Welcome to The Closing Bell. This is your last stop for biz scoops and big news before the weekend — a roundup of stories that can’t wait till Monday.
State approves some insurance rate hikes that exceed increase companies requested
While doing research on a story about health insurance rates — they’re going up next year — we noticed something odd: In some cases, the Kentucky Department of Insurance approved rate hikes that were higher than the insurance companies requested.
For health insurance companies to be allowed to increase rates, they need to seek approval from the DoI, which analyzes the requests and sets rates it deems appropriate. Insurance companies use the rates as one of the factors with which they calculate health insurance premiums. The new rates go into effect Jan. 1.
In most of the 15 cases before the department this year, the state set rates at or below the hikes requested by insurance companies. For example, Humana Health Plan Inc. requested that it be allowed to increase insurance rates for individuals in Kentucky by 33.7 percent; the DoI approved an increase of 31 percent. Aetna Health Plan Inc. wanted an increase of 7.6 percent; it got approval for 5.6 percent.
However, Baptist Health Plan Inc. requested a rate increase of 26.68 percent, yet the DoI approved a hike of 27.9 percent. And CareSource Kentucky Co. sought an increase of 20.55 percent — and received one of 29.3 percent.
Insurance Commissioner H. Brian Maynard told IL via email that in those cases, the department determined, based on actuarial review, that the request “would be inadequate to meet each company’s obligations to pay claims.”
Ultimately, Maynard said, the department feared that the requested rates would “lead to a harmful scenario for consumers.”
The commissioner said he wanted to avoid a repeat of the fate of the Kentucky Health Cooperative, which failed and forced the state’s other insurers to absorb more than 50,000 customers, many of whom suffered from significant health problems. Maynard had blamed part of next year’s rate hike on the co-op’s failure. —Boris Ladwig
Kevin Cogan’s crew tweaking design for more than $200 million development
More than a month after Louisville residents first got a peek at plans for a more than $200 million mixed-use development at the intersection of Grinstead Drive and Lexington Road, developer Kevin Cogan’s team is still modifying the design.
Residents likely will get another crack at commenting on the development in late August or early September.
“It’s really about staying focused on what we really saw and refining it so that the visualization is ‘Is this really an impact?’” Cogan told Insider Louisville after an event featuring businessman Ulysses “Junior” Bridgeman, who is backing the project.
The project includes apartments, retail, restaurants, a hotel and office space. At least one building is proposed to be more than 30 stories tall, which has some nearby residents worried.
Despite the concerns over height, Cogan said that is not an aspect his team of designers and architects is looking to revise. He added that he’s contemplating holding a meeting at the John B. Castleman Monument in Cherokee Triangle and floating a balloon up 30 stories to show residents in that area that the buildings won’t be a visual nuisance.
“You couldn’t see that balloon even in the dead of winter because of the trees and the elevation. It’s just not there,” he said.
There are always detractors, he said, but they tend to simply be a loud minority. Cogan added that people likely complained more than 100 years ago when the historic Brown Hotel and Seelbach Hilton Hotel were built.
As for the businesses operating on the land at Grinstead Drive and Lexington Road, the owners believe enough in the future development to sign a lease with a big caveat, Cogan said.
“Every one of those individuals knows that in two years we could say, ‘OK, we need to shut everything down,’” Cogan said. “It will not be easy, but there may be a period where we need to build a trailer in the parking lot for Parkside (Bikes) and just live as they can. We might have to serve coffee out of an airstream trailer. …They want to be there enough for the long-term that they wanted to do that.” —Caitlin Bowling
Fleet Feet finding new home in St. Matthews
The footwear and exercise retail store Fleet Feet Sports plans to move its Taylorsville Road location.
In late October, the store at 2239 Taylorsville Road will close, and all its inventory will move to a new location at 3900 Shelbyville Road in Saint Matthews Station.
“Fleet Feet faced a large rent increase in Fall of 2016 from the current landlord,” according to a news release. “After searching for spaces, they have found beautiful space in St. Matthews that offers great parking, easy park access for running and a great community of locally owned businesses.”
Fleet Feet Sports is a national fitness retail franchise with more than 150 locations in the United States that offer locally focused weekly workout classes for various levels of athleticism. Check out Fleet Feet Louisville’s Facebook page for more info on the locally owned shop. —Caitlin Bowling
Aetna CEO explains company’s change of heart on Obamacare
Aetna CEO Mark Bertolini has a pretty simple explanation as to why he changed his mind on the Affordable Care Act: When you lose tons of money, you take notice.
