DealBook: After Madoff, Financial Fraud Defies Policing

LOS ANGELES — To Philip Horn, the Braemar Country Club was not just a golf course, it was an extension of his office. Most weeks, Mr. Horn, a financial adviser at Wells Fargo, chatted up potential clients between holes at the upscale club set against the backdrop of the Santa Monica Mountains.

“I always thought, ‘This is a great guy and a straight shooter,’ ” said Barry Zelner, one of several country club members who invested with Mr. Horn.

Now, those same clients are wondering what went wrong.

After Wells Fargo alerted him to account discrepancies, Mr. Zelner, a corporate lawyer, said he stormed onto the club’s rolling greens in April, accusing the broker of theft. “Tell them what you did, Phil,” the lawyer bellowed among a crowd of members.

A few months later, Mr. Horn pleaded guilty to defrauding more than a dozen clients and Wells Fargo.

While Mr. Horn is a relatively minor player in the pantheon of financial fraud, his actions highlight the persistent problems with policing the industry, even after the wave of rules enacted since the collapse of Bernard L. Madoff’s giant Ponzi scheme in 2008.

And the challenge of oversight is not becoming any easier, with the ranks of financial advisers swelling. As new regulations crimp profits, big banks like Wells Fargo are ramping up their brokerage businesses in an effort to make up for lost revenue.

Amid the renewed focus, banks have spent millions of dollars to beef up their compliance systems and improve their oversight. Regulators, too, have bolstered their efforts, increasing enforcement and adopting new measures.

Every month, the Financial Industry Regulatory Authority, a Wall Street watchdog, penalizes more than 100 brokers for various actions, including unauthorized trading and fraudulent activities, as well as smaller violations.

“Theft, Ponzi schemes and other financial scams continue to happen at an alarming rate,” said Thomas Ajamie, a plaintiff’s lawyer who represents two of Mr. Horn’s clients.

For more than two years, Mr. Horn systematically executed and canceled trades in clients’ portfolios, pocketing the profits. To avoid detection, he limited his paper trail and made it appear that the trades originated in his own account, according to court documents.

“It’s simply unbelievable to me that this kind of fraud could happen for so long without Wells Fargo doing anything about it,” Mr. Zelner said. After meeting Mr. Horn on the golf course, Derek Brown invested more than $10 million with him in 2006, assured by the Wells Fargo name on his business card. “This wasn’t just Schlepper & Schlepper,” Mr. Brown, a retired pharmaceutical executive, said.

A Wells Fargo spokeswoman, Raschelle Burton, said the bank discovered the problems with Mr. Horn in October 2011 and immediately alerted law enforcement agencies. Wells Fargo also fired Mr. Horn. Mr. Horn is set to be sentenced on Monday. Prosecutors have recommended an 18-month sentence. A lawyer for Mr. Horn declined to comment.

Some of Mr. Horn’s clients are struggling to understand the extent of their losses. Mr. Brown and Mr. Zelner say that Wells Fargo has not let them review the trading records. Instead, they have had to rely on the bank’s analysis. “The firm believes it has provided appropriate information,” Ms. Burton said.

Prosecutors estimate the scheme’s damages at $732,000. But there are indications the losses could be higher. Last year, Wells Fargo, without explanation, transferred roughly $500,000 to an account that Mr. Brown has at Merrill Lynch. Mr. Brown said he planned to file a lawsuit seeking additional compensation.

While some clients still have concerns, Wells Fargo said the matter had been resolved and declined to provide further details. “In cases where his actions harmed the clients, the firm has either credited those accounts or reached another resolution with those clients,” Ms. Burton said.

On paper, Mr. Horn seemed like a model broker. After a short stint at Lehman Brothers in New York, he spent a decade at Citigroup in Los Angeles, moving to Wells Fargo in 2006. For much of his career, his regulatory record was clean, with few customer complaints.

At Wells Fargo, Mr. Horn, who worked in a team of brokers, seemed to land clients without an aggressive approach. He wooed clients slowly, often over many years. Between golf holes, he would casually mention winning trades, almost as an aside.

He nurtured friendships with clients. Norman Strang, an 80-year-old retired aerospace executive, said his wife regularly cooked dinner for Mr. Horn at the couple’s home in Pacific Palisades, Calif. “Here he was being this friendly guy, and yet he stole several thousands of dollars from our account.” Mr. Horn went to the weddings of both Mr. Brown’s children and planned to join him on a charitable trip to Israel and Morocco in the fall of 2011.

In 2011, Mr. Horn invited clients to his 50th birthday party inspired by the movie “Saturday Night Fever.” The tall and lanky Mr. Horn wore a white disco suit and handed out CDs with a cover that superimposed his head onto John Travolta’s body.

Given Mr. Horn’s gregarious nature, clients say they dismissed what should have been red flags. According to Mr. Zelner, Mr. Horn avoided meeting at his office, preferring the golf course. Between games, they would meet in the country club’s parking lot, where the broker would pull trading documents from his trunk.

