From The Pirate’s Cove:
More at the link.
By William Teach | January 23, 2013 – 8:02 am
We haven’t discussed the idiocy of ObamaCare lately, legislation which the majority of Americans still despise. But, it’s still out there and ready to cause havoc
(Forbes) A California insurance broker, who sells health plans to individuals and small businesses, told me that she’s prepping her clients for a sticker shock. Her local carriers are hinting to her that premiums may triple this fall, when the plans unveil how they’ll billet the full brunt of Obamacare’s new regulations and mandates.
California is hardly alone. Around the country, insurers are fixing to raise rates by double digits. They’re privately briefing politicians in Washington on what’s in store. Those briefings are leaving a lot of folks up and down Pennsylvania Avenue jumpy.
What’s gives? President Obama, after all, said he’d prevent these sorts of prices. His new health law gave state regulators the power to block premium increases. It even created a federal agency to oversee insurance rates. But these bureaucrats are spectators to the price hikes. They’re mere wallflowers. Even in the bluest of states.
Their silence is the best evidence of who is culpable for the increases. It’s the policymakers. It’s Obamacare. The President is accepting the premium hikes as an allowable consequence of his healthcare policies.
We were assured by the President and his top economic advisers that the Patient Protection and Affordable Care Act was going to reduce the growth in health care costs, and make our health care system more efficient and manageable. We were going to be able to cover an additional thirty or forty or fifty million people who did not previously have health insurance — primarily because they couldn’t afford it — through the private health insurance system, we’d require private health insurance companies to cover things which they previously would not, and everything would be great.
The reasoning was simple: since the previously uninsured would no longer get their medical care through visits to hospital emergency rooms, visits for which hospitals frequently went unpaid, and almost everybody would have health insurance, costs would decrease. That adding tens of millions of people who could not previously afford private health insurance to private health insurance rolls would somehow have more than a minor additional cost was simply the overly-excessive, and probably politically-motivated, worrying by conservatives.
We noted previously the increases in taxes Governor Jan Brewer (R-AZ) is contemplating to finance just the increase in Medicaid caused by the PP&ACA, and predicted that we would see more news reports along those lines, from other states, in the future. As much as your Editor would like to claim some great prescience, this was as difficult as predicting that the sun would rise in the southeast this morning.
And now, Mr Teach tells us that, unexpectedly enough, private insurance companies are going to have to raise their premiums. The President and his economic team assured us that the addition of tens of millions of new customers to the private insurance market would yield more premium savings, as the insurance companies had to compete for these new customers. Your Editor, who lacks the curriculum vitae of Jacob Lew, current White House Chief of Staff and the President’s nominee for Secretary of the Treasury, a graduate of Harvard University and Georgetown University Law Center, was somehow able to understand that the PP&ACA meant that the insurance companies would not have to compete for customers, and that such would not lower individual insurance premiums.
In businesses where you have a choice to not buy at all, the competitors must not only compete in price with each other, but keep their prices low enough so that there will be enough people who want their products more than they want the number of dollars it will cost them. With health insurance mandatory, that part has been removed from the equation: the health insurance companies know that virtually everyone has to buy, so they can raise prices. They don’t need to collude on this: one company taking the initiative will be followed by the next, and the next, and so forth, and that is perfectly legal.
It’s simple enough to see in practice: just ask yourself whether automobile insurance is reasonably priced. The insurers know that you have to buy, so the market is established. There is a bare-bones market for the (economically) poorest drivers, something which will keep drivers just barely legal, but such a bare-bones alternative is not allowable under the PP&ACA. There is a comprehensive auto insurance market, which new car buyers must use, because lenders will not allow drivers to borrow money to buy a new car if an accident destroys the collateral for the loan. And there’s a liability market, which is middle-range coverage, for people who would rather risk having to replace their own car if it gets destroyed, but want reasonable coverage for their other liabilities, should an accident occur. Without the mandatory automobile insurance laws, the bare-bones market would disappear.
The PP&ACA doesn’t allow the bare-bones version, the way the states allow the poorest drivers to manage to stay legal for less. The PP&ACA has not only decided that everyone should have good coverage, but the Department of Health and Human Services, as it has written the various regulations to flesh out the law, has insisted on adding many things that a lot of people wouldn’t normally choose to buy. HHS has, in effect, not only prohibited the bare-bones version, but has laden so many things onto the law that the middle-of-the-road insurance plans are moving closer in coverage and costs to the high-end insurance. In their zeal to Do Good, the bureaucrats at HHS have given us a narrow range of legal insurance, which has to come at a higher cost, and there is really no reason for insurers to compete.
Some might quibble with your Editor’s assessment of that, but he will be proved right, or wrong, not by debate, but by the costs of health insurance going forward. If the costs decline, or simply hold steady, then your Editor will have been proved wrong. But if the premiums charged by health insurance companies continues to rise at a rate greater than inflation, then I will have been proved right. I am perfectly willing to have my judgement measured on that scale.