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  • Rigging the System with New Regulation

    As a follow-up to earlier posts on the so-called consumer protections included in the bills backed by Congressional leadership, a state level survey by America’s Health Insurance Plans (AHIP) offers additional analysis of the effects of regulation on health insurance premiums.

    The AHIP report shows that the states with the three highest premium averages all require community rating and guaranteed issue. Of course, a range of other factors (such as demographics) affect the price of insurance, but these regulations do play a significant role in driving up costs. As the report explains:

    …states with guaranteed issue and community rating rules tend to have higher than average premiums. Knowing that they could purchase coverage at any time, younger and healthier people may not do so in sufficient numbers to balance insurance pools. When this happens, premiums reflect the higher average costs of older and less healthy people, and people with low- or moderate-incomes may not be able to afford coverage.

    In a new article in The American, Joseph Antos of the American Enterprise Institute and I argue that if Congress were to “up the regulatory ante” on private health plans by enacting such restrictive regulations nationwide it would stifle competition, leaving a new public plan with unfair advantages:

    The uniform set of federal rules outlined in the [House health care] bill raises the cost of insurance and dampens, rather than enhances, the scope of competition in the market. Worse yet, what competition is left between the public plan and private insurers would not be fair.

    We go on to write:

    By the very nature of its ‘public’ status, that plan would have serious advantages over its private competitors. Because it would be backed by the federal government, the public plan would be viewed by many consumers as safe and secure. Individuals could trust the public plan to ‘be there for them when it counts.’ The plan would benefit from billions in federal subsidies not offered to private plans. At first, there would be federal ‘seed’ money to force the public plan into established insurance markets. Later, Congress could be counted on to prop up the public plan if it faltered. The plan would be too important to fail regardless of the debt it accrued, since failure would mean millions of people losing coverage from a highly visible government program.

    The Obama administration and Democrats are selling their health reforms as “consumer protections.” But these “protections” are actually new rules that would limit consumer choice, reduce private sector competition, and inflate insurance costs. And, making matters worse, at the end of the day, the rules would be rigged to favor the public plan.

    Cross-posted at Fix Health Care Policy.

    Posted in Obamacare [slideshow_deploy]

    23 Responses to Rigging the System with New Regulation

    1. Pingback: » Financial News Update - 08/28/09 NoisyRoom.net: Where liberty dwells, there is my country…

    2. Matthew Bright says:

      More knee jerk anti regulation fever from the Republicans. The same impulse that talked the American people into setting aside all the protections put in place by FDR to keep us from falling into another the Great Depression.

      Well, we almost went into another Great Depression. It's happened a couple of times since Reagan started the Conservative Revolution. It was foreshadowed by the Savings & Loan debacle.

      The Republicans almost succeeded in privatizing Social Security. If they had, we'd have fifty million old people begging on the streets today.

      Personally, I don't want to see 30 percent of my health care dollars going to a bunch of morally challenged CEO's with their 80 million dollar yachts, multiple mansions and private jets. Especially considering they offer nothing whatsoever in the way of benefits to the nation's health.

      And the next time the American people decide to elect a bunch of oilmen and tobacco executives to the Oval Office, I think I'm going to take a long vacation overseas.

    3. Chad says:

      A public plan would be viewed by consumers as "safe and secure" precisely because it would be "safe and secure". That's something worth paying for.

      The day I have the option to switch my insurance to a public plan from the current private plan I have, I am going to switch. The last thing I want between me and my doctor is a corporate bureaucrat with his bonus money on the line. I would much rather have a public bureaucrat with my vote for his boss on the line.

      I also find this "public plans limit choices" meme bizarre and in denial of facts. No country with a single-payer system, that I know of at least, limits your choice of doctor at all. On the other hand, I don't know a private plan here in the US that DOESN'T put restrictions on which doctor you use.

    4. Tim, Portland OR says:

      It seems to me that the assertion that guaranteed issue (GI) combined with modified community rating (MCR) raises rates is attacking the wrong issue. It is true that the three states with GI/MCR rating have higher premium costs than average. But those states also mandate minimum coverage, and set a penalty for non-participation that is far too low.

      GI is likely to become increasingly important as am ever-increasing fraction of the population acquires knowledge (genetic or otherwise) of preexisting conditions that affect their rates. Lack of GI/MCR will drive individuals to avoid discovery of health risk to avoid an adverse impact on their rates.

      If a GI model were to allow for any coverage plan (particularly for high-deductible, catastrophic coverage) and set non-participation penalties high enough, I suspect the rate differential between GI and non-GI states would nearly evaporate.