“Phil would present his investments as if he was giving you something that would protect you,” said Mr. Zelner, adding that “he was also just a guy you wanted to drink with.”

Many clients trusted him. Each month, they received thick booklets detailing trading activity, but few pored over the trades. “If I had time to do that, I wouldn’t need a broker,” Mr. Brown said.

Amid hundreds of legitimate transactions, a dubious trade was also hard to spot. In one instance, Mr. Horn bought 1,000 shares of an exchange-traded fund for $77.93 apiece on Feb. 15, 2011, according to Mr. Brown’s bank statements. A month later, Mr. Horn canceled the trade. By then, the price had surged to $86. But the transaction was buried within more than 50 double-sided pages. It appeared as a canceled trade, which by itself was not alarming.

Mr. Brown and his wife did not know anything was amiss until they received a startling call from an executive at Wells Fargo. While the couple were celebrating the Jewish holidays in Toronto in October 2011, the bank executive told them about the problems with their account. Mr. Brown added, “He said we had a ‘six-figure problem.’ ”

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Alarm in Albuquerque Over Plan to End Methadone for Inmates

Mark Holm for The New York Times

Officials at New Mexico’s largest jail want to end its methadone program. Addicts like Penny Strayer hope otherwise.

ALBUQUERQUE — It has been almost four decades since Betty Jo Lopez started using heroin.

Her face gray and wizened well beyond her 59 years, Ms. Lopez would almost certainly still be addicted, if not for the fact that she is locked away in jail, not to mention the cup of pinkish liquid she downs every morning.

“It’s the only thing that allows me to live a normal life,” Ms. Lopez said of the concoction, which contains methadone, a drug used to treat opiate dependence. “These nurses that give it to me, they’re like my guardian angels.”

For the last six years, the Metropolitan Detention Center, New Mexico’s largest jail, has been administering methadone to inmates with drug addictions, one of a small number of jails and prisons around the country that do so.

At this vast complex, sprawled out among the mesas west of downtown Albuquerque, any inmate who was enrolled at a methadone clinic just before being arrested can get the drug behind bars. Pregnant inmates addicted to heroin are also eligible.

Here in New Mexico, which has long been plagued by one of the nation’s worst heroin scourges, there is no shortage of participants — hundreds each year — who have gone through the program.

In November, however, the jail’s warden, Ramon Rustin, said he wanted to stop treating inmates with methadone. Mr. Rustin said the program, which had been costing Bernalillo County about $10,000 a month, was too expensive.

Moreover, Mr. Rustin, a former warden of the Allegheny County Jail in Pennsylvania and a 32-year veteran of corrections work, said he did not believe that the program truly worked.

Of the hundred or so inmates receiving daily methadone doses, he said, there was little evidence of a reduction in recidivism, one of the program’s main selling points.

“My concern is that the courts and other authorities think that jail has become a treatment program, that it has become the community provider,” he said. “But jail is not the answer. Methadone programs belong in the community, not here.”

Mr. Rustin’s public stance has angered many in Albuquerque, where drug addiction has been passed down through generations in impoverished pockets of the city, as it has elsewhere across New Mexico.

Recovery advocates and community members argue that cutting people off from methadone is too dangerous, akin to taking insulin from a diabetic.

The New Mexico office of the Drug Policy Alliance, which promotes an overhaul to drug policy, has implored Mr. Rustin to reconsider his stance, saying in a letter that he did not have the medical expertise to make such a decision.

Last month, the Bernalillo County Commission ordered Mr. Rustin to extend the program, which also relies on about $200,000 in state financing annually, for two months until its results could be studied further.

“Addiction needs to be treated like any other health issue,” said Maggie Hart Stebbins, a county commissioner who supports the program.

“If we can treat addiction at the jail to the point where they stay clean and don’t reoffend, that saves us the cost of reincarcerating that person,” she said.

Hard data, though, is difficult to come by — hence the county’s coming review.

Darren Webb, the director of Recovery Services of New Mexico, a private contractor that runs the methadone program, said inmates were tracked after their release to ensure that they remained enrolled at outside methadone clinics.

While the outcome was never certain, Mr. Webb said, he maintained that providing methadone to inmates would give them a better chance of staying out of jail once they were released. “When they get out, they won’t be committing the same crimes they would if they were using,” he said. “They are functioning adults.”

In a study published in 2009 in The Journal of Substance Abuse Treatment, researchers found that male inmates in Baltimore who were treated with methadone were far more likely to continue their treatment in the community than inmates who received only counseling.

Those who received methadone behind bars were also more likely to be free of opioids and cocaine than those who received only counseling or started methadone treatment after their release.

Read More..

Alarm in Albuquerque Over Plan to End Methadone for Inmates

Mark Holm for The New York Times

Officials at New Mexico’s largest jail want to end its methadone program. Addicts like Penny Strayer hope otherwise.

ALBUQUERQUE — It has been almost four decades since Betty Jo Lopez started using heroin.

