer Savings From Lower Premiums, Rebates

Maximum Out-of-Pocket Premium Payments Under PPACA

Maximum Out-of-Pocket Premium Payments Under PPACA (Photo credit: Wikipedia)

Topics: Health Costs, Insurance, Marketplace, Health Reform

Sep 12, 2012

A Health and Human Services Department analysis estimated that consumers have saved $2.1 billion from the health law‘s consumer protections, resulting in lower premiums and rebates.

Modern Healthcare: Studies Find Massive Premium Savings, Lower Rate Hikes
New analysis from HHS found that the 2010 healthcare law’s insurance reforms have saved consumers an estimated $2.1 billion through lower premiums and rebates, while a separate report said health insurance premiums for families rose by 4% in 2012. Since September 2011, the Patient Protection and Affordable Care Act‘s rate-review provision has required insurance companies planning to raise premium rates by 10% or more in the individual and small group markets to justify the need for those rate hikes (Zigmond, 9/11).

Politico Pro: HHS Breaks Down $1B In Rate Review Savings
Of the $1 billion in savings from premium rate reviews over the past year, about 70 percent came from reviews at the state level and the rest came from HHS reviews, agency officials said in a conference call this afternoon. CCIIO Director Gary Cohen said that 64 percent of requested double-digit premium increases nationwide were either withdrawn or reduced. The $1 billion in savings is for all rate reviews — both the ones over 10 percent that the federal health law made mandatory and lesser hikes as well. While many states have been conducting rate reviews for years before health reform, the Affordable Care Act provided funding to beef up operations in states that could not afford it before, said Cohen and Teresa Miller, acting director of the oversight group at CCIIO (Norman, 9/11).

This is part of Kaiser Health News‘ Daily Report – a summary of health policy coverage from more than 300 news organizations. The full summary of the day’s news can be found here and you can sign up for e-mail subscriptions to the Daily Report here. In addition, our staff of reporters and correspondents file original stories each day, which you can find on our home page.

House Panel Votes To Separate Agents’ Payments From Health Law’s MLR Rules

Topics: Insurance, Marketplace, Politics, Health Reform

Sep 12, 2012

On a largely party-line vote, the subcommittee voted to modify the provision of the 2010 health law. A vote by the full Energy and Commerce Committee is expected next week.

CQ HealthBeat: Health Insurance Broker Payments, Cancer, Pediatrics Research Backed By Panel
A House Energy and Commerce panel advanced several health-related bills Tuesday, including a controversial measure that would modify a consumer protection provision in the 2010 health care overhaul. The measure, which the Health Subcommittee approved by voice vote, would amend the law’s provision on medical loss ratios in an effort to protect the earnings of insurance brokers and agents (Khatami and Phenicie, 9/11).

The Hill: House Panel Votes To Carve Out Insurance Agents From New Health Care Rules
The measure, sponsored by Rep. Mike Rogers (R-Mich.) would remove insurance agents’ commissions from the health law’s medical loss ratio (MLR) calculation. The MLR provision requires insurance companies to spend 80 or 85 percent of their premiums on medical costs, leaving only the remaining 15 or 20 percent for administrative costs and profit. Companies that don’t meet the standard must pay a rebate (Baker, 9/11).

Politico Pro: House Panel Backs Insurance Broker Bill
House Democrats in a subcommittee markup Tuesday afternoon said they were happy that Republicans were holding votes on a series of bipartisan health bills — except for one controversial piece of legislation that would exclude agent and brokers fees from the 2010 health care law’s limits on insurers’ administrative expenses. And even that one, the Democrats noted, a bit tongue-in-cheek, didn’t involving dismantling the health law. The broker measure passed on a party-line vote — although it’s likely to pick up a few Democratic votes when it reaches the full committee (Millman, 9/11).

In other Capitol Hill news, House Speaker John Boehner, R-Ohio, expresses budget deal doubts while Democrats attack GOP vice presidential nominee Rep. Paul Ryan.

Los Angeles Times: Boehner ‘Not Confident’ Budget Deal Can Be Reached
As Moody’s Investors Service threatened to downgrade the United States’ top debt rating,  House Speaker John A. Boehner said Tuesday he doubted Congress could reach a bipartisan budget deal to avoid that potentially dangerous outcome. … Yet the political dynamic remains the same now as it did then: Republicans refuse to raise taxes by allowing current tax rates on wealthier Americans to expire, as the president wants; Democrats resist cuts to Medicare or other domestic programs unless the GOP agrees to new revenue (Mascaro, 9/11).

The Washington Post: Democrats In Congress Try To Put Paul Ryan Back In Campaign Spotlight
Democrats this week have focused floor speeches on Ryan’s budget proposal, which would achieve trillions of dollars in savings by turning Medicaid into a block-grant program run by the states and by creating a private insurance option for Medicare. Sen. Richard J. Durbin (Ill.), the No. 2 Democratic leader, used his floor speech honoring victims of the Sept. 11, 2001, terrorist attacks to criticize Ryan for not “asking some sacrifice” — such as reduced military spending or higher taxes on the wealthy (Kane, 9/11).

This is part of Kaiser Health News’ Daily Report – a summary of health policy coverage from more than 300 news organizations. The full summary of the day’s news can be found here and you can sign up for e-mail subscriptions to the Daily Report here. In addition, our staff of reporters and correspondents file original stories each day, which you can find on our home page.