WSJ.COM/Morning Brief: A Crackdown On Insurers -2-

Feb.14, 2008 in Market Outlook

Last Update: 2/14/2008 8:04:09 AM

By Joseph Schuman
Of THE WALL STREET JOURNAL ONLINE

While health care yet again looms as one of the biggest issues in the 2008
presidential election, some officials already in office aren’t waiting to act
against the perceived abuses of medical insurers.

The office of New York state Attorney General Andrew Cuomo Wednesday announced
plans to sue UnitedHealth Group (UNH) and issued subpoenas against Aetna Inc.
(AET), Cigna Corp. (CI), and 14 other insurance companies as part of an
investigation into how they set fees for patients who turn to hospitals and
doctors outside their networks. “The move takes aim at a common practice among
health insurers that can result in higher medical-bill payments for many
consumers,” The Wall Street Journal notes. “While insurers typically pay
in-network hospitals and physicians a negotiated fee for medical claims,
out-of-network providers are reimbursed ‘usual and customary’ or ‘reasonable’
charges,” and “when the usual and customary payment is much lower than what the
provider charged, patients are often billed for the difference.” That difference
can be considerable, and critics have long accused the insurers’ billing
methodology of being opaque and artificially slanted toward low reimbursements.

Across the country, Los Angeles City Attorney Rocky Delgadillo “has assembled a
team of investigators and prosecutors to probe industry practices such as
canceling patients’ coverage after they get sick” and today plans to unveil a
“first-of-its-kind Web site to solicit information about insurance cancellations
and delays and denials of treatment,” the Los Angeles Times reports. Insurers in
the past year have been hit by a string of fines and citations in California, the
paper notes, adding that the “crackdown echoes the frustration of consumers who
revolted in the early 1990s against new health maintenance organizations, many of
which sought to cut costs by rigidly regulating patients’ freedom to choose
doctors and limiting the medical care they would cover.”

Rebuffed Builders Halt Campaign Giving

The economic-stimulus bill signed Wednesday by President Bush was aimed at
boosting consumer and business spending, and something it didn’t do was directly
address the housing-sector meltdown - at least in the ways the National
Association of Home Builders wanted. The builders “unsuccessfully pressed
lawmakers to adopt a provision to reduce the tax liability of home builders by
allowing them to offset their past profits with future losses,” the Washington
Post notes. Now the powerful lobbying group, one of the top 10 corporate donors
to politicians, “has stopped contributing to congressional candidates” in
protest, the paper reports.

More Sovereign Wealth to Target Banks

Government Investment Corp, the Singapore sovereign wealth fund, “is expected to
be the lead investor in a $6 billion fund that TPG, the private equity firm, is
raising to invest in troubled financial firms,” the Financial Times reports. GIC
“would commit between $2 billion and $3 billion to the new financial
opportunities fund, which is being marketed exclusively to a handful of the
world’s largest sovereign wealth and pension funds,” sources tell the FT. And
they are likely to find plenty of targets. As UBS AG (UBS) acknowledged Thursday,
thanks to continuing fallout from the U.S. subprime-mortgage meltdown its
investors - and by extension, those of other banks - should expect “another
difficult year.”

The Spielberg Factor For Beijing Olympics

China on Thursday said it regretted Steven Spielberg’s decision to cut his ties
with the Beijing Olympics because he felt the Chinese should put greater pressure
on Sudan to end the violence in Darfur, and a spokeswoman for the country’s
Olympic organizing committee said the American film director’s move doesn’t match
the Olympic spirit of separating sports from politics, as Agence France Presse
reports. But that may be a difficult argument to make, now that International
Olympic Committee President Jacques Rogge is among the signatories of an open
letter addressed to China and published Thursday, which is also critical of
Beijing’s Darfur record. The Wall Street Journal notes that the mounting
Olympic-related Western pressure on Beijing over Darfur could prompt sponsors of
the games to also respond in some way.

FDA Hadn’t Examined Suspect Chinese Plant

The U.S. Food and Drug Administration Wednesday said it hadn’t inspected a
Chinese pharmaceutical plant that made the active ingredient in a widely used
blood-thinning drug that may be responsible for hundreds of allergic reactions
and four deaths among its users. The disclosure about the Baxter International
Inc. (BAX) drug heparin “is likely to add to broad concerns about the safety and
quality of products imported from China and elsewhere in the developing world,”
as The Wall Street Journal reports. And “although it isn’t known whether the
Chinese plant played a part in the drug’s problems, its role as a supplier to
Baxter is expected to fuel questions about U.S. regulators’ ability to ensure the
safety and quality of imported drugs and drug ingredients.” Separately,
“Panamanian investigators have concluded that at least 174 people were poisoned,
115 of them fatally, by counterfeit cold medicine linked to an unlicensed Chinese
chemical plant,” the New York Times reports.