Her face gray and wizened well beyond her 59 years, Ms. Lopez would almost certainly still be addicted, if not for the fact that she is locked away in jail, not to mention the cup of pinkish liquid she downs every morning.

“It’s the only thing that allows me to live a normal life,” Ms. Lopez said of the concoction, which contains methadone, a drug used to treat opiate dependence. “These nurses that give it to me, they’re like my guardian angels.”

For the last six years, the Metropolitan Detention Center, New Mexico’s largest jail, has been administering methadone to inmates with drug addictions, one of a small number of jails and prisons around the country that do so.

At this vast complex, sprawled out among the mesas west of downtown Albuquerque, any inmate who was enrolled at a methadone clinic just before being arrested can get the drug behind bars. Pregnant inmates addicted to heroin are also eligible.

Here in New Mexico, which has long been plagued by one of the nation’s worst heroin scourges, there is no shortage of participants — hundreds each year — who have gone through the program.

In November, however, the jail’s warden, Ramon Rustin, said he wanted to stop treating inmates with methadone. Mr. Rustin said the program, which had been costing Bernalillo County about $10,000 a month, was too expensive.

Moreover, Mr. Rustin, a former warden of the Allegheny County Jail in Pennsylvania and a 32-year veteran of corrections work, said he did not believe that the program truly worked.

Of the hundred or so inmates receiving daily methadone doses, he said, there was little evidence of a reduction in recidivism, one of the program’s main selling points.

“My concern is that the courts and other authorities think that jail has become a treatment program, that it has become the community provider,” he said. “But jail is not the answer. Methadone programs belong in the community, not here.”

Mr. Rustin’s public stance has angered many in Albuquerque, where drug addiction has been passed down through generations in impoverished pockets of the city, as it has elsewhere across New Mexico.

Recovery advocates and community members argue that cutting people off from methadone is too dangerous, akin to taking insulin from a diabetic.

The New Mexico office of the Drug Policy Alliance, which promotes an overhaul to drug policy, has implored Mr. Rustin to reconsider his stance, saying in a letter that he did not have the medical expertise to make such a decision.

Last month, the Bernalillo County Commission ordered Mr. Rustin to extend the program, which also relies on about $200,000 in state financing annually, for two months until its results could be studied further.

“Addiction needs to be treated like any other health issue,” said Maggie Hart Stebbins, a county commissioner who supports the program.

“If we can treat addiction at the jail to the point where they stay clean and don’t reoffend, that saves us the cost of reincarcerating that person,” she said.

Hard data, though, is difficult to come by — hence the county’s coming review.

Darren Webb, the director of Recovery Services of New Mexico, a private contractor that runs the methadone program, said inmates were tracked after their release to ensure that they remained enrolled at outside methadone clinics.

While the outcome was never certain, Mr. Webb said, he maintained that providing methadone to inmates would give them a better chance of staying out of jail once they were released. “When they get out, they won’t be committing the same crimes they would if they were using,” he said. “They are functioning adults.”

In a study published in 2009 in The Journal of Substance Abuse Treatment, researchers found that male inmates in Baltimore who were treated with methadone were far more likely to continue their treatment in the community than inmates who received only counseling.

Those who received methadone behind bars were also more likely to be free of opioids and cocaine than those who received only counseling or started methadone treatment after their release.

Read More..

Virtual U.: Massive Open Online Courses Prove Popular, if Not Lucrative Yet

Ramin Rahimian for The New York Times

Coursera has 35 employees in Mountain View, Calif. An employee works on a laptop near a new reception area.

MOUNTAIN VIEW, Calif. — In August, four months after Daphne Koller and Andrew Ng started the online education company Coursera, its free college courses had drawn in a million users, a faster launching than either Facebook or Twitter.

The co-founders, computer science professors at Stanford University, watched with amazement as enrollment passed two million last month, with 70,000 new students a week signing up for over 200 courses, including Human-Computer Interaction, Songwriting and Gamification, taught by faculty members at the company’s partners, 33 elite universities.

In less than a year, Coursera has attracted $22 million in venture capital and has created so much buzz that some universities sound a bit defensive about not leaping onto the bandwagon.

Other approaches to online courses are emerging as well. Universities nationwide are increasing their online offerings, hoping to attract students around the world. New ventures like Udemy help individual professors put their courses online. Harvard and the Massachusetts Institute of Technology have each provided $30 million to create edX. Another Stanford spinoff, Udacity, has attracted more than a million students to its menu of massive open online courses, or MOOCs, along with $15 million in financing.

All of this could well add up to the future of higher education — if anyone can figure out how to make money.

Coursera has grown at warp speed to emerge as the current leader of the pack, striving to support its business by creating revenue streams through licensing, certification fees and recruitment data provided to employers, among other efforts. But there is no guarantee that it will keep its position in the exploding education technology marketplace.

“No one’s got the model that’s going to work yet,” said James Grimmelmann, a New York Law School professor who specializes in computer and Internet law. “I expect all the current ventures to fail, because the expectations are too high. People think something will catch on like wildfire. But more likely, it’s maybe a decade later that somebody figures out how to do it and make money.”