      If the individual penalty for non-insurance were related to premium (e.g., allow insurers the option- not the obligation- to charge an applicant up to 2 years of premiums for being uninsured), applicants would move toward higher deductible policies (lower premium, lower penalty). This would likely also have a statistical effect on increased demand for price signals from the provider marketplace, and improve provider-level competition. It does not appear to me that an optimal, choice-oriented GI issue model has been attempted.

      TSB

    5. Cindy Merrill says:

      My husband and I just got turned down for a SNAP Food credit increase ( He's diabetic and we live on SSI). Which would you prefer: An extra $100 for dietic food, or $180,000 a month for Hospital costs if or when John has a Diabetic blackout or slips into a Coma? You ( as a taxpayer) already pay for his SS and VA, so its your decision. If Obama wants to prevent complications associated with diabeties, obesity, heart disease and other ailments, wouldn't it make sense to issue specified food vouchers/ Dietic foods/Care boxes to VA clinics,Food pantries and other institutions that address the needs of Low income Americans? And why is it that Government Commodities ( often delivered to Non Profit Organizations) are extremely high in Sodium and Carbs?

      Over two thirds of Americans are Obese: Has the Obama administration agreed to tax incentives for joining a healthclub, gym or diet plan like Nutrisystem? Will Candy finally be banned from all Store Checkout counters? the answer is NO to all of the above- and you think this government is serious about preventive healthcare? Oh, please. Get real.

    6. Grace, Florida says:

      No the government is not serious about preventive healthcare. The government is serious about taking everything over. Plain and simple. I don't think a public plan would be safe and secure. I would never join the public plan. I don't believe my employer would drop our healthcare choices b/c I work in profesional sports and healthcare must be offered to the players and we are able to purchase it too. Yes, out employer pays part of it but we pay too. Over the years the premiums have gone up but it's still ok with me to have the peace of mind that I'm going to get good care for myself and my family. Public health option would seem like we would all be on Medicade and I don't want to feel like that. I think Medicade needs to be overhauled because so many people receiving it have learned how to work the system. That kind of thing needs to change. Obama talks about preventive healthcare – what are his plans for prostitutes, drug addicts and alcoholics. What about that group who continually make bad irresponsible choice. What is he going to do about that – open another methadone clinic on a new street corner. Nope this is all wrong.

    7. rich weirton, wv says:

      must be a lot of obamabots leaving their "talking points".

      Give it up, libs, WE ARE NOT THAT STUPID!

    8. Grace, Florida says:

      Matthew that would probably be a good idea for you to take a long vacation overseas. Privitazing Social Security could have been a good idea. What about the prescription health care bill for seniors that Bush introduced? While some think it was a bad idea, and maybe it was, it is run privately and works quite well. Why not social security or va benefits – It can't be any worse that the government running it. The one thing we need to remember is it doesn't matter who is running it – they all have their hands out in the end. They are all elite and want to make plenty of money – this includes our elected officals. We only see what they want us to see – what about the Kennedy clan – where do you think all their $ came from? They were corrupt yet you probably would rather them running the country instead of a conservative. I just don't get the progressive mind set. To me it's more like people operating with blinders on.

    9. Keith somewhere in t says:

      Matthew Bright,

      Everyone is entitled to their own opinion, but not their own facts. Please re-read history from sources other than the MSM, and you might obtain a more accurate account of what really happened during events related in your post.

    10. Anita says:

      I'll take the public option when all the ?public? officials in Washington are put on it.

    11. Mike Mancuso, San Jo says:

      Real bipartisan health/insurance reform would require an honest, unbiased look at why costs are so high. Identify who is overcharging or making huge profits, if you will.

      If the laws of supply and demand don't eventually catch up then you know someone is exercising undue influence. We have fair trade laws. They don't seem to work here. And we know why.

    12. Lloyd Scallan - New says:

      Matthew Bright is a prime example of why we have the problems we have in this country today. If it was not for WW II, FDR's policies would have failed. Oilmen, and tobacco executives may have million dollar yachts, but they supply almost every job that is available to those who want to work. That's the "offer of benefit". When was the last time you saw a person with no money supply just one job. The "Saving and Load debicle", as well as many of todays problems are because of DEMOCRAT controlled congress. Carter almost destroyed this nation. Reagan brought it back. Clinton only wanted BJs in the Oval Office while a Republican controled congress led us to the highest stock market rally in history. If we don't elect a more conserative President and congress, you won't have an America to run away from. So many of your type swore the would leave the country if so and so were elected, but the still are here, making millions and millions dollars but supply NO JOBS. Why don't you have the "balls" to get a head start on all the others. Leave NOW. You don't belong to be a part of a free nation.