Aetna on Tuesday became the latest big insurer to cut back on its health insurance offerings on the public exchanges through which Americans can purchase health insurance. Aetna, based in Hartford, Conn., wants to buy Louisville-based Humana, which also has struggled with customers it has gained through the ACA.
Aetna said it has canceled plans to offer policies on exchanges in more states next year, including Indiana, and was weighing how to participate in the 15 states in which it is offering plans. The exchanges are a central piece of the Affordable Care Act, aka Obamacare.
Aetna said this week that it expects to lose $300 million this year on the customers it has gained through the exchanges. As recently as May, Bertolini had said that he viewed the ACA business as a good opportunity.
In an interview with Bloomberg Markets, Bertolini explained his change of heart:
Cameras for new tolling system installed
Don’t worry, the tolls aren’t starting yet.
But workers on Thursday night installed cameras — a key component of the new tolling system called RiverLink — on the new Abraham Lincoln Bridge. Eventually, the two cameras will snap pictures of cars’ license plates as they drive by so that they can be charged for crossing the bridge.
The cameras are only for cars that don’t have a transponder and RiverLink account. Sensors will pick up a signal from a transponder or E-ZPass. Those with a RiverLink account and transponder only pay $2 per bridge crossing compared to $4 per trip for those who don’t register their license plate with RiverLink.
The RiverLink-specific transponders are free, but the E-ZPass transponders, which can be used nationwide, cost $15. People can sign up online or by calling 855-RIV-LINK. People also can visit one of the customer service centers, at either 400 E. Main St. in Louisville or 103 Quartermaster Court in Jeffersonville, Ind., for help.
Tolling will begin later this year — either when all six lanes of the John F. Kennedy Memorial Bridge reopens or the new East End bridge opens. Both bridges also will be tolled in addition to the Lincoln Bridge. —Caitlin Bowling
Bloomberg: Are Chinese consumers souring on Yum Brands?
News of Yum Brands’ plans to spin off its China operations before the end of 2016 was met happily by U.S. investors, but the Louisville-based restaurant giant seems to be having trouble selling Chinese investors on the plan, according to a report by Bloomberg.
The business media outlet notes that Yum Brands’ subsidiaries KFC and Pizza Hut have lost market share in recent years to Chinese food chains and healthier options. In 2011, Yum Brands held 40 percent of market share, but in 2015, that number dropped to 23.9 percent.
The company is looking to sell a 20 percent stake in the new Yum China Holdings company, but that is on hold after potential Chinese investors complained about the terms of the deal and Yum Brands’ valuation of the stake. Yum believes 20 percent of Yum China is valued at $10 billion, according to Bloomberg.
“There would definitely have been more buyer interest five years ago, but at that time they were doing so well that they couldn’t bear to sell,” management professor Li Weihua, of China University of Political Science and Law, told Bloomberg. “With the bloom off the rose, if they don’t sell now, it would be worth even less five years later.”
Yum Brands isn’t the only U.S. chain facing this problem. McDonald’s performance also has declined, and few bidders have expressed interest in acquiring its China franchise. Li told Bloomberg that Yum Brands’ restaurants and McDonald’s were once a novelty, offering some of the first tastes of America.
“Once the novelty factor wears off, there’s nothing keeping consumers going there as local chains are cheaper and often more dynamic in meeting local tastes and preferences,” he said. —Caitlin Bowling
Demand for Ford vehicles — even the F-Series — falls in July
Ford Motor Co. sold 216,000 vehicles in July, down 2.8 percent from a year earlier. Sales of the Louisville-made Escape fell 10 percent, and even demand for the company’s best seller, the F-Series pickup, dipped 1 percent.
General Motors said it sold 236,000 vehicles in July, up 5 percent from July 2015. FiatChrysler’s sales rose 0.3 percent, to 181,000.
Ford said car sales fell 9.3 percent, year-over-year, while SUV sales fell 5.6 percent. Truck sales improved 4.8 percent, with greater demand for the Transit van offsetting lower consumer interest in the F-Series.
Ford Sales Analyst Erich Merkle said that July marked the beginning of “some very difficult year-over-year comparisons.”
While Ford expects sales to remain strong, they will decline compared to the record levels from last year.
Ford said its price per transaction also improved about $1,600 compared to a year ago because more people are shifting to higher-end trucks and SUVs.
Ford had said last week in its second-quarter earnings call that U.S. sales were flattening, which unnerved investors. Ford’s shares fell 8 percent that day. Shares have fallen a further 5 percent since then. —Boris Ladwig