For their part, Ms. Koller and Mr. Ng proclaim a desire to keep courses freely available to poor students worldwide. Education, they have said repeatedly, should be a right, not a privilege. And even their venture backers say profits can wait.

“Monetization is not the most important objective for this business at this point,” said Scott Sandell, a Coursera financier who is a general partner at New Enterprise Associates. “What is important is that Coursera is rapidly accumulating a body of high-quality content that could be very attractive to universities that want to license it for their own use. We invest with a very long mind-set, and the gestation period of the very best companies is at least 10 years.”

But with the first trickles of revenue now coming in, Coursera’s university partners expect to see some revenue sooner.

“We’ll make money when Coursera makes money,” said Peter Lange, the provost of Duke University, one of Coursera’s partners. “I don’t think it will be too long down the road. We don’t want to make the mistake the newspaper industry did, of giving our product away free online for too long.”

Right now, the most promising source of revenue for Coursera is the payment of licensing fees from other educational institutions that want to use the Coursera classes, either as a ready-made “course in a box” or as video lectures students can watch before going to class to work with a faculty member.

Ms. Koller has plenty of other ideas, as well. She is planning to charge $20, or maybe $50, for certificates of completion. And her company, like Udacity, has begun to charge corporate employers, including Facebook and Twitter, for access to high-performing students, starting with those studying software engineering.

This fall, Ms. Koller was excited about news she was about to announce: Antioch University’s Los Angeles campus had agreed to offer its students credit for successfully completing two Coursera courses, Modern and Contemporary American Poetry and Greek and Roman Mythology, both taught by professors from the University of Pennsylvania. Antioch would be the first college to pay a licensing fee — Ms. Koller would not say how much — to offer the courses to its students at a tuition lower than any four-year public campus in the state.

“We think this model will spread, helping academic institutions offer their students a better education at a lower price,” she said.

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IHT Rendezvous: Will 2013 Be the Year of the Electric Car?

The Hague —Last year was a good one for electric and plug-in hybrid cars, according to 2012 sales figures and experts.

For example, sales of the Chevrolet Volt, one of North America’s most popular plug-in hybrid cars, tripled in the United States, according to year-end figures.

The 23,461 Volts sold last year represented only about a third of a percent of all new passenger cars sold in the United States, but such sales might be the harbingers of an automobile market shift toward green vehicles.

A new market study estimates annual global sales of 3.8 million electric or plug-in hybrid cars by 2020. The study, released by Pike Research last week, estimates that sales of plug-in cars will grow by 40 percent annually. During that same period, general car sales will grow by 2 percent, according to the research firm. In a press statement, Dave Hurst, the author of the study wrote:

“Sales of EVs have not lived up to automakers’ expectations and politicians’ proclamations, but the market is expanding steadily as fuel prices remain high and consumers increasingly seek alternatives to internal combustion engines.”

Plug-in cars, be they hybrids like the Chevrolet Volt, or all-electric cars like the Nissan Leaf (both of whose successes in the United States in 2012 were reviewed in this story by my colleague Bradley Berman), will contribute most of the growth, while non-plug in hybrids — now the most dominant force on the low-emission front — are expected to grow at 6 percent.

By 2020, there could be as many as 4.4 million all-electric vehicles on the world’s roads and another 3.4 million plug-in hybrid cars, predicts the report’s author.

Currently, all-electric vehicles make up only a sliver of the market, while substantially more drivers invest in hybrid cars. (Our report on fuel efficient vehicles last year explains the difference and the advantages of the competing technologies).

In the United States pure electric vehicles made up roughly 0.3 percent of cars sold in 2012, while hybrids or plug-in hybrids accounted for 3 percent, according to another market study. Here in Europe, electric cars are mostly seen as part of corporate fleets or city car sharing programs, like the Parisian “autolib” program.

Despite the fact that Europe is lagging behind the United States in plug-in cars on the road, the company predicts that by 2018 Germany will come in at third place for plug-in hybrid cars, after the United States and China. Japan, meanwhile, will dominate the non plug-in hybrid market, with almost half of all plug-in cars sold in that country.

In the United Kingdom the number of all-electric cars is expected to double in the coming year, according to one industry expert.

Ben Lane, the managing editor of nextgreencar.com, told the Guardian newspaper:

“The pricing is not yet quite right and the range is still not long enough. Very few people in 2012 were willing to pay a significant sum more for a car that still cannot do everything.”

There are other issues, too. A recent University of Indiana survey of 2,300 adult drivers in the United States, found that most were ignorant and apathetic about plug-in electric cars, as Bradley Burman reported for the Wheels blog some weeks ago.

Quoting John Graham, who designed the latest study, Bradley wrote:

“We found substantial factual misunderstandings of electric cars in our sample of 2,000,” Dr. Graham said. “In some cases, the misunderstandings would cause one to be more pessimistic about the vehicle than they should be. And in other cases, it would cause people to be more optimistic than they should be.”