    13. Tim AZ says:

      Mathew and his ilk would rather kill of social security recipients by refusing health care to Senior citizens. For them this would also fix the coming medicare problem. What they refuse to understand is that they will be compelled to pay for the government run health care through the IRS. It will cost much more than their current insurance and be ineffective. And the IRS will wait until they owe enough in health care premiums to equal the value of all their assets before they decide to collect. They may be homeless and without any hope of health care at all. Unlike the current system where they can get help at any emergency room.

    14. Al, The Villages, Fl says:

      A government plan may seem safe but the devil is in the details. A gov plan can set pay standards below what any private plan can provide, thus pushing them out of the market. Once that happens, we will have a single payer, government plan just like the dems want. However, then comes the hammer – costs will need to be reined in and that will be done by reducing costs (rationed care). Where will you go since the private plans are gone? Just look at the universal health plans in the UK, Canada and elsewhere – not at the healthy but at what happens to those who are sick. On the other hand, there will still be some private plans around for those who can afford it – sounds like a fair and universal health care system, no? Or we can fix the one we have by addressing the shortcomings that have been well identified in this debate (and eliminate care for non citizens as stated in the H.R.3200).

    15. Ross writes, Braden says:

      Healthcare Insurance? Wasn't that a Democrat generated issue? Whatever happened to Medical Insurance for off-setting catastrophic medical cost? Did it disappear when congress dictated how much it would pay the medical industry for Medicare and Medicaid in the late 1980's when the Democrats controlled congress and could over-ride the (Republican) President's veto? Thus forcing doctors and the medical industry to "shift" cost to us "poor folks" with small individual medical plans paid out of OUR pocket, not a member of Medicare or Medicaid or some large group insurance plan that demanded and got discounts, like the union members of the car industry.

      Of course the real parasite sucking the life's blood out of the medical industry has been the "ambulance chasing" lawyers that slither about in today's legal system. What about Tort reform? That would be another good starting place to lowering medical costs.

      In 1987, I had a Blue Cross/Blue Shield of California family medical plan costing $168 per month. Before 1990, it had jumped to over $500 per month for the same plan(and the S&L debacle had nothing to do with it). I had to drop the plan long before reaching that amount, when it reached almost $300 per month(I couldn't shift my family budget anymore and all "extra's" had long since fallen to the wayside).

      Only congress can make laws of the land, not the president(at least that is the way it reads in the US Constitution). The blame for this debacle in the cost of medical service can only be laid at the feet of liberal Democrats and social leaning Republicans in the legislative branch of state and federal government, including presidents and governors who supported it.

      Regretfully, another loss in personal liberty and a win through social engineering in the making!

    16. Melby, Arizona says:

      I agree with Maria in NC. When I go to the grocery store to purchase frugally,as she has outlined, both I and the managers at the grocery store are appalled to see the grocery carts of those using food stamp cards. Mostly junk food, instant microwave items, chips and soda. And they usually weigh over 200 lbs for a 5'4" frame. These same people sit at home all day watching TV, and many of them are diabetic because of their lifestyle and diet. I work, pinch pennies, have fewer medical bills than what I'm charged for insurance, and the bleeding heart liberals want me to pay for someone like this? If so, make it work for pay and have them clean sidewalks and streets,pick up garbage, etc. for those who are paying their bills!!!

    17. Jeanne Stotler, wood says:

      Let'S all be honest, there are those who play sports that graduate from College ( and some still ignorant) and start out with million dollar salaries before ever playing a Pro game, the people in Hollywood make millions and travel all over the world, some move to a foriegn country so as not to pay Taxes, uet collect million in royalties. This country is not perfect, it's better than the alternative, to bring things back to what is real, you work, you gain, and those that don't work, don't get ahead. Insurance companies should publish their cost sheets annually, if they are making to high a profit they should be censored by an Insurance board, each state has an Insurance Commissioner, stop frivolous law suits and let the M.D.'s and D.O.'S practice what THEY went to school to learn.