Formaldehyde Danger For FEMA Trailer Residents

U.S. health officials Thursday plan to urge Gulf Coast hurricane victims living
in government-issued trailers to move out as soon as possible because tests of
the trailers have uncovered toxic levels of formaldehyde fumes. The fumes
emanating from 519 trailer and mobile homes tested in Louisiana and Mississippi
“were - on average - about five times what people are exposed to in most modern
homes,” the Associated Press reports, citing tests performed by the Centers for
Disease Control and Prevention. “In some trailers, the levels were nearly 40
times customary exposure levels, raising fears that residents could contract
respiratory problems.” The trailers were supplied by the Federal Emergency
Management Agency to some 120,000 victims of the 2005 hurricanes Katrina and
Rita, and the following year some residents started to report headaches and
nosebleeds that were linked to formaldehyde.

Also Of Note

New York Times: Iraq’s parliamentary leaders pushed through three far-reaching
measures that have the potential to spur reconciliation between Sunnis and
Shiites and set the country on the road to a more representative government,
starting with new provincial elections. They include the 2008 budget; a law
outlining the scope of provincial powers, a crucial aspect of Iraq’s
self-definition as a federal state; and an amnesty that would apply to thousands
of the detainees held in Iraqi jails. But their success was clouded because many
of the most contentious details were simply postponed, raising the possibility
that the accord could again break into rancorous factional disputes in future
debates on the same issues.

BBC: President Bush issued an executive order expanding economic sanctions
against senior Syrian officials and their associates, freezing the assets of
those the White House accuses of being responsible for actions that “undermine
efforts to stabilize Iraq” or benefiting from public corruption.

Washington Post: The Senate voted to ban waterboarding and other harsh
interrogation tactics used by the CIA, matching a previous House vote and putting
Congress on a collision course with the White House over a pivotal national
security issue. Separately, the House overwhelmingly rejected an attempt by
Democratic leaders to extend a controversial surveillance law by 21 days,
increasing pressure on lawmakers to approve more-lasting White House-backed
legislation by the end of the week.

Guardian: Five young Muslim men Wednesday had their U.K. terrorism convictions
quashed after judges concluded that reading Islamist material was not illegal
unless there was “direct” proof it was to be used to inspire violent extremism.
The men had been jailed in July 2006 with the trial judge saying they had been
“intoxicated” by extremism after Islamist ideological CDs and computer downloads
were found in their possession.

Roll Call: The Senate Ethics Committee issued a formal rebuke to Republican Sen.
Larry Craig in connection with his arrest last summer in an airport men’s room
and subsequent guilty plea to misdemeanor disorderly conduct charges. The
committee said it accepts Sen. Craig’s guilty plea as an accurate admission of
guilt and questions his attempts to reverse the charges once his arrest and plea
deal were made public. And it was particularly harsh in its assessment that he
shouldn’t have presented a U.S. Senate business card to police and said “What do
you think about that?” after he was accused of soliciting sex in a Minneapolis
airport men’s room.

Women’s Wear Daily: Retailers received a double dose of positive news from the
federal government, as the Commerce Department reported stronger-than-anticipated
January sales and President Bush signed an economic stimulus package. January
sales for all retail and food service providers increased a seasonally adjusted
0.3% after a 0.4% decline the previous month.

Nikkei: Japan’s economy grew at an annual pace of 3.7% on a real basis in the
last quarter of 2007 on strong domestic and external demand, the government said.
The rate of growth was much higher than the average of projections made by 15
private-sector research institutions.

Los Angeles Times: Taking what they described as a significant step to protect
senior citizens, Californian regulators have persuaded the biggest seller of
annuities in the state to promise to stop targeting the elderly with pitches
allegedly designed to sell them pricey policies that could never pay off. The
agreement between Allianz Life Insurance and the Department of Insurance requires
the company to set up an internal review system to make sure sales agents don’t
pressure senior citizens into buying investment vehicles that cannot meet their
needs.

Wall Street Journal: Yahoo Inc. (YHOO), in its bid to fend off Microsoft Corp.
(MSFT), is discussing a possible swap of a stake of 20% or more in Yahoo with
News Corp.’s (NWS) MySpace and several other online properties, according to
people familiar with the discussions. News Corp. owns Dow Jones, publisher of the
Wall Street Journal and this newswire.

Variety: Four of Hollywood’s most influential actors - George Clooney, Robert De
Niro, Tom Hanks and Meryl Streep - are pressuring the Screen Actors Guild to
launch its contract talks as soon as possible to avert a strike. In an ad placed
Thursday in Daily Variety, the quartet ask SAG leaders to commit to negotiating a
deal quickly, amid uncertainty created by SAG’s strong support for the Writers
Guild during its just-concluded 100-day strike.

Financial Times: Airbus said it has been approached by potential Asian buyers who
are looking to turn an A380 “superjumbo” aircraft into a flying casino for
high-rolling gamblers.

Agence France Presse: Henri Salvador, a French crooner who first went on stage in
the cabarets of prewar Paris, played guitar with Django Reinhardt, inspired the
creation of the bossa nova sound in Brazil and helped introduce rock ‘n’ roll to
France, died at his home in Paris after suffering a brain hemorrhage. He was 90
years old. Among his enduring hits - many composed with Boris Vian - was the
quirky “Mais non, mais non.”

-For continuously updated news from The Wall Street Journal, see WSJ.com at
http://wsj.com.

(END) Dow Jones Newswires

February 14, 2008 08:04 ET (13:04 GMT)

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