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Despite New Health Law, Some See Sharp Rise in Premiums

Health insurance companies across the country are seeking and winning double-digit increases in premiums for some customers, even though one of the biggest objectives of the Obama administration’s health care law was to stem the rapid rise in insurance costs for consumers.

Bob Chamberlin/Los Angeles Times

Dave Jones, the California insurance commissioner, said some insurance companies could raise rates as much as they did before the law was enacted.

Particularly vulnerable to the high rates are small businesses and people who do not have employer-provided insurance and must buy it on their own.

In California, Aetna is proposing rate increases of as much as 22 percent, Anthem Blue Cross 26 percent and Blue Shield of California 20 percent for some of those policy holders, according to the insurers’ filings with the state for 2013. These rate requests are all the more striking after a 39 percent rise sought by Anthem Blue Cross in 2010 helped give impetus to the law, known as the Affordable Care Act, which was passed the same year and will not be fully in effect until 2014.

 In other states, like Florida and Ohio, insurers have been able to raise rates by at least 20 percent for some policy holders. The rate increases can amount to several hundred dollars a month.

The proposed increases compare with about 4 percent for families with employer-based policies.

Under the health care law, regulators are now required to review any request for a rate increase of 10 percent or more; the requests are posted on a federal Web site, healthcare.gov, along with regulators’ evaluations.

The review process not only reveals the sharp disparity in the rates themselves, it also demonstrates the striking difference between places like New York, one of the 37 states where legislatures have given regulators some authority to deny or roll back rates deemed excessive, and California, which is among the states that do not have that ability.

New York, for example, recently used its sweeping powers to hold rate increases for 2013 in the individual and small group markets to under 10 percent. California can review rate requests for technical errors but cannot deny rate increases.

The double-digit requests in some states are being made despite evidence that overall health care costs appear to have slowed in recent years, increasing in the single digits annually as many people put off treatment because of the weak economy. PricewaterhouseCoopers estimates that costs may increase just 7.5 percent next year, well below the rate increases being sought by some insurers. But the companies counter that medical costs for some policy holders are rising much faster than the average, suggesting they are in a sicker population. Federal regulators contend that premiums would be higher still without the law, which also sets limits on profits and administrative costs and provides for rebates if insurers exceed those limits.

Critics, like Dave Jones, the California insurance commissioner and one of two health plan regulators in that state, said that without a federal provision giving all regulators the ability to deny excessive rate increases, some insurance companies can raise rates as much as they did before the law was enacted.

“This is business as usual,” Mr. Jones said. “It’s a huge loophole in the Affordable Care Act,” he said.

While Mr. Jones has not yet weighed in on the insurers’ most recent requests, he is pushing for a state law that will give him that authority. Without legislative action, the state can only question the basis for the high rates, sometimes resulting in the insurer withdrawing or modifying the proposed rate increase.

The California insurers say they have no choice but to raise premiums if their underlying medical costs have increased. “We need these rates to even come reasonably close to covering the expenses of this population,” said Tom Epstein, a spokesman for Blue Shield of California. The insurer is requesting a range of increases, which average about 12 percent for 2013.

Although rates paid by employers are more closely tracked than rates for individuals and small businesses, policy experts say the law has probably kept at least some rates lower than they otherwise would have been.

“There’s no question that review of rates makes a difference, that it results in lower rates paid by consumers and small businesses,” said Larry Levitt, an executive at the Kaiser Family Foundation, which estimated in an October report that rate review was responsible for lowering premiums for one out of every five filings.

Federal officials say the law has resulted in significant savings. “The health care law includes new tools to hold insurers accountable for premium hikes and give rebates to consumers,” said Brian Cook, a spokesman for Medicare, which is helping to oversee the insurance reforms.

“Insurers have already paid $1.1 billion in rebates, and rate review programs have helped save consumers an additional $1 billion in lower premiums,” he said. If insurers collect premiums and do not spend at least 80 cents out of every dollar on care for their customers, the law requires them to refund the excess.

As a result of the review process, federal officials say, rates were reduced, on average, by nearly three percentage points, according to a report issued last September.

Read More..

Despite New Health Law, Some See Sharp Rise in Premiums

Health insurance companies across the country are seeking and winning double-digit increases in premiums for some customers, even though one of the biggest objectives of the Obama administration’s health care law was to stem the rapid rise in insurance costs for consumers.

Bob Chamberlin/Los Angeles Times

Dave Jones, the California insurance commissioner, said some insurance companies could raise rates as much as they did before the law was enacted.

Particularly vulnerable to the high rates are small businesses and people who do not have employer-provided insurance and must buy it on their own.

In California, Aetna is proposing rate increases of as much as 22 percent, Anthem Blue Cross 26 percent and Blue Shield of California 20 percent for some of those policy holders, according to the insurers’ filings with the state for 2013. These rate requests are all the more striking after a 39 percent rise sought by Anthem Blue Cross in 2010 helped give impetus to the law, known as the Affordable Care Act, which was passed the same year and will not be fully in effect until 2014.