    18. Maria, NC says:

      Diabetic foods are low cost – turkey, frozen veggies, whole grain pasta, skim milk; we shouldn’t have to sponsor anybody’s food or healthcare in America unless they have an overwhelming treatment resistant psychosis or cognitive failure. If you work (any jobs) for 50 hours a week (which you can get if you bother to do ALL your homework in school, pay attention in class, learn to read/speak English as well as our President has, and move to where ever the jobs are), get your extended family to help in hard times, delay and limit childbearing until you’ve saved some money and are in a permanent stable marriage, keep your home purchase/rent below your means, cook bulk inexpensive food, buy clothes at resale shops, delay or avoid vacations or non-necessities until you have a large rainy day fund in the bank, you can afford a low premium, high deductible health insurance. I have practiced what I’m describing, and it works. I am so tired of all these people with no personal responsibility who are now demanding that I work extra hours in order to pay them for their own bad life choices and poor work ethic (starting in school). As MT said, the problem with Socialism is pretty soon you run out of other people’s money. When this happens guys (and you are spending my money really fast now), you are on your own. Grow up.

    19. Bill Lee says:

      No need for new regulations, except forbid health insurance to deny people with prior medical conditions.

      But also allow them to charge some reasonable amount more for people with unhealthy habits like smoking and being overweight. We do this with car insurance for those who drive recklessly.Why not charge more for people who live recklessly which makes them more likely to have serious medical conditions?

      I know this is not going to solve all the medical cost problems but it is at least some start.

      This with tort reform and other cost saving ideas such as not covering illegals who sneak into here to work.

      We need to get serious about illegals and our border security. Companies who hire illegals should be shutdown!First time this happens other companies will stop hiring this cheap labor. Same thing with the illegals coming here,some punishment is needed like fingerprinting and a ban on ever becoming a citizen, starting with the first time caught.

      Another costly situation is those on medicare using the emergency room instead of less expensive doctor's office visits for colds and flu.

      Maybe tax insenitives for medical treatment companies to open clinics than will see patients on off hours such as nites and weekends. We have two such clincs here in the Shreveport/Bossier area and for a 35 dollar co-pay you can see a doctor for flu and or other minor problems before they get worse.

    20. Jerry from Chicago says:

      To Matthew — I think you are overdue for that long vacation. Write us when you find that special place in the world where no one makes any money because no one needs any money.

      Obama's program of "consumer protections" will wind up in "protecting" us out of all we own.

      And by the way, I'm getting more than a little tired of reading the critics' complaints that Republicans haven't come up with any alternatives. They have. But there is no interest on the part of the Democrats to give any consideration to Republican alternatives. Their answer to Republican alternatives is "we won, you lost, go away". The lap dog media refuse to cover or print any alternative health care reform sponsored by Republicans, because Obama is "their guy" and they are in the tank for him.

      Republicans have been proposing tort reform as one of the planks in their health reform platform. Nowhere is tort reform discussed in House Bill 3200, why? Republicans have proposed allowing the purchase of health insurance across state lines, to generate greater competition, I don't see this in House Bill 3200, why? Republicans have proposed allowing individuals to purchase their own high-deductible HRA or HSA accounts, where individuals could fund the cost of their insurance on a pre-tax basis and carry unused deductible amounts forward from one year to the next, this proposed Republican alternative was not included in House Bill 3200, why?

      The insurance industry, in talks with the Obama administration, was quite willing to make pre-existing condition limitations a thing of the past. There are a raft of reforms that could and should be made to the delivery of health insurance in this country, not the least of which is keeping government out of it. Every year, over the past fourty years, the federal government has legislated the expansion of benefits and eligibility for benefits of employer sponsored medical plans. Each of these expansions increased the cost of insurance. Yet has anybody blamed the government for these increased health insurance costs? No, they blame the insurance companies, who increase premiums to cover the increased claims and overhead expenses.

    21. Mike inMissouri says:

      Matthew,

      When you go on that "long vacation" (hopefully in 2012), please take Chad with you — and don't come back! I generally appreciate input from alternate viewpoints, but clueless liberals who don't understand how free markets lead to innovation and better care have no place commenting on a conservative blogsite! It is unconstitutional for government to create monopolies to compete directly with private enterprise. Prices will come down when gov't regulations which stifle competition are removed. People would then be free to shop for plans across state lines. Congress only has the power to regulate and tax — NOT establish entities to compete! If this passes, it will be no doubt be challenged in the Supreme Court.

    22. Bobbie Jay says:

      wow. Some people just don't get it.

      What about the diseases that can be cured, but because of the amount of money aquired due to expenses of prescriptions and other medical supplies are a gold mine and holding back the cure.

    23. Polprav says:

      Hello from Russia)

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