Tag: Puerto Rico

Will Obamacare increase or decrease the average cost of an insurance policy on the individual market? Ending discrimination against sick people raises premiums for the healthy but lowers them for the sick. Reducing discrimination against old people raises premiums for the young but reduces them for the old. Regulating insurance products raises prices at the low-end of the insurance market but cuts costs for people who actually get sick and need insurance that actually covers illnesses. Unlike the US, Puerto Rico does not have a trillion dollars in subsidies to cut costs for the poor. Unlike the US, Puerto Rico does not have an Exchange to encourage competition between insurers and hence, reduce costs. Unlike the US, Puerto Rico does not have either an individual mandate nor an employer mandate to help reduce average premiums by bringing younger, healthier applicants into the market yet PR’s Insurance Code mandates essential benefits in health care plans. Find out some of the sobering implications of the Affordable Care Act of 2010 for MiSalud, Medicare Advantage, individuals, and employers in Puerto Rico.

The Affordable Care Act of 2010, better known as Obamacare, consists of a set of rules, which represent the biggest change in US health public policy since 1965 when Medicare was created. The main goal of this law is to provide affordable health insurance for all US citizens, including Puerto Rico, and to halt the growth of health care spending for increasing numbers of older Americans in need of health care. Not all the provisions of this law will apply in PR and some analysts forecast it could increase insurance premiums by 15% to 20%, which is clearly against Obamacare goals. Will this law help with health conditions in PR? The island faces several health challenges, such as: an ageing population, outward migration of the younger age groups, high health costs and inflation, a fiscal crisis, high prevalence of chronic conditions, poor personal health behavior, and increasing need of health care professionals. All these issues are challenging PR’s population, policy makers, and health. This issue sets the context for the implementation of Obamacare in PR and to some extent enables readers to pass judgment on the effectiveness of health care expenditures in Puerto Rico.

The winds of change have swept through Puerto Rico during the first half of 2013 and not surprisingly some have found some of this change to be rather unsettling. Critical press coverage about the recently completed legislative session has raised concerns in some corners that future economic development might suffer. Not unexpected, the legislature enacted major changes to PR’s tax policy, which increased corporate tax rates as well as imposed new taxes to curtail an estimated billionaire budget deficit for fiscal 2013 and 2014. Meanwhile, the Secretary of Economic Development and its subsidiary, the PR Trade Company, keep harping on the topic of a job creation target of 50,000 jobs within the first 18 months of this Administration. Well, 8 of those 18 months have already elapsed. It is time to review what is really happening in the Island’s labor market.

The financial and fiscal problems plaguing the Puerto Rico government are not new. The island has been borrowing its way to growth. Over the past years, PR has been struggling under the growing weight of massive fiscal deficits that have increased the costs of credit and among other things, disrupted reimbursements to vendors who contract with the government. The legislature and the governor recently approved a combination of revenue-raising and cost-cutting measures. The new budget includes $1.5 billion in additional new taxes. We need to understand how the underlying budget squeeze and recent wave of tax increases will impact GDP. Many fiscal distortions will deter investment. Can the PR tax system support growth in other ways? Preliminary forecasts suggest impacts on businesses and the economy could derail an already fragile growth in 2014.

Puerto Rico’s own Great Recession has already left an indelible mark on the local economy with several important issues still unresolved. The channels through which microeconomic activities typically unfold are in disequilibrium. Moreover, the Puerto Rican economy has not responded to economic fundamentals for some years, not because policy makers are consistently getting it wrong but rather because the fundamentals themselves have not stopped changing. As a result, old practices are dying out while new ones are emerging in response to these very fluctuations.  These changes will create challenges in the form of market gaps and unmet demand that will transform the way businesses are conducted on the Island. This second installment on local SMEs examines how the new emerging economic fundamentals are creating opportunities for small-scale businesses.  Hence, not everything is lost for the Island.