 In other states, like Florida and Ohio, insurers have been able to raise rates by at least 20 percent for some policy holders. The rate increases can amount to several hundred dollars a month.

The proposed increases compare with about 4 percent for families with employer-based policies.

Under the health care law, regulators are now required to review any request for a rate increase of 10 percent or more; the requests are posted on a federal Web site, healthcare.gov, along with regulators’ evaluations.

The review process not only reveals the sharp disparity in the rates themselves, it also demonstrates the striking difference between places like New York, one of the 37 states where legislatures have given regulators some authority to deny or roll back rates deemed excessive, and California, which is among the states that do not have that ability.

New York, for example, recently used its sweeping powers to hold rate increases for 2013 in the individual and small group markets to under 10 percent. California can review rate requests for technical errors but cannot deny rate increases.

The double-digit requests in some states are being made despite evidence that overall health care costs appear to have slowed in recent years, increasing in the single digits annually as many people put off treatment because of the weak economy. PricewaterhouseCoopers estimates that costs may increase just 7.5 percent next year, well below the rate increases being sought by some insurers. But the companies counter that medical costs for some policy holders are rising much faster than the average, suggesting they are in a sicker population. Federal regulators contend that premiums would be higher still without the law, which also sets limits on profits and administrative costs and provides for rebates if insurers exceed those limits.

Critics, like Dave Jones, the California insurance commissioner and one of two health plan regulators in that state, said that without a federal provision giving all regulators the ability to deny excessive rate increases, some insurance companies can raise rates as much as they did before the law was enacted.

“This is business as usual,” Mr. Jones said. “It’s a huge loophole in the Affordable Care Act,” he said.

While Mr. Jones has not yet weighed in on the insurers’ most recent requests, he is pushing for a state law that will give him that authority. Without legislative action, the state can only question the basis for the high rates, sometimes resulting in the insurer withdrawing or modifying the proposed rate increase.

The California insurers say they have no choice but to raise premiums if their underlying medical costs have increased. “We need these rates to even come reasonably close to covering the expenses of this population,” said Tom Epstein, a spokesman for Blue Shield of California. The insurer is requesting a range of increases, which average about 12 percent for 2013.

Although rates paid by employers are more closely tracked than rates for individuals and small businesses, policy experts say the law has probably kept at least some rates lower than they otherwise would have been.

“There’s no question that review of rates makes a difference, that it results in lower rates paid by consumers and small businesses,” said Larry Levitt, an executive at the Kaiser Family Foundation, which estimated in an October report that rate review was responsible for lowering premiums for one out of every five filings.

Federal officials say the law has resulted in significant savings. “The health care law includes new tools to hold insurers accountable for premium hikes and give rebates to consumers,” said Brian Cook, a spokesman for Medicare, which is helping to oversee the insurance reforms.

“Insurers have already paid $1.1 billion in rebates, and rate review programs have helped save consumers an additional $1 billion in lower premiums,” he said. If insurers collect premiums and do not spend at least 80 cents out of every dollar on care for their customers, the law requires them to refund the excess.

As a result of the review process, federal officials say, rates were reduced, on average, by nearly three percentage points, according to a report issued last September.

Read More..

Despite New Health Law, Some See Sharp Rise in Premiums

Health insurance companies across the country are seeking and winning double-digit increases in premiums for some customers, even though one of the biggest objectives of the Obama administration’s health care law was to stem the rapid rise in insurance costs for consumers.

Bob Chamberlin/Los Angeles Times

Dave Jones, the California insurance commissioner, said some insurance companies could raise rates as much as they did before the law was enacted.

Particularly vulnerable to the high rates are small businesses and people who do not have employer-provided insurance and must buy it on their own.

In California, Aetna is proposing rate increases of as much as 22 percent, Anthem Blue Cross 26 percent and Blue Shield of California 20 percent for some of those policy holders, according to the insurers’ filings with the state for 2013. These rate requests are all the more striking after a 39 percent rise sought by Anthem Blue Cross in 2010 helped give impetus to the law, known as the Affordable Care Act, which was passed the same year and will not be fully in effect until 2014.

 In other states, like Florida and Ohio, insurers have been able to raise rates by at least 20 percent for some policy holders. The rate increases can amount to several hundred dollars a month.

The proposed increases compare with about 4 percent for families with employer-based policies.

Under the health care law, regulators are now required to review any request for a rate increase of 10 percent or more; the requests are posted on a federal Web site, healthcare.gov, along with regulators’ evaluations.

The review process not only reveals the sharp disparity in the rates themselves, it also demonstrates the striking difference between places like New York, one of the 37 states where legislatures have given regulators some authority to deny or roll back rates deemed excessive, and California, which is among the states that do not have that ability.

New York, for example, recently used its sweeping powers to hold rate increases for 2013 in the individual and small group markets to under 10 percent. California can review rate requests for technical errors but cannot deny rate increases.

The double-digit requests in some states are being made despite evidence that overall health care costs appear to have slowed in recent years, increasing in the single digits annually as many people put off treatment because of the weak economy. PricewaterhouseCoopers estimates that costs may increase just 7.5 percent next year, well below the rate increases being sought by some insurers. But the companies counter that medical costs for some policy holders are rising much faster than the average, suggesting they are in a sicker population. Federal regulators contend that premiums would be higher still without the law, which also sets limits on profits and administrative costs and provides for rebates if insurers exceed those limits.

Critics, like Dave Jones, the California insurance commissioner and one of two health plan regulators in that state, said that without a federal provision giving all regulators the ability to deny excessive rate increases, some insurance companies can raise rates as much as they did before the law was enacted.

“This is business as usual,” Mr. Jones said. “It’s a huge loophole in the Affordable Care Act,” he said.

While Mr. Jones has not yet weighed in on the insurers’ most recent requests, he is pushing for a state law that will give him that authority. Without legislative action, the state can only question the basis for the high rates, sometimes resulting in the insurer withdrawing or modifying the proposed rate increase.

The California insurers say they have no choice but to raise premiums if their underlying medical costs have increased. “We need these rates to even come reasonably close to covering the expenses of this population,” said Tom Epstein, a spokesman for Blue Shield of California. The insurer is requesting a range of increases, which average about 12 percent for 2013.

Although rates paid by employers are more closely tracked than rates for individuals and small businesses, policy experts say the law has probably kept at least some rates lower than they otherwise would have been.

“There’s no question that review of rates makes a difference, that it results in lower rates paid by consumers and small businesses,” said Larry Levitt, an executive at the Kaiser Family Foundation, which estimated in an October report that rate review was responsible for lowering premiums for one out of every five filings.

Federal officials say the law has resulted in significant savings. “The health care law includes new tools to hold insurers accountable for premium hikes and give rebates to consumers,” said Brian Cook, a spokesman for Medicare, which is helping to oversee the insurance reforms.

“Insurers have already paid $1.1 billion in rebates, and rate review programs have helped save consumers an additional $1 billion in lower premiums,” he said. If insurers collect premiums and do not spend at least 80 cents out of every dollar on care for their customers, the law requires them to refund the excess.

As a result of the review process, federal officials say, rates were reduced, on average, by nearly three percentage points, according to a report issued last September.

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Michael Cronan, Who Gave TiVo and Kindle Their Names, Dies at 61

Michael Cronan, a San Francisco-based graphic designer and marketing executive who placed his stamp on popular culture when he created the brand names TiVo and Kindle, died on Tuesday in Berkeley, Calif. He was 61.

The cause was colon cancer, said his wife, Karin Hibma, with whom he founded the marketing firm Cronan in the early 1980s.

Mr. Cronan, who studied art in college, had many corporations and cultural institutions as clients, but he was most remembered for the pair of brand names he came up with a decade apart.

In the spring of 1997, he was asked to forge a name and an identity for a new device, a digital video recorder developed by a company called Teleworld that offered more sophisticated television recording choices than the videocassette recorder.

“We reviewed probably 1,600-plus name alternatives, seriously considered over 800 names and presented over 100 strong candidates to the team,” Mr. Cronan told Matt Haughey for his blog PVR (the letters stand for personal video recorder) in 2005.

“We spent the early meetings trying to place a cultural context on the product,” he said. Among the possibilities were Bongo and Lasso, which never got far.

Believing that “we were naming the next TV,” Mr. Cronan recalled, “I thought it should be as close as possible to what people would find familiar, so it must contain T and V.”

“I started looking at letter combinations,” he added, “and pretty quickly settled on TiVo.” (The “Vo” portion, he said, had a connection to the Latin and Italian words for vocal sound and voice.) Then came the search for a mascot that Mr. Cronan hoped “would become as recognizable as the mouse ears are to Disney.” He created a TV-shaped smiley character with the name TiVo inscribed on its face, rabbit ears suggesting an early TV set and large, splayed feet. Teleworld changed its name to TiVo Inc.

When Amazon prepared to introduce its first electronic reader in 2007, it turned to Mr. Cronan, who envisioned imagery reflecting the reading experience as an embryonic but rising technology.

Ms. Hibma said in an interview on Friday that in pondering a brand name, Mr. Cronan “wanted to create something small, humble, with no braggadocio,” while choosing an image that “was about starting something, giving birth to something.” He found the name, she said, by likening use of the new e-reader to “starting a fire.”

Michael Patrick Cronan was born on June 9, 1951, in San Francisco. He studied painting at the California College of Arts and Crafts (now California College of the Arts), where he later taught, and received a degree in art from California State University, Sacramento. He was a founder and past president of the San Francisco branch of AIGA, the professional association for design.

Mr. Cronan and his wife expanded their focus in 1992 to create the Walking Man clothing collection, featuring loose-knit tops and pants. Mr. Cronan also designed a pair of 1999 postage stamps, one commemorating the 50th anniversary of NATO and the other promoting prostate cancer awareness, and painted portraits and watercolors.

In addition to his wife, Mr. Cronan is survived by his sons, Shawn HibmaCronan and Nick Cronan; a brother, Christopher; a sister, Patricia Cronan; and a granddaughter.

For all his devotion to marketing and branding, Mr. Cronan felt that sometimes the demands of commerce went too far, as in the often-changing corporate names attached to sports stadiums and concert halls.

“There was a time in American life where going to a sporting event or a concert was sort of magical, because a lot of these places had these fun names,” he told The Denver Post in 2010. “But these days, with the amount of people craving advertising exposure, the sponsors have found a way to sell everything. They’re selling our nostalgia, and it’s sad.”

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In Fields and Markets, Guatemalans Feels Squeeze of Biofuel Demand

Richard Perry/The New York Times

José Antonio Alvarado and his family harvested corn in November on a highway median in Guatemala, where farmers struggle to find land. More Photos »

GUATEMALA CITY — In the tiny tortillerias of this city, people complain ceaselessly about the high price of corn. Just three years ago, one quetzal — about 15 cents — bought eight tortillas; today it buys only four. And eggs have tripled in price because chickens eat corn feed.

Meanwhile, in rural areas, subsistence farmers struggle to find a place to sow their seeds. On a recent morning, José Antonio Alvarado was harvesting his corn crop on the narrow median of Highway 2 as trucks zoomed by.

“We’re farming here because there is no other land, and I have to feed my family,” said Mr. Alvarado, pointing to his sons Alejandro and José, who are 4 and 6 but appear to be much younger, a sign of chronic malnutrition.

Recent laws in the United States and Europe that mandate the increasing use of biofuel in cars have had far-flung ripple effects, economists say, as land once devoted to growing food for humans is now sometimes more profitably used for churning out vehicle fuel.

In a globalized world, the expansion of the biofuels industry has contributed to spikes in food prices and a shortage of land for food-based agriculture in poor corners of Asia, Africa and Latin America because the raw material is grown wherever it is cheapest.

Nowhere, perhaps, is that squeeze more obvious than in Guatemala, which is “getting hit from both sides of the Atlantic,” in its fields and at its markets, said Timothy Wise, a Tufts University development expert who is studying the problem globally with Actionaid, a policy group based in Washington that focuses on poverty.

With its corn-based diet and proximity to the United States, Central America has long been vulnerable to economic riptides related to the United States’ corn policy. Now that the United States is using 40 percent of its crop to make biofuel, it is not surprising that tortilla prices have doubled in Guatemala, which imports nearly half of its corn.

At the same time, Guatemala’s lush land, owned by a handful of families, has proved ideal for producing raw materials for biofuels. Suchitepéquez Province, a major corn-producing region five years ago, is now carpeted with sugar cane and African palm. The field Mr. Alvarado used to rent for his personal corn crop now grows sugar cane for a company that exports bioethanol to Europe.

By Jeff DelViscio

A large palm plantation and factory recently opened in the indigenous village where Ms. Quirix lives.

In a country where most families must spend about two thirds of their income on food, “the average Guatemalan is now hungrier because of biofuel development,” said Katja Winkler, a researcher at Idear, a Guatemalan nonprofit organization that studies rural issues. Roughly 50 percent of the nation’s children are chronically malnourished, the fourth-highest rate in the world, according to the United Nations.

The American renewable fuel standard mandates that an increasing volume of biofuel be blended into the nation’s vehicle fuel supply each year to reduce carbon dioxide emissions from fossil fuels and to bolster the nation’s energy security. Similarly, by 2020, transportation fuels in Europe will have to contain 10 percent biofuel.

Large companies like Pantaleon Sugar Holdings, Guatemala’s leading sugar producer, are profiting from that new demand, with recent annual growth of more than 30 percent. The Inter-American Development Bank says the new industry could bring an infusion of cash and jobs to Guatemala’s rural economy if developed properly. For now, the sugar industry directly provides 60,000 jobs and the palm industry 17,000, although the plantations are not labor-intensive.

But many worry that Guatemala’s poor are already suffering from the diversion of food to fuel. “There are pros and cons to biofuel, but not here,” said Misael Gonzáles of C.U.C., a labor union for Guatemala’s farmers. “These people don’t have enough to eat. They need food. They need land. They can’t eat biofuel, and they don’t drive cars.”

By Jeff DelViscio

Ms. Siquic and her relatives sold their land to a palm plantation and now have to buy foods that they once grew.

In 2011, corn prices would have been 17 percent lower if the United States did not subsidize and give incentives for biofuel production with its renewable fuel policies, according to an analysis by Bruce A. Babcock, an agricultural economist at Iowa State University. The World Bank has suggested that biofuel mandates in the developed world should be adjusted when food is short or prices are inordinately high.

Mike McDonald contributed reporting.

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